15 March 2009

Cities are SELLING their stimulus money!

Maybe I haven't thought this through enough, but my initial impression is one of dismay...

A few area cities have found an alternate way to use their federal stimulus money: selling it to other cities for cash.

Metropolitan Transportation Authority has allocated a minimum of $500,000 in federal stimulus funds to each of the 88 cities in the county for transportation-related projects. Unincorporated areas will benefit, too.

Several smaller cities, some without shovel-ready projects, are making deals with others to sell or swap such funds and replenish their general funds.

"The best way to see this is as a huge windfall for us because we do have the flexibility of using the general fund money now," city manager Shauna Clark of La Habra Heights said.

The city of Bradbury, with a population of roughly 1,000, is working on a deal to sell its $500,000 share of federal funding doled out by the MTA to the city of Torrance for $315,000 in cash for its general fund, according to Torrance officials.

So, the money was allocated among 88 cities NOT according to who needed it or who was prepared to use it, but rather with a half-million $ minimum to every city. When I used to apply for federal research grants, you had to submit proposals with budgets to the penny and a plan for using the money; they didn't give $10K to every researcher and tell them to trade it around.

This may be well-intentioned, but it seems sloppy and inefficient.

(via The New Shelton wet/dry)

Update: Never mind; money swapping has been forbidden. Thanks, Leighsah

7 comments:

  1. I don't know if I am actually dismayed. The government is never all that good about doling out money efficiently especially in amounts of hundreds of billions pushed through the legislature in a week or so. That is obviously somewhat dismaying. But look how the free market is working here! The transit funds are flowing to the places that need them and cash is flowing to the places that need that. Its a great example of the win/win scenario of free trade.

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  2. That's a good way of looking at it, A. Fischer.

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  3. In theory, of course, you are absolutely correct. I just have doubts re the efficiency of the setup.

    Suppose you wanted to support college education by giving tuition money to 17-year-olds, and did so by giving $10,000 to every kid. The ones who don't plan to go to college then trade sell their $10,000 to the college-bound students for $6,000 cash. Now the funds are "flowing" to the ones that can use it, but what you have is a college-bound student with net +$14,000 and a slacker with net +6,000 cash. Why not just give the college-bound kids $20,000 - if your goal is to support going to college. Using this technique the money still goes out there and the slacker kids use $6,000 to buy weed and iPods. That supports the economy, certainly, and it shows the "free market" at work, but it's playing a bit loose with taxpayer money.

    Same with the transportation scenario. Torrance now has net +$685K for transportation and Bradbury has net +$315 cash to use for something.

    It will stimulate the economy. And inflation. Is it the best method? I don't know. I'll grant it may be the only practical quick solution, but I don't think it represents the best of all scenarios.

    stan

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  4. @Minnesotastan you are absolutely right. It is a little fast and loose with taxpayer money. I am just happy that at the very least my current (and future) taxes are going to places that need/want the money (as it has been allocated).

    The only bone I have to pick with your slacker/college analogy is that Bradbury probably won't spend its cash on weed an ipods. It will probably pay teachers, clerical workers, and other local employees with the cash rather than having a useless glut of transportation money.

    Should the government have divvy'd up the money better in the first place? Yes. But at least things are sorting themselves out.

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  5. Oh and I agree... the best scenario is definitely not this. But maybe the most practical given the situation?

    Also... I don't even want to start thinking about future inflation.

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  6. Oh, I absolutely didn't mean to conflate my hypothetical scenario with the actual one and suggest that the good people of Bradbury would spent their stimulus money on skunk. I was just exaggerating to make a point.

    In theory it may not matter much what the good citizens of Bradbury do. They will probably use it to have someone build a city park, or to upgrade sewers or hire locals to pick up litter. But they could just as well divvy the money among citizens and have them spend it at Sarah's Greasy Spoon Diner and at the local Ace Hardware. If the money is being spent, then the stimulus is occurring. One just hopes it will be spent wisely.

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  7. And just as quick as the cities said "trade ya", the government said no...

    http://www.nytimes.com/2009/03/12/us/12swap.html

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