New employment data for August will be released this Friday, fueling a fresh round of analysis and punditry about whether the economy is on the upswing.
To get ahead of that news, Vice President Biden will give what’s billed as a “major address” tomorrow at Brookings to reinforce the administration’s assessment that the economy is improving and the federal stimulus package is working. No doubt, he will come armed with a new set of corroborative economic statistics and federal spending data.
These national statistics are encouraging, but there’s just one problem.
There is no uniform national economy.
Instead, the U.S. is made up of a network of 366 metro economies that are rebounding unevenly.
For instance, at the end of the first quarter of 2009, the U.S. unemployment rate rose to 9 percent. Among the 100 largest metro areas, the unemployment rate ranged from a low 5.1 percent in Provo, UT to a high of 17.5 percent in Modesto, CA, an indication of the bleak prospects facing Central Valley in the months ahead.
Nationally, home prices dropped 6.3 percent over the past year but have improved recently. But a scan of metropolitan housing markets tells a different story. Between first quarter 2008 and 2009, home values plummeted by a whopping 30 percent in Stockton, CA and Las Vegas, NV but increased by 4.7 percent in Houston and several metro areas in upstate New York (likely because they missed the housing boom).
In fact, the last quarterly Metro Monitor report tracking the economic recovery of the 100 largest metro areas confirmed this wide divergence across several key economic indicators.
The implication for federal policy is that broad-based fiscal stimulus measures may not be enough. Targeted interventions (say those found in the FY 2010 budget) or truly flexible tools within the existing stimulus package are needed to address local circumstances.
Is the federal recovery package structured to address this unevenness and bolster metro economies?
Somewhat.
Recall that of the $787 billion in the American Recovery and Reinvestment Act (ARRA), two-thirds was dedicated to fiscal stabilization funds to states, tax cuts, and helping those in need. These are the dollars that can--and have--hit the streets quickly and have helped stave off massive budget cuts and layoffs in many communities.
It is the remaining one-third of the package set aside for state and local spending programs that provide the opportunity for leaders to tailor federal stimulus dollars to local conditions. The much publicized federal highway and infrastructure projects are in this basket.
However, as a recent Avenue post asserted, to act quickly ARRA poured the vast majority of these critical discretionary dollars through business-as-usual federal programs--generally not designed well for flexible, outcome-oriented solutions to reboot varying metro economies.
Yet, ARRA did issue some new spending programs to meet the president’s desire to “reinvest” and transform the economy. These investments, in high-speed rail, energy efficient homes and green initiatives, broadband and health IT systems, neighborhood stabilization, and bold school reform, are spawning noteworthy innovations among local public and private sector leaders. These are paving the way for some potentially game-changing initiatives in metro areas like Chicago, Memphis, Philadelphia and Flagstaff.
To date, just over $200 billion in ARRA funds have been obligated, signaling that we are still at the beginning of a two-year recovery package. There is still time to make improvements to particular spending programs to increase the speed and flexibility of stimulus dollars to transform our metropolitan communities.
The hope is that Biden’s remarks go beyond arguing what economic stimulus has accomplished in the last six months to also reveal the administration’s game plan for the next 18. If the focus is on getting stimulus spending and implementation right for states and metro areas, then the best impact of ARRA is truly still to come.