November 25, 2020

Recovery Act Spending: Getting to the Bottom Line

Under most circumstances, government spending is slow and deliberate—a key fact that helps reduce the chances of waste and fraud. But the recently passed Recovery Act is a special case: spending the money quickly is understood to be essential to the success of the Act. We all know that shoppers in a hurry tend to get less value for their money. But, ironically, the overall macroeconomic impact of the stimulus (and hence the average stimulative effect per dollar spent) may be maximized by quick spending, even if the speed premium does increase the total amount of waste and abuse.

This situation creates a paradox for transparency and oversight efforts. On the one hand, the quicker pace of spending makes it all the more important to provide for public scrutiny, and to provide information in ways that will rapidly enable as many people as possible to take advantage of the stimulus opportunities available to them. On the other, the same rush that makes transparency important also reduces the time available for those within government to design and build an infrastructure for stimulus transparency.

One of the troubling tradeoffs that has been made thus far involves information about stimulus funds that flow from the federal government to states and then from states to localities. This pattern is rarer than you might think, since much of the Recovery Act spending flows more directly from federal agencies to its end recipients. But for funds that do follow a path from federal to state to local officials, recent guidance issued April 3 by the Office of Management and Budget (OMB) makes clear that the federal reporting infrastructure being created for Recovery.gov will not collect information about what the localities ultimately do with the funds.

OMB says that it does have the legal authority to require detailed reporting on “all levels of subawards,” reaching end recipients (Acme Concrete or whomever gets a contract or grant from the municipality at the end of the governmental chain). But in the context of its sprint to get at least some system into place as soon as possible (with the debut date for the Recovery.gov system already pushed back to October), OMB has left this deep-level reporting out of its immediate plans. The office says that it “plans to expand the reporting model in the future to also obtain this information, once the system capabilities and processes have been established.”

On Monday, ten congressmen sent a letter to OMB urging it to collect this detailed information “as early as possible.” One reason for OMB to formulate detailed operational plans in this area, as I argued in recent testimony before the House Committee on Oversight and Government Reform, is that clarity from the top will help states make competent choices about what if anything they should do to support or supplement the federal reporting. As the members of Congress write:

While it is positive that OMB goes on to reserve the right in the guidance to expand this reporting model in the future, it would seem exercising this right and requiring this level of reporting as early as possible would help entities prepare for the disclosures before projects begin and provide clarification for states as they begin investing in new infrastructure to track ARRA funds.

In the end, everyone agrees that this detailed information about subawards is important to have—OMB “plans to collect” it and the signatories to yesterday’s letter want collection to start “as soon as possible.” But how soon is that? We don’t really know. The details of hard choices facing OMB as it races to implement the Recovery.gov reporting system are themselves not public, and making them public might (or might not) itself slow down the development of the site. If no system were permitted to launch without fully detailed reporting of subawards, we might wait longer for the web site’s launch. How much longer? OMB might not itself be sure, since software development times are notoriously difficult to forecast, and OMB has never before been asked to build a system of this kind. OMB asserts that it’s moving as fast as it can to collect as much information as possible, and without slowing it down to ask for explanations, we can’t really check that assertion.

Transparency often reduces the degree to which citizens must trust public officials. But in this case, ironically, it seems most reasonable to operate on the optimistic but realistic assumption that the people working on Recovery Act transparency are doing their jobs well, and to hope for good results.

Comments

  1. Anonymous says:

    It’s inflation you guys have to worry about. Well no inflation is just a way to wash out the mistakes of the past and “reboot” the economy, but in this case inflation is also going to rip off the Chinese and leave them holding worthless paper in the form of US treasury bonds… I think they’ll be cranky.