From Daniel Wilson, “Are Fiscal Stimulus Funds
Going to the ‘Right’ States?” at the SF Fed (h/t Torsten Slok at DB):

…While
it is too early to tell whether the overall stimulus
package will have its intended effects, this review
suggests that, by and large, the distribution of federal
stimulus funds is indeed tilted toward those states most
likely to spend the funds quickly and effectively.

Figure 1: Are Fiscal Stimulus Funds
Going to the “Right” States?

The Letter continues in the conclusion:

The Fiscal Relief Fund, however, appears to be
well-targeted because it is geared toward those states
with the most serious fiscal strains.And the sheer
magnitude of the $90 billion fiscal relief program is
enough to ensure that ARRA fiscal aid funds will
in aggregate be allocated to those states most likely
to spend the money quickly. What’s more, aid provided
to states to fund additional unemployment
insurance benefits is directly aimed at getting money
into the hands of unemployed people, who are generally
considered to have high propensities to spend
rather than save.

Of course, readers who do not believe in the existence of economic slack will be unconvinced by this demand-side argument.

For earlier discussion of the timing of stimulus, see [1] [2]; for size, see [3]; for range of effectiveness (from CBO): [4]; for an explanation of the theoretical divide in assessments, see: [5]; for a primer on one real business cycle view of the world, see: [6].

Last 5 posts by Menzie Chinn

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