Metropolitan Stimulus

The economic geography of the country is lumpy. It mostly, though not entirely, corresponds to the geography of the nation’s metropolitan areas which do not correspond exactly with the lines of state and local governments. Policy, on the other hand, is generally carried out at the level of state and local government. This means that depending on the dynamics within the state and local government policies targeted at some economic issue may vary considerably in how they are applied and how effective they are. This matters quite a bit when the economic issue in question is a major recession, and the policy is stimulus. Along these lines, a new Brookings analysis of the stimulus from a metropolitan perspective notes:

ARRA, which became law in February 2009, was assembled as the nation’s unemployment rate exceeded 8 percent, and job losses exceeded 600,000 a month.  Thus, the need to intervene quickly led the package’s designers to channel ARRA’s huge flow of funds largely through existing federal-state-local mechanisms, subject to existing laws and guidelines.  Because current federal policy is generally neutral or hostile towards action at a metropolitan scale, ARRA is also. As a result, ARRA inhibits metropolitan creativity in implementation in three ways.  First, it assigns a dominant role to states—which have an uneven record on metropolitan issues. Second, the package treats most of its investment streams as separate and distinct, and sends them to multiple actors at different levels of state-regional-local authority, which will complicate creative efforts at the metropolitan level to “put it all together” in service of integrated solutions. And third, ARRA’s welcome emphasis on transparency tilts too much toward curbing waste, fraud, and abuse and too little on establishing a clear, sensible focus on measuring outcomes.

The report goes on to note that in crucial ways the stimulus does support metropolitan areas, and that with appropriate coordination still more good could be wrung out of various provisions. But states will face a lot of pressure to direct stimulus money to projects that don’t necessarily contribute all that much to the economy, and the feds don’t really have the ability to stop them. As the Brookings Metropolitan Policy Program likes to emphasize, getting rid of policy silos and developing metropolitan-level agencies around which policy can be built would give the federal government a crucial lever at the basic unit of economic policy. In this case, that would have meant a better stimulus with a larger multiplier.