Friday, March 13, 2009

What if the stimulus become a band-aid?

When the stimulus package was finally passed one of my big questions was -- How do we measure if the spending is stimulative or simply plugging the gaps in state budgets?

Well, NY made a mention of the stimulus money offsetting the need for new taxes yesterday.

From the NY Times - "By swapping the proposed tax hikes for $1.3 billion in stimulus money—funds that are technically allocated to states’ Medicaid budgets but can also be diverted to other programs."

Also, Wisconsin is facing a budget gap but "the Governor's job is being made easier with the state expecting $3.5 billion in federal stimulus money."

There are similar stories running from California to Utah to New Jersey as states look to plug their budget gaps in the most pain-free way.

I'm becoming increasingly concerned that the "stimulus" will be used, not to stimulate the economy, but to maintain the status quo. It may be spent by the states to avoid hard spending cuts, avoid consumption taxes, etc, etc.

Unfortunately, we might look back in Jan 2010 and say how did we waste $800 billion???


Bernard said...

Well, imagine if the funds were NOT there at all. Instead of "maintaining status quo" we'd continue circling the drain!

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