- The Washington Times - Tuesday, September 29, 2015

The Recovery Accountability and Transparency Board will shutter its doors Wednesday, six years after it was created to monitor hundreds of billions of dollars that President Obama doled out in spending and tax breaks under his 2009 stimulus — and some watchdogs are sorry to see it go.

The board is shutting down even though the latest reports show that 5 percent of stimulus money — more than $40 billion — is left unspent.

The closure is putting some focus back on the stimulus, known as the American Recovery and Reinvestment Act, which failed to live up to the White House’s projections for keeping unemployment low and left an economy still sluggish six years later despite $840 billion in resources.

House Speaker John A. Boehner, Ohio Republican, called the implementation of the act “generational theft.”

The White House has defended the stimulus as a salve on a deep economic rift and said it staved off what would have been a repeat of the Great Depression.

The Recovery Accountability and Transparency Board, which became somewhat ironically called the RAT Board, was the overseer for it all, trying to sniff out waste while tracking how much economic impact the massive spending infusion was having, including how many jobs were created.

The stimulus, and the board’s tracking reports, have faced their share of problems.

As of June 2010, the board said businesses had reported funding about 750,000 jobs with stimulus money — the peak number.

The number was way lower than the target of millions of jobs Mr. Obama promised, but economists said the board’s methods dramatically underreported the overall impact.

In the case of a bridge project, the report might count the people hired to build the bridge, from the planners to the construction workers, but might not take into account construction subcontractors or suppliers, such as those who provide bulldozers and other equipment, said Josh Bivens, an economist at the Economic Policy Institute. It definitely would not take into account the jobs that might be created when those construction workers go to a diner for lunch, and the money they spend there might create jobs for wait staff, he said.

“[The reports] seemed to me an exercise in undercounting,” Mr. Bivens said. “Those multiplier effects were not captured in these reports, and those could be really big with an economy as weak as ours was.”

The Congressional Budget Office, using modeling rather than actual reports, calculated that the combination of tax cuts and spending hikes supported as few as 700,000 jobs, or as many as 3.4 million jobs, by the middle of 2010.

The CBO also figured that the stimulus added as much as 4.6 percent to the country’s gross domestic product at that point — as little as eight-tenths of 1 percent.

Economists heatedly debated about the actual number.

“It depends on who you ask, but a lot of economists would argue that the aggregate effects the economy felt were, if we could tally those, marginal, if at all,” said Aparna Mathur, an economist at the American Enterprise Institute.

She said part of the problem with the stimulus was that much of the money went to localities, which didn’t always have idle projects waiting for funding. Instead, she said, some of the localities cut back their own spending on projects already in the pipeline and replaced it with federal money, which showed up as jobs supported by the stimulus even though they would have existed anyway.

The Recovery Accountability and Transparency Board said it spotted $13 billion in questionable or fraudulent spending — about 1.5 percent of the overall funding. The inspectors general who made up the board and oversaw the specific aspects of spending said they won more than 1,600 convictions, pleas and judgments against frauds and cheaters and recovered or seized $157 million.

The board also said it was the first government financial agency to use cloud computing infrastructure, a move they said would improve security and accountability.

In 2013, as the stimulus was winding down, the board took on the task of overseeing federal spending on Superstorm Sandy recovery. By the end of that year, the board was no longer required to release reports about how the stimulus money was spent.

The board was funded only through the end of fiscal year 2015, which closes Wednesday. The Government Accountability Office this month said the board’s termination would deprive the government of some important fraud-fighting tools.

In particular, the Recovery Operations Center conducted data analysis that helped inspector general offices at various agencies spot potential fraud. The GAO said the Obama administration should try to keep those operations running in some way once the board disbands.

Gary Burtless, an economist at the Brookings Institution, said the Recovery Act was just one step in fighting the recession.

The federal government, he said, took a three-pronged approach to economic stability.

First, the Federal Reserve lowered interest rates to zero to make it easier for consumers to borrow and spend more, stimulating the economy through a freer flow of capital.

Second was the wildly unpopular Troubled Asset Relief Program, enacted under President George W. Bush, which offered hundreds of billions of dollars to bail out banks and other “too big to fail” companies.

The third measure was the stimulus.

The combination of programs helped end the Great Recession by June 2009.

“So, contrary to the impression that a lot of members of Congress had and many, many voters had, these measures, in combination, ended the recession very quickly. That’s the facts,” Mr. Burtless said.

Still, job growth remained sluggish.

“This recession and recovery has stood out because while you can argue just in terms of GDP numbers we’re on the right track, the labor market never seemed to take off,” Ms. Mathur said. “So if the point of the stimulus was job creation, it hasn’t succeeded in the way that we’d like. After so many years of recession and recovery, there’s still so much slack in the labor market.”

The government’s three-pronged approach made it tough to determine which deserved the most credit for the economy.

“I cannot apportion the credit between the different aspects of a national economic policy that helped end the recession and bring us back to our current growth,” Mr. Burtless said. “I cannot say that the TARP program itself in rescuing the financial institutions deserves 50 percent of the credit, the Federal Reserve deserves 25 percent of the credit and the fiscal policy indicated by the stimulus packages, both in the late Bush administration and the early Obama administration, deserve the remaining 25 percent. I can’t do that; nobody knows that.”

Analysts also disagreed on how the administration could have done better. Ms. Mathur suggested that the government didn’t do enough to directly create jobs, such as offer employers subsidies to train new employees and establish a direct line for the unemployed to employment. She gave the economic plan a “C or a D.”

Mr. Burtless said state and local governments should have received some rules for spending stimulus money and gave the plan a B+.

Mr. Bivens said the government simply didn’t spend enough money.

“I’d give it somewhere between a B and a B+. I think the thing keeping it from an A is some of the composition. I didn’t think it was perfect,” he said. “It didn’t anticipate how long-lasting a fiscal boost the economy needed.”


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