Your Stimulus Dollars at Work: Going to Places Regardless of Economic Need


USA Today's invaluable Dennis Cauchon has written up results of the paper's study of where stimulus spending has been directed. You'd expect it to go to the places hit hardest by the recession, right? Well, you'd be wrong:

States with the highest jobless rates are getting less money per person under the federal stimulus program than states with below-average unemployment, a USA TODAY analysis finds.

Hard-hit Florida ranks last in stimulus benefits per resident despite having the nation's fifth-highest unemployment rate. Nevada has the nation's worst unemployment — 14.2% — but ranks 46th in stimulus benefits.

By contrast, North Dakota has the nation's lowest jobless rate — 3.6% — but ranks fourth in stimulus benefits. Alaska ranks No. 1 in stimulus aid — $3,505 per person — and has a jobless rate below the 9.5% national rate.

Stimulus benefits skew to better-off states because of longtime federal spending formulas that consider many things — income, population density, highway fatalities — but usually not unemployment. Result: States that do well under federal formulas prospered again in the $862 billion stimulus law, regardless of their jobless rate

Whole thing, including a nifty and nauseating interactive graphic, here.

And if any of this sounds familiar, well, it should. Reason columnist and Mercatus Center economist Veronique de Rugy wrote up the same results for us back in November 2009:

Michigan's 15.2 percent unemployment rate is the highest in the country. So far, it has received $403 per person in stimulus funds. That's above the average stimulus per person across all states ($326).  However, it's lower than the $409 per person that the state of Vermont, a state with relatively low unemployment (6.8 percent), has received so far. Michigan's per-person take is also much lower than the $707 per person the District of Columbia received. D.C.'s unemployment rate is 9.9 percent.

Now look at the state with the lowest unemployment rate in the country: North Dakota. It's getting $253 per person with a 4.3 percent unemployment rate. Many other states are receiving roughly the same amount of stimulus funds per person despite much higher rates of unemployment.

Which suggests that stimulus funds are being allocated without thought to the level of unemployment within states. If government spending could in fact create jobs, then the problem of unemployment could be mitigated by distributing funds to states based on their relative unemployment levels.  

But that's not being done at all. Instead, funds are being distributed randomly, as quickly as possible, among the states. That in turn suggests something else: Even the federal government doesn't believe the myth that government spending can actually create jobs.