When President Barack Obama signed the $787 billion stimulus bill in February, he promised the American people transparency and efficient spending. Yet contrary to those promises, there was nothing in the bill to guarantee that the money wouldn't be wasted. In fact, even the president's promise to have a searchable online version of the spending bill has proven to be little more than talk. The result will be billions of dollars shoveled at beautification projects, museums, parks, and street lamps.
Consider the $80 billion of stimulus spending allocated to the states. We've all heard how the money will be spent for critical, urgent "ready-to-go" local projects in transit, infrastructure, housing, airports, and school modernization. Yet there is nothing in the bill explaining how that spending will take place or even what projects will be funded. The U.S. Conference of Mayors gave us a peek in December, and it wasn't pretty. The shovel-ready wish list from 779 cities topped out at $149.7 billion for 18,750 projects.
Based on that list, we can map a worst-case scenario of how cities might spend your money. For instance, the bill appropriates $1 billion for the Housing and Urban Development's Community Development Block Grant (CDBG). Based on the mayors' requests, that money might buy 23 restroom projects, 79 athletic fields, 77 sidewalks and street lighting projects, 3 dog parks, 14 animal shelters, 11 zoos, and 31 museums.
On top of that, $10 billion in public housing funds could be going to projects that have nothing do with shelter or improving public housing safety. The mayors requested millions of "housing" dollars for parking lots and landscaping projects, art centers, security cameras (some at museums), gazebos, domestic violence shelters, sidewalks, shoreline restorations, recreation centers, and playgrounds.
The Senate version of the stimulus bill had provisions designed to stop money from going to wasteful or low-priority uses such as casinos or other gambling establishments, aquariums, zoos, golf courses, swimming pools, stadiums, community parks, museums, theaters, art centers, and highway beautification projects. However, the conference committee abandoned that commitment to rooting out pork and waste. The final bill—now the law—allows money to flow to museums, stadiums, arts centers, theaters, parks, and highway beautification projects.
Here are a few of the ways the states might spend it: There are 20 planned beautification projects—including landscaping and tree planting—for a total of $68 million. Another $868 million is slated for streetscape work, such as edging and sidewalk renovations, 23 of which are in Miami/Dade, Florida alone. Mayors might spend $453 million on 19 entertainment venues, including a new $375 million performing arts center in Las Vegas, not to mention $145 million for 36 theater projects.
This worst-case scenario is not far-fetched. In many instances, the most ludicrous examples from the ready-to-go wish list—such as $2.1 million for a new state-of-the-art eco-conscious "green animal rescue foundation building" for the city of Superior, Wisconsin—aren't examples of fraud. They're run-of-the-mill federal spending. It's perfectly legal to use Public Housing Modernization dollars to buy doorbells and HVAC units. Whether it's a good idea or not is another matter.
Most importantly, the stimulus simply does not have any built-in mechanisms to safeguard taxpayers against wasteful spending. To be sure, the Obama Administration promised to let us track stimulus money through Recovery.gov, a website the administration set up to publish reports on stimulus spending. Supposedly, those who are interested will be able to see certain detailed reports. But there are several glaring problems.
First, the administration doesn't even believe that its plan will work. Earl Devaney, the chief auditor overseeing the stimulus spending, told a House Oversight and Government Reform Committee hearing several weeks ago that some fraud and waste is inevitable. In fact, according to Rep. Dan Burton (R-Ind.), the industry standard level of government fraud is 7 percent. That would mean $55 billion wasted.
As Devaney explained, "The problem will be aggravated by a lack of federal workers needed to oversee the spending. Federal agencies will have difficulty hiring enough skilled workers 'to minimize the risks associated with moving this amount of money quickly.'" Let's get this straight: The federal government will have massive waste because it can't hire enough bureaucrats to watch what state and local governments are doing with taxpayers' money?
Second, the stimulus bill only requires states and cities to provide project-level receipts for the money they spend. In other words, the money disappears once it changes hands twice. The federal government will disclose how much money it gives to a particular state, and that state must then report back on how the money was first distributed. Beyond that, there's no requirement for disclosing where the money ends up.
None of this will give the American people a clear picture of their stimulus dollars at work. Besides, the devil is always in the details. The essential questions we need answered are as follows: Who got what? What did they buy? And how, if at all, did it help revive the economy?
For a preview of what we can expect from Recovery.gov, visit USASpending.gov, a site created to provide transparency in federal spending. There we can see that in fiscal year 2008, New York City received $656 million from the federal government (channeled through New York State). The city's Office of Community Planning and Development spent $148,500 of that money for the federal Special Neighborhood Initiative. How did the city spend the rest? That information is not online. To find out, you have to call city hall.
Finally, there won't be any real data on Recovery.gov until at least October or even sometime next year. Which means that accountability for a year's worth of stimulus spending is likely to be lost forever. This matters because Congress has already crippled the effort to control wasteful spending by removing a competitive bidding provision from the stimulus package.
Transparency is neither hard nor expensive. Nebraska recently created a budget website giving taxpayers an easy way to track where the state's money is going. After much howling about the expensiveness of the site, in the end it cost the state a mere $38,000. And when it comes to tracking stimulus spending, the private sector is doing it for free. Onvia, a company that matches contractors with government needs, has already launched Recovery.org, a free, searchable database of stimulus projects. (Go here for a Reason.tv video with Onvia's CEO.)
If President Obama means what he says about transparency, he will demand that governors, mayors, city executives, and grantees be required to account for every dime that comes into their hands. And he'll do so now, not in a year. Until American taxpayers are provided detailed information at every stage of the stimulus process, we can only assume the worst.
Veronique de Rugy and Eileen Norcross are economists at the Mercatus Center at George Mason University.