A Major Problem with Fiscal Policy

From CNN Money:

 The federal government has made available more than $74 billion in stimulus funds, but the majority of that money has yet to hit the streets.

Here is “why” monetary policy is usually preferred over fiscal policy:

That’s because states have to jump through hoops before they can claim the funds and put them to use. Some have to get approval from their legislatures before they can spend the money. Others must wait for municipalities and school districts to submit applications to state agencies before distributing the dollars.

These are some of the main reasons why states have drawn down only $15.6 billion of the $74 billion made available to them in the 11 weeks since President Obama signed the $787 billion recovery act. Nearly $14 million of that amount has gone to help states handle the crush of Medicaid expenses.

The “discretionary fiscal lags” are real. This could lead to a rush of bad projects just to obtain some more federal funding. This rush could lead to taxpayer waste.


21 Responses to “A Major Problem with Fiscal Policy”

  1. 1 Tracy Thomas May 7, 2009 at 8:22 PM

    I think that it’s understandable that the states would have to go through hoops to get there share of the stimulus money. It” typical of our government. Usually anything the government is willing to give you free is accompanied by a ton of paper work. It’s almost as if they bombared you with enough paper work you’ll be discouraged to recieve there FREE money. I know these dollars do need to be in our economy as soon as possible but it looks like even though some states have not recieved there funds they already changed there budgets to account for the money that’s coming. All is all i do think the government should do there best to hurry up!!!!!!

  2. 2 Jay Surface May 9, 2009 at 3:59 PM

    From reading this it seems monetary policy is a no brainer. If what results from fiscal policy is a waste of tax payer dollars what is the issue here? My money, or anyone elses for that matter should never be wasted. We give these tax dollars with the confidence that people we elect will use them for the right reasons and not go spending like a kid in a candy stores with unlimited funds.

  3. 3 el Bouzkouri Youssef May 9, 2009 at 9:17 PM

    I ll have to agree with the first person, because it is obvious that the government is discouraging people for asking to be bailed out, that’s why they make go through hell in order to get your free money. But this is no good for the economy right now, because states rely on that money in this crisis, therefore, they have no time for bureaucracy!

  4. 4 Andrew May 12, 2009 at 8:57 AM

    Policy shouldn’t be rushed, you’ll only end up with having wasted money and possibly having to go back and spend more to correct the problems that were made. I agree that money should be made more available to states but states should also have a responsibility to make sure they use the money wisely

  5. 5 Matthew Dimech Econ-101 May 12, 2009 at 2:52 PM

    I don’t see why everyone is in such a big hurry. Calm down and enjoy the warm weather a little bit. I’m glad that Obama signed the stimulus bill but i think that our state also plays a huge part and needs to decide what to use that money for. If they can come up with a better idea to fix our economy then just hand us th emoney i say go for it.

  6. 6 mrrodenas May 12, 2009 at 5:23 PM

    Fiscal lags are not lack of patience, they are real problems that obstruct the flow of money where is needed. Budgets are drawn with much anticipation and cannot include funds that might be there or not. I agree with more controls and accountability for people’s tax money, but they have to create functioning measures, so these funds are not a waste.

  7. 7 Lucy Hwang May 13, 2009 at 2:41 PM

    I just don’t know. I heard a lot of news that the government’s spending money. However, I never hear any news actually what big constructions they do. (or they plan) Where the ‘stimulus funds’ go?

  8. 8 Nirbhik Trehan May 13, 2009 at 11:47 PM

    there is a saying”Hurry Hurry spoils the curry” so i do not think they should hurry at all as they will not do a good job and thus will waste the invested money. i know Obama has signed the stimulus plan but now the state has to act carefully and spend the allotted money well and with a calmer attitude.

  9. 9 Casey Kingdon May 14, 2009 at 7:41 PM

    Why are they complaining about some petty petition and some paperwork in order for foundations to receive money from the government. If that’s all they have to do, then by all means if it means creating a stable environment for the time being while our economy is under such pressure. In order for us to force out of this sort of depression, people have to work hard, and if they do that, they can receive these funds from the gov and act on actions and not words.

  10. 10 Courtney G. May 14, 2009 at 8:50 PM

    I don’t think that rushing it is the best option. This will take a long time and there is no sense rushing it. We need to figure out a way to get it taken care of asap in a very good and well thought manner.

    obama and his team need to figure out a way to do it.

  11. 11 tmt2 May 14, 2009 at 11:06 PM

    I really hope that those who do receive the money are putting it to good use in benefiting the economy and the issues that are within their own states. If Obama asks for another stimilus package I think that the chances of him getting it are slim so this money needs to be spent wisely where it matters the most.

  12. 12 Kevin Clark St marys May 16, 2009 at 12:29 AM

    i dont know why monetary policy hasnt fully taken over by now. Without the real time lags that are expierenced within the fiscal policy the states could be recieveing their funds quicker which in turn the state could start investing the money given to them back into the people of california, the states number one asset. The happier the people are the better the world will be on a social, economic, politicial, and literal level.

  13. 13 Linda Villasenor May 16, 2009 at 5:46 PM

    Monetary Policy is much better since with fiscal policy, people aren’t getting the money that they have available to them. If the government has set out 75 million and only 15 million have been given to the people then where is the rest of the money going towards? I think that people need to get their hands on the money because it will stimulate the economy because people will spend more money.

  14. 14 Molly Jordan May 16, 2009 at 9:15 PM

    Both monetary and fiscal policies are used to help the economy recover from a recession. People need to realize that it takes time for the money to get distributed back to the people that need it most. The business cycle will simply have to take its course.

  15. 15 Robert LaVoy May 17, 2009 at 2:21 PM

    It is extremely important that states, once they are able to obtain their portion of the stimulus money, properly allocate their funds. I read in my text book that Keynes, a famous economist believes that improper spending of money is a major problem during recessions and depressions.

  16. 16 Andrea Nemeth May 18, 2009 at 2:17 PM

    I dont think anyones money should be wasted. taxes payers are not here to be taken advantage of. we should do whatever is necessary to save as much money as possible, especially during the recent money troubles of this time.

  17. 17 Leticia Martinez May 18, 2009 at 6:39 PM

    It’s always been a custom of the government to have tons of red tape everywhere so there’s no surprise that it’s a giant obstacle course for states to get their share of the stimulus package. plus, the government needs to make sure the money is being distributed fairly. What leaves me a little worried is that some places are spending money without having received any funds. Is the amount they think they will receive set in stone because what would happen if they received less money than they thought would be alloted to them? Yet, the state can’t keep waiting for the money.

  18. 18 Santi Orona May 18, 2009 at 10:30 PM

    It doesn’t surprise me the federal government has a lot of barriers. In government and politics, nothing is ever free. Especially money. States and everyday people have to work hard to receive any kind of benefit from the government. It is sad to see that only 1/5 of the money is actually being given to those who need it.

  19. 19 Alysaa McKinney May 20, 2009 at 10:12 AM

    Pretty unsurprising. The federal government bullying the states into doing what they want is par for the course by now.


    California tries to balance the budget through vital wage cuts and the federal government threatens to hold back stimulus payments if the state does not back down. It is completely unrealistic for state workers to expect to benefit when the economy is thriving, but then not share in the downturn when it comes. It is going to be impossible for California to balance its books if it is not allowed to make necessary cuts and is forced to subsidize unproductive elements of the economy and force to keep wages well above market levels.

  20. 20 Debbie May 20, 2009 at 12:38 PM

    Well, I pretty much agree with all stated above. I also believe that because we are so desperate in getting the funds rolling, that we overlook what we REALLY need to use these funds for. I am not quite sure if all the red tape and paperwork is really necessary in the long run. Why does the government make it so difficult and oppresive to receive the funds necessary to operate. Obama put a plan into action, however, it hasn’t started rolling yet.

  21. 21 jordan May 20, 2009 at 2:23 PM

    I feel like when opportunities like these arise we are quick to start planning big. Bigger planning than we may actually have the means to support. Any improvements we can make with the money is great, but it also seems like we should focus on some of the things that would help get us more out of debt. Hopefully we see this money sooner rather than later because I think it would help avoid a lot of arguments, about what to use it for, from getting dragged on.

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