USA – This month, the City Journal published complaints about local governments wasting federal COVID relief funds. This is in addition to criticisms lodged against expenditures of American Rescue Plan Act (ARPA) and Coronavirus Aid, Relief, and Economic Security (CARES) Act funds in March. Back then, the National Taxpayers Union (NTU) wrote Congress complaining about, for example, “$10 million for a drone program in Alaska; $72,000 to two cities’ Little Leagues in Connecticut; $15 million for swimming lessons in Connecticut; over $6 million to state police in Oregon for vehicle purchases, lab equipment, and forensic services; $250 million in Virginia for funding prioritized for the hospitality and tourism industries; $70 million in Wisconsin for the state’s lodging industry; and nearly $250 million for marketing campaigns in several states.”
Funding also went to “arts, culture, and tourism” and “stadiums, marketing, golf courses, zoos, movie theaters, museums, and aquariums.” While some of these programs may serve a good purpose, they overlook their expected targets, the run-of-the-mill entrepreneurs who hit the streets with cardboard signs because the shutdowns directly forced them out of business and indirectly forced them out of their apartments.
The NTU was further agitated that the federal government was allowing emergency relief to fund these types of projects while its debt was then around $30 trillion. Another problem was that, presumably due to inadequate up-to-date information, Congress could not steer funds away from states already running healthy budget surpluses with low unemployment rates.
As rumors began to fly about another round of bailouts, Senator Marco Rubio (R-FL) sent a request for an investigation to the Government Accountability Office Comptroller General Gene Dodaro. “The stories of waste and abuse are piling up,” he wrote. His short list included baseball stadium renovations, new golf course irrigation systems, website upgrades, and luxury hotel construction.
Steven Malanga, writing for the City Journal, provided pages of color commentary on what he considers inappropriate reasons for accelerating the growth of the national debt. New York City handed out $5,000 grants to, among other things, the artist behind a giant banana sculpture that tours neighborhoods, a street dancer, a puppeteer, and a People’s Bus that travels with the Ice Cream Truck of Rights to educate consumers of their free ice cream about “housing, immigration, labor, and voting rights.” Austin issued disbursements from a $5 million pot to music venue proprietors, contingent upon their attendance at three racial equity workshops and the creation of an Equity Strategic Plan.
School sports equipment and facilities received a lot of ARPA funding. Another popular “investment” was rural broadband. Malanga complained that using federal funds for the latter displaces private-sector providers, the service is typically met with minimal interest by the people it is supposed to help, and rural connectivity runs a high probability of being replaced by more advanced technology by the time its infrastructure is constructed.
The last area of spending Malanga questioned in the article was direct cash payments to individuals. He noted that the last round of stimulus checks came when employers were struggling to find workers, and, for those unacquainted with the psychology of incentives, data was indicating that states that terminated extra unemployment benefits early were enjoying decreased unemployment. He secondarily questioned the implications of giving hundreds of dollars a week to hundreds of thousands of illegal immigrants. More controversial were the pilot programs launched in Chicago and Minneapolis to supplement welfare payments to nonworking families.
Despite hefty regulations for administration and oversight, the program still fell into pitfalls common to others ripe for waste, fraud, and abuse. For example, several grantees offered programming for education and awareness. Exactly what it takes to reach awareness proficiency cannot be gauged, so it would be possible to spend $10 on handouts, do a let’s-not-and-say-we-did, and pocket the balance. Other programs, like Buffalo’s repeated attempts to revive its theater district, merely unsuccessfully revived programs that had failed with previous federal subsidies.
Also, government disbursements pair well with the mentality that all funds must be spent, fair or foul. Whereas a prudent private-sector business leader would put surplus money away for a rainy day or to save up for future reinvestment, government grants typically come with no forgiveness for overestimation. Therefore, program directors have to buy extra things to burn through them or justify the overage. In this case, retailers were even soliciting recipients to let them know that their products and services qualified for funding.
“It’s all part of a program whipped up so quickly that it included billions of dollars for municipal governments that don’t even exist,” wrote Malanga. The Tax Foundation claims $2 billion was allocated to counties that either don’t exist or have no government budgets.
Overall, in the name of COVID relief, the federal government issued about $5 trillion in bailouts. This turned out to be excessive, since the recovery moved a lot faster than those designing the bill had anticipated. By 2021, 29 states would already have collected more revenue than they had in the 12 months preceding the shutdowns. More recently, Pew reported that states were enjoying the greatest budget surpluses and fund balances in history, totaling $217 billion, compared to $117 billion in the last pre-COVID year. This was accompanied by the greatest collective spending by states in 2021, which was up 16.2 percent. Several states also reported record tax collections.
Since ARPA funds are being printed, if not generated electronically, they have added anywhere from one to three percentage points to inflation, something Malanga points out raises the cost of everything the government will do henceforth. With construction costs rising as much as 20% and inflation driving demand for pay increases, Malanga wonders how many of the more-or-less legitimate public works projects fueled by ARPA are going to go belly-up.
As the House oversight committee gears up to investigate waste, fraud, and abuse in ARPA disbursements, Marc Joffe, writing for multiple outlets, feels the case has already been made, and he’s moving forward on educating leaders so they stop acting like, “every downturn must be met with a torrent of federal spending and money creation.” He said when ARPA was written, economic indicators were already showing enough signs of recovery to override Moody’s $500 billion estimate of government revenue losses, on which the bailouts were based.
Anticipating challengers, Joffe said the jury is still out on whether the Obama-era bailouts failed for being too small; whether giving all citizens a stimulus check tends to have an economic impact for about a fiscal quarter; and whether stimulus investments in infrastructure only work if the projects are value-added, unlike the mass transit projects for California and Honolulu, which, while public interest in using them is waning, have yet to be completed. Lastly, Obama-era bailouts, rather than being the tide that lifts all boats and “finding their way into the broader economy… found their way into asset markets, … mostly benefiting wealthy investors.”