When the Great Recession hit, liberals and conservatives disagreed on the appropriate role of government. (“Yes,” I can hear you saying, “and the sun rose in the east…”). One of the bones of contention was the stimulus. While virtually all economists supported a stimulus, there were lots of arguments about its proper size, with Nobel Laureates like Paul Krugman and Joseph Stiglitz pressing for a larger amount than the Republicans in Congress would authorize.
As we have begun the slow and decidedly unsteady climb out of the economic abyss, there have been even more vociferous arguments about the stimulus’ effect. Economists of all ideological persuasions agree that things would have been much worse without it, but conservatives have continued to pooh-pooh its importance to the economic recovery.
If the stimulus’ effect really was less robust than predicted, I now have one theory about why.
Bear with me.
Yesterday’s post was about the substantial “reversion” of money from the Department of Children’s Services at a time when the agency was underfunded, understaffed and ultimately unable to save the lives of 26 abused children. Reversions are budgeted but unspent amounts that an agency sends back to the state’s general fund. A friend who works on policy issues for a major nonprofit shared the full list of reversions for fiscal year 2011-12. The total was a staggering $670,931,548.98.
Some of the amounts unspent seemed reasonable–after all, budget figures are “guestimates.” Others were eyebrow-raising: juvenile justice and violent crime administration returned half a million. The Department of Health and its various programs returned six and a half million dollars that weren’t spent making Hoosiers healthier.
FSSA–the agency charged with responsibility for our most vulnerable populations–returned a whopping $47,643,955 to the general fund. The Department of Environmental Management was close behind, at $38,860,038. (What’s a little environmental degradation among friends??) After those two, Education’s reversion looked positively skimpy at $7, 302,510.
What do these reversions have to do with the stimulus, you ask?
According to friends with knowledge of the arcana of state fiscal matters, the Administration used portions of its stimulus funds to replace state monies budgeted for service delivery. This was illegal, but people I trust, knowledgable people with no reason to lie, assure me it happened. The agencies then “reverted” the replaced monies back to the state, allowing the Governor to brag about his budgetary prowess and return that all-important $100 each to Indiana taxpayers.
The reason such shenanigans are illegal should be obvious–if stimulus funds are used to replace dollars that are going to be spent anyway, they aren’t going to “stimulate” anything. Given the complexity and lack of transparency of state budgetary processes, my informants say, the likelihood of being caught was remote. The political reward was worth the risk.
Caveat here: I am not a budget wonk–I am admittedly incapable of the sort of analysis needed to confirm these charges. It is certainly possible my sources are wrong.
If they are wrong, however, we are left with an explanation that is even worse.
Either the administration misused stimulus funds and reduced their effectiveness, delaying the recovery and keeping many Hoosiers unemployed, or it deliberately refused to spend money that had been budgeted for education, health and the environment, piling up surpluses while failing to meet the needs of children and our most vulnerable citizens.
No matter which explanation is right, what we are left with is very, very wrong.