The Democrats were nonplussed when a CBO analysis showed that only 7% of the infrastructure spending in the “stimulus” package would be spent this year, and only 38% by 2010. They suppressed the report, and waited in hopes that the analysis of the full package (which also includes tax cuts and transfer payments) would look better.
That analysis is now out, and it shows that 64% of the “stimulus” package would be spent by fiscal 2010. (Via Hot Air.) (The Washington Post story rounds it favorably to 65%.) After reading several stories on the report, I couldn’t find any that gave a figure for this fiscal year, so I went to the report itself (pdf, page 24) and found that the figure is 21%, a bit better than the 7% for infrastructure spending alone. Those revised figures are still terrible, and don’t even satisfy President Obama’s stated goal of 75% by fiscal 2010.
ASIDE: The U.S. fiscal year begins October 1, so fiscal 2009 refers roughly to the next eight months. Since most economists project a recovery late this (calendar) year, that represents the period of greatest need.
It’s not surprising that the tax cuts and transfer payments are much quicker than the infrastructure spending. Tax cuts go into effect instantaneously (they “spend” 36% this year and 98% by 2010, according to the CBO figures) and the government can cut transfer payment checks pretty quickly. Given that even believers in fiscal stimulus concede that it must be timely to be effective, why not scrap the boondoggle infrastructure spending and go with only the tax cuts and transfer payments?
Two reasons. First, tax cuts and transfer payments don’t really fit the mold of a Keynesian stimulus. (Tax cuts, if structured properly, can deliver supply-side stimulus, but transfer payments aren’t likely to do either.) Secondly, and much more importantly, infrastructure spending is where most of the potential for pork lies, which makes it the priority for Congress.
POSTSCRIPT: The report seems to confirm that “shovel-ready” infrastructure projects don’t exist for the most part. It does not separate the spending side into infrastructure and transfer payments, but the spending side spends 15% of its total this year and 53% by 2010, which is entirely consistent with the 7% and 38% reported for infratructure alone. This undercuts the idea, promoted by some on the left during the last week (for example), that the preliminary CBO report was bogus. It may not have been an official publication, but the numbers appear to be accurate.
UPDATE: This CBO document (an official one, I might add) does break the spending into infrastructure (“appropriations”) and transfer payments (“direct spending”). (Via Greg Mankiw, via Instapundit.) The document agrees with the preliminary report to within a few billion, but does change the percentages a little. Rather than 7% this year and 38% by 2010, the new infrastructure numbers are 12% and 41%. I’ve recalculated the next paragraph accordingly.
POST-POSTSCRIPT: We can compute the timeliness of the transfer payment component as 26% this year, and 70% by 2010. From this we can see that tax cuts are more timely (98% by 2010) than transfer payments (70%), which in turn are dramatically more timely than infrastructure spending (41%).