Diary

Obama Encourages States To Be Responsible

In the aftermath of the $1 Trillion spending orgy foisted off on us by the crisis driven Obama Administration, Barack Obama and his court jester, Joe Biden, are encouraging the states to be responsible in their visit to the trough.

Obama stopped by a conference Thursday with state officials gathered in the capital to discuss carrying out the $787 billion economic stimulus program. He said he believes the American people are behind his administration’s efforts but also said that officials at all levels of government must spend the money wisely.

Obama told his audience: “You’ve got this wonderful mission. And it’s rare where you get your chance to put your shoulder to the wheel of history and put it in a better direction.”

Vice President Biden, in comments opening the daylong conference, said states that misuse money from the economic stimulus package shouldn’t look to the federal government for help again for a long time.

There are two issues here. Can the states spend the money wisely and was giving them the money wise to begin with.


The answer to both questions is almost certainly no. If you’ve ever been in an agency that has had a huge influx of money you learn very quickly that your real mission is spending the money before your obligation authority lapses and you lose it, not necessarily ensuring the money is spent wisely. While you might receive some mild criticism for doing strange things with the money (so long as it doesn’t involve drugs or hookers) you might very well lose your job if you fail to spend a substantial sum of money.

The reason that we already know that the money will not be spent wisely is because the money has been micromanaged by the White House. For instance, this from California:

In a letter to city officials, the transit agency provided a list of cities that would not be able to use their allocation. Last week, when the financing streams were announced, cities, many of them facing deficits and hard choices, moved to exchange the transportation money for cash, at about 62 cents on the dollar.

Irwindale, which has roughly 1,500 residents, agreed to sell its $500,000 allocation to the city of Westlake Village — 9,000 residents — for $310,000 in cash, which would go into Irwindale’s general fund.

“We have a general fund deficit this year,” said Robert Griego, the city manager of Irwindale, which got offers from a half-dozen cities for its money. “So we probably would have used it to avoid people getting laid off.”

Torrance, a city in southern Los Angeles County, moved to snap up transportation dollars to spruce up major arteries, and planned to buy a $500,000 share from Bradbury, another small city, for about $315,000.

“We thought it was kosher,” said Eric Tsao, the finance director of Torrance. “We could have leveraged more for our projects, and the other cities would have had some money to do what they would like. You can’t do much with $500,000 in infrastructure anyway.”

But when the exchanges were brought to light on Monday by The Pasadena Star-News, the transit agency quickly intervened. It sent letters to cities clarifying that the only swapping allowed would be federal money for equal amounts of state transportation money.

So, do we have any bets on what Irwindale is going to do with the $500k in stimulus money? Guys, there is no doubt what’s going to happen. They are going to pave something to the tune of $500k. And this is going to happen with everyone knowing it is stupid but if they don’t slop $500k in asphalt on something they’re going to loose the $500k. Bureaucratically, this decision is a no-brainer. And you can’t really blame them.

There will be other atrocities like this happening in every jurisdiction in the nation.

Was giving this money wise in the first place?

Of course not. We all know that. Any jobs created with this will lapse at the end of the spending authority for the bill. It won’t help the economy in any great way because unlike the Great Depression Obama imagines he’s shepherding us through, the underlying cause of our problem lies in investment and risk management. Not in unemployment. But if you are going to take advantage of a crisis you have to be perceived as doing something and right now we’re looking at $1 Trillion in perception being created.

And we can always leave it to Joe Biden to throw in a bit of humor.

Vice President Biden, in comments opening the daylong conference, said states that misuse money from the economic stimulus package shouldn’t look to the federal government for help again for a long time.

If you’ve ever dealt with state governments in an adversarial manner over money you know this is BS.

Let me give you two small examples from my personal experience. Some years ago I was detailed to a federal agency from the Pentagon. My agency administered about $400 million in grants to states for a specific program. The rules were simple. The grant money had to go into a dedicated account and all expenditures had to be accounted for. We did an audit and one particular state was simply dropping the money in their general fund. Essentially you couldn’t tell what they were doing with the money. Their response to the audit report was, “you’re right, next year we’ll be better.”

My assistant secretary went bananas and pulled their grant. Not a good move. The entire state’s congressional delegation was on the phone to him within minutes. Not only that state, but the friends of that state’s senators and representatives called, too. Because they knew if we could do that to one state, we could do it to all states.

No, this money is going to be spent. Some states may obey the rules and simply do silly things with the money. Others will simply ignore the rules to get more value for the money. A few will just steal it and do little to nothing. The odds of it being spent responsibly are zero.