Stimulus not linked to jobless rate

WASHINGTON — A McClatchy-Medill analysis of American Recovery and Reinvestment Act spending and unemployment found that some states with low unemployment have fared much better than have others with higher jobless rates.

North Dakota has had one of the nation's lowest unemployment rates for the past year. In June, it hit 3.6 percent. Yet the analysis found that it's scheduled to receive more stimulus spending per capita than is Nevada, where the unemployment rate climbed to 14.2 percent in June.

Part of the disparity is because much of the stimulus spending was doled out based on formulas that were already in place.

Transportation dollars, for example, were distributed to the states based on existing formulas that take into account population, existing roads and other factors. Officials then were directed to consider which parts of their states were "economically distressed," but that criterion didn't come into play until after the money had gone to the state capitals.

That means transportation dollars were distributed to states regardless of their economic fortunes. North Dakota and South Dakota, whose unemployment rates are among the lowest in the nation, have more than $250 per capita to spend on recovery act transportation projects. Michigan and Nevada, which have the nation's highest unemployment rates, will get about $100 per capita for such projects.

Economists who've studied the stimulus package say there's little connection between which states have the worst unemployment and where the stimulus dollars have been spent. Edward Glaeser, a Harvard University economist, wrote in March that, "Stimulus aid was not particularly well matched with need."

Veronique de Rugy of George Mason University testified before the House Committee on Transportation and Infrastructure in March that she and other researchers were unable to find any relationship between unemployment in a given area and the amount of stimulus dollars spent there.

"No matter how we measure unemployment, we find no correlation," she said.

Though other economists

recognize de Rugy's findings, some disagree with Glaeser and her that funding stimulus programs without regard for local unemployment or economic conditions is a problem.

"If you say, 'Let's target states that are doing worse, places that saw the property crash in the worst way,' " said Timothy Taylor, the managing editor of the Journal of Economic Perspectives, "is that really the right goal here? This wasn't just inflicted on them like a lightning bolt. Rewarding failure is never the best plan."

'Timely, targeted'

According to Taylor, the stimulus was intended to be "timely, targeted and temporary," and state-level funding was meant to prevent state budget shortfalls from contributing to the already slumping economy. Though the system of disbursing money may have been less than ideal, he argues, it was better than creating a complicated distribution system that would have slowed the recovery.

"I think giving (money) to the state governments was probably about as targeted as one could reasonably do," he said. "It was no more unfair than other possibilities could have been. To have the federal government try to fix things county by county seems insane, especially if you take timely as an important task."

Administration officials also disagree that targeting communities with high jobless rates would have been a better approach.

"Economic need isn't bound by county or state lines and, fortunately, neither are the economic benefit of recovery act programs and projects," said Elizabeth Oxhorn, the recovery act spokeswoman for Vice President Joe Biden. "And when it comes to supporting the hardest-hit among us, assistance like unemployment benefits, tax relief and health care are directly targeted to those who need it most, regardless of where they live."

"Bottom line: It's working," Oxhorn said. "Before the recovery act, our economy was losing an average of 750,000 jobs each month. In the first five months of this year, the economy has created nearly half a million new private-sector jobs."