After 100 Days, Grading Obama's Stimulus Gamble

When he launched his campaign for president, Barack Obama could not have foreseen that the signature accomplishment of his first 100 days in office would likely involve spending $787 billion on an economic stimulus package. But the effects of that piece of legislation—one heavy with both expenditures and expectations of economic recovery—may well determine Obama's success as president. Two and a half months after its passage, it's still early to evaluate the full ramifications of the Recovery and Reinvestment Act for the economy. But there are some promising signs. Paychecks are receiving bumps from the Making Work Pay tax credit, and one major pot of funds—$53.6 billion in aid to states, 82 percent of which must be used for education—started flowing when California received nearly $4 billion in mid-April. Government officials also have reported that many projects are costing them less than expected, as contractors, crunched for cash, compete fiercely for the work.

As plans for the expenditures take shape, however, some concerns remain. One worry is the speed of spending. Some funding is getting out relatively quickly. In a speech after the Department of Transportation approved its 2,000th project two weeks ago, Obama said that "this government effort is coming in ahead of schedule and under budget." Overall, however, $69.3 billion of the package has been promised to specific projects, or about $1 billion per day. Only $14.2 billion of that sum has actually been spent—less than 3 percent of the package's roughly $499 billion in new spending provisions.

"It's obvious that there are lags in spending this money," says Alan Viard of the conservative American Enterprise Institute. While he supported some form of stimulus, one of his main worries was that the stimulus bill's discretionary spending would not get out quickly enough. "I've seen nothing yet that would dispel my concerns," he adds.

The Obama administration is trying to manage a very difficult balancing act between trying to create jobs quickly while still picking projects carefully enough to avoid waste. "We're losing perspective about how much is actually getting accomplished," says Bill Gale, the director of the Brookings Institution's economic studies program. "The stimulus is one of the biggest things the government has ever done, and it was out the door in four weeks." Some economists also dispute the notion that the stimulus is only useful if it's completely spent this quarter. Critics have worried from the start that the bill would be too focused on "ready-to-go" projects that would give the economy a temporary boost but leave the potential for collapse later. Therefore, they say, including both sustained and immediate spending is a better recipe for longer-term recovery.

The speed of spending aside, experts agree that one condition is essential for making sure that payouts are efficient and responsible: having as many eyes on the package as possible. Government watchdog groups have praised the Obama administration for emphasizing accountability and transparency in the stimulus, including the appointment of former Interior Department Inspector General Earl Devaney as the package's top overseer and the launch of the government website Recovery.gov. However, experts add, more still needs to be done. The Government Accountability Office pointed out in a report last week that states are struggling with how to oversee and manage stimulus expenditures, particularly because their own crunched budgets have forced personnel cuts. New Jersey, for example, has not increased the number of its state auditors or investigators, despite a jump in projects, and a state hiring freeze has prevented many of New Jersey's agencies from increasing their oversight efforts, the GAO says.

One change that critics would like to see is better systems to stop waste before it starts, rather than relying on investigations and other mechanisms that kick in after the spending occurs. David Walker, the former head of the GAO, says that this was a key lesson from the first bank bailout legislation passed under the Bush administration. "We wasted tens of billions of dollars because we didn't have clearly defined criteria, objectives, and conditions," says Walker, who now runs the fiscally conservative Peter G. Peterson Foundation. "We don't want the same thing to happen."

With both the nation's economic recovery and its own political reputation on the line, neither does the Obama administration. It will, however, take more than another 100 days to figure out whether the stimulus bill will go down in history as a prime exhibit of wasteful spending, or if the White House can plug potential holes quickly enough for it to be remembered as a bold step that helped dig the United States out of recession.

• Read The Uncertain Wait for All Those Stimulus Dollars.
• Read more about Obama's first 100 days.