# Stimulus

More proof the stimulus did its job in Iowa

Voting for the so-called “failed stimulus” has become a stock phrase in Republican attack ads against Congressional Democrats. But as Bleeding Heartland has discussed many times before, the “Great Recession” would have been more devastating without the 2009 American Recovery and Reinvestment Act.

State budget cuts are a huge drag on the economy. Follow me after the jump for a picture that’s worth a thousand words on how a favorite conservative punching bag helped soften the recession’s impact in Iowa.

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7,000 long-term unemployed Iowans are out of luck

Approximately 7,000 Iowans who have been out of work for at least a year have lost their chance to receive an extra 13 weeks of unemployment benefits at the federal government’s expense. The 2009 stimulus (American Recovery and Reinvestment Act) included a provision “to fund the entire cost of extended unemployment benefits through the end of 2011, rather than requiring states to pay half of the cost.” States with unemployment rates of at least 6.5 percent could qualify for 13 weeks of extended benefits, and states with unemployment rates exceeding 8 percent could qualify for 20 weeks of extended benefits.

Iowa was among nine states that did not pass enabling legislation (a “Total Unemployment Rate trigger”) to take advantage of that portion of the stimulus. Democrats in the Iowa Senate recently approved a bill on a mostly party-line vote and urged the Iowa House to act by March 10. New employment figures to be released on that date were expected to bring Iowa’s three-month average unemployment below the threshold for qualifying for the federal stimulus program. Indeed, Iowa Workforce Development confirmed that the state’s unemployment rate held steady at 6.1 percent in January, bringing the three-month average rate down to 6.1 percent.

Governor Terry Branstad didn’t advocate for the enabling legislation, and House Republican leaders decided not to move the bill:

“[T]he House Republican caucus is not interested in making it harder to be an employer in the state of Iowa,” said House Speaker Kraig Paulsen, R-Hiawatha. “What’s going on with unemployment compensation right now is making it harder to be an employer.”

I believe Republicans misunderstood the essence of this program. As the National Employment Law Project explained in a February report, the stimulus act included full federal funding for these extended benefits. Note: that report estimated that about 29,000 Iowans could potentially receive the 13 weeks of extended unemployment benefits. Iowa Senate Democrats estimated that about 7,000 would qualify. That’s a relatively small percentage of the 102,000 unemployed Iowans, but roughly $14.5 million in benefits divided among 7,000 people would have meant a lot of extra disposable income in communities with high jobless rates.

It’s lamentable that Republicans declined to act on behalf of Iowa’s long-term unemployed. In addition to helping jobless individuals, unemployment benefits have a powerful multiplier effect in local economies, because the people who receive them tend to spend the money quickly on goods and services they could not otherwise afford.

Democrats in the Iowa House and Senate share the blame for not passing the Total Unemployment Rate trigger during the 2010 legislative session. When the stimulus went into effect in 2009, Iowa’s unemployment rate was too low to qualify for that money (though state officials did secure unemployment benefits through a different part of the stimulus). But in early 2010, Iowa’s unemployment rate exceeded 6.5 percent. If the Iowa House and Senate had passed enabling legislation, Governor Chet Culver surely would have signed it, and some jobless Iowans would already have received the extra federal funding.

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Iowa risks leaving $116 million in unemployment benefits on the table

An estimated 29,183 long-term unemployed Iowans could qualify for some $116.3 million in additional benefits, but only if state legislators act quickly, according to a new report by the National Employment Law Project. Federal dollars could cover an extra 13 weeks of benefits for those Iowans. Follow me after the jump for details and background on the federal stimulus money we may leave on the table.

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How well did Iowa use transportation stimulus money?

Last week the non-profit organization Smart Growth America released a report on “how successful states have been in creating jobs with their flexible $26.6 billion of transportation funds from the American Reinvestment and Recovery Act (ARRA).” The report demonstrates that “the states that created the most jobs were the ones that invested [stimulus funds] in public transportation projects and projects that maintained and repaired existing roads and bridges. The states that spent their [stimulus] funds predominantly building new roads and bridges created fewer jobs.”

Table 2 of the full report (pdf file) ranks the states in terms of percentage of road spending allocated to “system preservation” (road and bridge repair) versus building new capacity. Here Iowa did well, spending 93 percent of the stimulus road money on repair work. Iowa ranked 12th in this category; seven states and Washington, DC spent 100 percent of their ARRA road funds on repair.

Iowa didn’t score as well (30th place) on Smart Growth America’s list of states by the percent of stimulus transportation funding spent on public transit or non-motorized projects. Just 3.5 percent of Iowa’s transportation stimulus money went to such projects. That’s not surprising; it has long been difficult to persuade Iowa policy-makers to invest more in passenger transit, even though we have an aging population, and many older Americans want alternatives to driving. A long-range transportation funding plan adopted in 2008 didn’t require a single extra dollar to be spent on public transit in Iowa. The Republican-controlled Iowa House has already voted to scrap funding that would help bring passenger rail service to Iowa City, and Governor Terry Branstad didn’t include passenger rail funding in his draft budget for the next two years.

After the jump I’ve posted excerpts from the full report, which explain why repair and transit projects create more jobs per dollar spent. A memo about the recent opinion poll findings references below can be downloaded here (pdf).

Smart Growth America’s latest study didn’t assess the rate at which states turned around their stimulus transportation funding to create jobs. A 2009 study by the U.S. House Transportation and Infrastructure Committee showed that Iowa was the second-best state in terms of allocating stimulus road funds quickly. At the end of July 2009, 85.1 percent of the $358 million Iowa received for highway and bridge projects was under contract, and 74.9 percent was for projects already underway. Those percentages were more than double the national average.  

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Weekend open thread: Back to school edition

Iowa school districts are able to hire back more teachers as the academic year begins, thanks to the fiscal aid Congress approved earlier this month. That’s the bill Terry Branstad avoided talking about for weeks, before finally admitting that he opposed extra federal money to support state education and Medicaid budgets. Republican governors who aren’t in campaign mode understand how foolish it would be to turn down funding for schools and health care. Mitch Daniels of Indiana, whom Branstad seems to admire, is in full-blown Republican hypocrite mode. Daniels echoed the GOP talking points against the stimulus package this summer, but now that it’s law he’s asking for the education and Medicaid money.

I see why Branstad avoided advertising his opposition to the “one-time money”; the extra federal funding has real-world benefits for tens of thousands of Iowa children. In Des Moines public elementary schools, it means time for art, music and physical education will be restored to previous levels, with 13 jobs saved. We were thrilled to learn that the beloved music teacher at my children’s school will be back. He had expected to be assigned elsewhere in the district because of the cuts announced in the spring.

In the third Congressional district race, Leonard Boswell’s campaign highlighted Republican Brad Zaun’s votes against education funding in the Iowa Senate, as well as his promise to try to shut down the federal Department of Education if elected. In contrast, Boswell

has more than doubled the maximum Pell Grant award for Iowa students attending college, and has made the largest investment in federal student aid since the first GI bill was passed. He has continued to support early childhood education programs like Early Head Start and child care services provided through Community Block Development Grants. Boswell has advocated for smaller class sizes in our public schools and voted to save education jobs threatened due to state budget shortfalls.

You can read the Boswell campaign press release at the end of this post. Zaun’s campaign responded by accusing Boswell of “taking decisions away from our local school boards, and having Washington, DC dictate to us.” In case Zaun hadn’t noticed, local school districts are determining which jobs to restore using the additional federal funds. They’re not all making the same decisions. I doubt that the staff at my son’s school feel Washington has “dictated” anything to them. They are just relieved that more funding came through for the current academic year. Why should young kids get short-changed on art, music and p.e. just because they were in grade school during a recession?

Zaun also noted, “Being married to a teacher, I understand what’s going on very well. Despite increased spending, we are witnessing constantly declining performance. We have a problem that Washington, DC can not and will not solve.” That doesn’t explain why he voted against so much state funding for education.  

Speaking of teachers, I was so touched when my older son’s teacher called me on Friday afternoon. After eight months without a sniffle, he got sick this week and had to miss the first two days of school. She was planning to come in to work over the weekend, so she invited us to drop by the classroom on Saturday. She showed him what he missed on Thursday and Friday, and he was able to paint a picture she’ll laminate and hang on his locker.

This is an open thread. What’s up with you this weekend?

P.S. Todd Dorman is not a hobo. Not that there’s anything wrong with that!

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Branstad opposes federal aid for education, Medicaid

When Congress passed $26 billion in fiscal aid to the states, including $96.5 million in education funding and $128 million in Medicaid assistance for Iowa, Republican gubernatorial candidate Terry Branstad avoided commenting on the issue. Scott Keyes of Think Progress was in Iowa recently and got Branstad to speak on the record about the issue. Click the link for the audio and the full transcript. Excerpt:

[Think Progress]: They just passed that big state aid bill out in Washington. I was curious how you felt about that.

BRANSTAD: I have real concerns because there’s strings attached to that. And it’s one-time money, so it doesn’t solve the problem, it just puts it off a year. And it increases the federal debt. I don’t think they should have done it. I’m not sure, we’ve got to see what the strings are and whether or not we should even accept it or not.

Branstad added that he was against the 2009 stimulus bill and wasn’t sure whether he would accept or reject stimulus funding for Iowa.

Perhaps Branstad has never heard of economic cycles. Congress approved the stimulus bill when the U.S. was in the middle of the worst recession since World War II, and state revenues were dropping at the sharpest rate seen in 60 years. Although the recession is technically over, and state revenues are increasing in Iowa, shortfalls are still projected in key social services.

Branstad says federal assistance “doesn’t solve the problem, it just puts it off a year.” But if the economy continues to improve, state budgets will be under less strain in the 2012 fiscal year. Branstad would rather give up an additional $96.5 million for Iowa schools during the current fiscal year, which would cost approximately 1,800 teachers’ jobs. He would rather do without an extra $128 million for Medicaid, and I doubt he’ll offer an alternative budget showing how he would meet the need for those services. Branstad can’t explain how he would have balanced the current-year budget without stimulus funds, just like he can’t explain how he would pay for his new spending promises.

Branstad is wrong about the $26 billion fiscal aid bill adding to the federal deficit, by the way. The Congressional Budget Office confirmed that the bill’s costs are fully offset by closing tax loopholes and various spending cuts.

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