Monday, July 6, 2009

President Obama billed the stimulus package as a national effort, one that would involve spending “in communities across America.” But the money is not being doled out proportionally across the country. The most funds are not even being distributed to the areas with the greatest economic problems.

The Wall Street Journal has compiled data on stimulus spending by state for seven categories of social spending (education, housing and urban development, health, crime fighting, job training, arts, veteran spending) and five categories of infrastructure spending (transportation, water, energy, military, government). The total accounts for $187 billion out of the $787 billion spent on the stimulus. Florida, at $464 per capita, receives the least, while the District of Columbia gets the most, at $3,376 per capita.

To find out how the money was allocated, we studied the most recent measures of economic problems that were available when Congress and the president passed the stimulus in February. We found that states with higher income and lower bankruptcy rates during the fourth quarter of 2008 will receive the most stimulus cash per person.

Each $1,000 in a state’s per capita income means that the state got $21 more per capita in stimulus funds. With a spread of almost $38,000 in per-person income between the top and bottom states, this has a sizable impact. High-income states get considerably more stimulus money. Counterintuitively, states with higher bankruptcy rates tended to get less, not more, money — roughly $70 less for each percentage point increase in the state’s bankruptcy rate.

Some of this disparity benefits Mr. Obama’s supporters. The Davis-Bacon provision in the stimulus bill forces states to pay the prevailing union wage for construction work even if there are lower-cost alternatives. In one case, a Los Angeles County official says the rule will force the county to pay workers twice as much to complete a stimulus grant for weatherizing low-income homes.

According to a June 5 report by Politico about the so-called “Stimulus tour,” visits by Mr. Obama and other administration officials to announce stimulus spending have been overwhelmingly in states that voted Democratic last year: “52 of the 66 events were in states that backed Obama.” We found that states that voted more heavily for Mr. Obama got an extra $10 per person for each additional percent of the vote for Mr. Obama. Virtually all of this comes in the form of more infrastructure spending.

Some types of spending naturally favor “blue states.” The nearly $10 billion for the Department of Housing and Urban Development, for instance, goes mostly to big cities, not to rural, Midwestern states. But other spending differences in Mr. Obama’s proposal are harder to explain. For every extra percent of the vote Mr. Obama got, a state could expect an extra $102,000 in road spending per mile of interstate highway.

It is not surprising that political calculations play a major role when the government hands out money. But it is shocking that Mr. Obama and the Democrats are sending stimulus funds to those places that need help the least.

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