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The Biden Bucks Blowout

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from the magazine

The Biden Bucks Blowout

Local governments are spending hundreds of billions of dollars in federal handouts for dubious needs. Autumn 2022
Economy, finance, and budgets
Politics and law

For 20 years, golf had been wilting in the heat of South Florida. As aging players gave up the sport and younger people sought recreation elsewhere, the area’s grand, lush courses and the planned communities surrounding them—many built by overly optimistic entrepreneurs—struggled. Dozens of courses closed. Then Covid-19 arrived, and among the many effects it has left in its wake was a golf resurgence, as a new generation, wanting to spend more time outside, discovered the links. Courses overflow again in South Florida, and tee times are scarce.

Not to worry: the Biden administration is coming to the rescue. The town of Palm Beach Gardens is using $2 million in federal money from President Biden’s $1.9 trillion American Rescue Plan Act (ARPA) to build a $16 million public course, with a two-story clubhouse and driving range that should help at least partially slake the new thirst for golf. The city’s project, one of several golf-course investments that the Biden legislation is funding, is entirely within the spirit of the “rescue” act, which devotes only about 9 percent of its money to public-health causes that fight the virus but allocates hundreds of billions of dollars to local governments and schools for the vague task of providing “support for a recovery” and funding “investments in infrastructure.” As one wag at a South Florida newspaper observed, “If this keeps up much longer, Palm Beach Gardens may get an equestrian center from it.”

Showering local governments with unprecedented federal dollars, ARPA is the last of several emergency packages, totaling more than $5 trillion, to come from Washington in response to the pandemic. Though termed a “rescue bill” to enhance its appeal, the Biden legislation was more of a stimulus, designed to stoke spending by the country’s tens of thousands of local governments to boost economic activity. Signed by the president in March 2021, even as the economy was recovering and tax revenues were rebounding far faster than most analysts had predicted, ARPA allows for wide discretion in how to spend “Biden Bucks.”

The federal money has turned pols into the proverbial kids in the candy shop. They’re using it to restart parades, fund street performers, upgrade high school weight rooms and sports fields, and build bike paths, golf courses, pickleball courts, and other “essential” infrastructure. Billions of dollars are going to illegal aliens. Cities are testing efforts to give low-income residents guaranteed money that supporters say will end poverty. Municipalities are moving to construct their own broadband networks, in competition with the private sector. It’s all part of a program whipped up so quickly that it included billions of dollars for municipal governments that don’t even exist.

To many local officials, ARPA’s allocations seem like free money. But it comes at a cost to the United States. The act’s funds haven’t been generated by taxes or other federal revenues. Instead, they’re financed by “printing” new money (something done mostly via electronic keystrokes these days)—massively expanding the dollars in circulation and thus intensifying our current inflation, the highest in decades. Aside from the pain that the upward spiral of costs is causing ordinary Americans, inflation is also raising the price that governments pay for essential services like police and fire protection, even as politicians rush to spend their one-time Biden Bucks on ephemeral projects and untested programs. With a Federal Reserve–induced recession, sparked by high interest rates to curb inflation, now a distinct possibility, Biden Bucks may soon be remembered as the spending blowout that preceded a local government budget bust-up.

When President Biden introduced ARPA in early 2021, the federal government had already passed several earlier Covid relief bills, totaling more than $3 trillion. The March 2020 CARES Act, for instance, pumped $2.2 trillion into the economy in the form of $280 billion in direct payments to households, $260 billion in supplemental unemployment benefits, $350 billion in potentially “forgivable” loans to small businesses, $300 billion in hospital aid, and $339 billion for states and cities, including $150 billion deposited in a Coronavirus Relief Fund. The one restriction on the money was that local governments couldn’t use it for general budgetary purposes—that is, to make up for lost tax revenues from shutdowns or otherwise to fund non-Covid programs. The Trump administration and congressional leaders wanted to encourage governors and mayors to reopen their economies as soon as possible. Some nine months later, as his White House tenure was ending, Trump signed another funding bill that unleashed $900 billion in new Covid relief money. It extended supplemental unemployment benefits through March 2021 and added $284 billion in small business loans, $12 billion in grants for businesses in low-income communities, and $55 billion for public schools, along with $2.7 billion for private institutions.

Biden began formulating his “rescue” legislation just weeks later, partly to fulfill campaign pledges. His plan was to send American households another round of direct payments (in the form of checks worth $1,400), extend federal supplemental unemployment benefits to September 2021, and provide $130 billion to help public schools reopen, along with a whopping $350 billion in extra budgetary aid to states and localities. By the time Congress began considering his plan in early 2021, however, the country’s recovery was already accelerating. With signs of a rebound emerging daily, Republicans tried to limit the rescue effort’s size, proposing, instead, a $618 billion stimulus package, with no direct budget funds for states and cities. But Biden’s plan passed along party lines, with no Republicans supporting it.

Since then, nearly $500 billion in federal money has begun pouring into the accounts of states, cities, counties, towns, and school districts, even as they’re already awash in cash. Whereas experts predicted early in the pandemic that local governments might lose as much as $200 billion in revenues, 29 states by early 2021 had already managed to bring in more yearly revenue than in the 12 months before Covid shutdowns began, reaching this recovery milestone “far faster than after at least the previous two recessions,” a Pew study concluded.

A more recent Pew report found that states have now amassed their largest “fiscal cushion” in history—surplus revenues and rainy-day funds totaling $217 billion, an increase of more than $100 billion over the pre-Covid 2019 fiscal year. This cushion comes even after states boosted spending in 2021 by 16.2 percent—the highest level in at least 35 years, according to the National Association of State Budget Officers. The flood of tax revenues has continued into 2022, with many states in April registering record tax collections.

Many governments have gotten creative in spending the federal windfall. Though no comprehensive database yet tracks this massive program, one representative file, containing the spending plans of 151 large municipal governments around the country—those with more than 250,000 residents—suggests how politicians are putting this money to work. The $19 billion of spending on nearly 2,300 programs and projects announced so far by these governments includes $96 million for arts and cultural spending and $477 million for direct cash subsidies to residents, or to continue cash-assistance programs that Congress stopped funding. They are spending more than $800 million on housing, $219 million on government-subsidized broadband, and $166 million on premium pay and bonuses to public-sector workers. Despite record tax collections, the governments also list some $6.7 billion in Biden spending to replace revenues in government operations “lost” during the pandemic, allowing them to spend the replaced funds on projects that Washington hasn’t approved.

The millions of dollars flowing to arts and cultural programming hardly sounds like rescue financing. New York City, one of the communities hardest hit by Covid, has allocated $25 million from the rescue legislation to arts projects, including a program called City Artists Corps that has made thousands of $5,000 grants to street performers, outdoor “pop-up” shows, poets, and musicians. Among the grantees, according to a social media account highlighting the works that the city funded, is the creator of a giant banana sculpture touring Gotham neighborhoods, a street dancer, an evening of “Bodega Raps” in Soho, and an artist “activating” toy Plushies for kids around the city. Also featured: the People’s Bus, a mobile community center accompanied by something called the Ice Cream Truck of Rights, which offers free ice cream “while creatively educating the recipients about their housing, immigration, labor and voting rights.”

Austin has used $5 million in Biden Bucks for a live-music preservation fund. Grants target venues at risk of shutting down. Recipients, though, must “attend three racial equity workshops and create an Equity Strategic Plan” for using the funds—part of the administration’s push at “driving equity with state and local rescue funds.” Chula Vista, in Southern California, is funneling $1 million into a new arts facility, where “the community can feel welcome.” Chula Vista will also offer artists $10,000 in Biden Bucks–funded commissions for new works, while investing $200,000 in federal cash to revive its annual pre-Christmas Starlight Parade, a casualty of California’s extreme pandemic lockdown mandates. San Jose will spend $4.2 million of recovery money to expand into a yearlong program its summer Viva Parks series of “free events focused on health and wellness resources, physical activity, and community.”

Much of the design of ARPA money for municipalities was based on previous federal-funding programs like the community development block grant, so it’s not surprising that many cities are reprising or expanding former government-funded projects—regardless of their effectiveness. Buffalo is spending some $5 million in Biden dollars to bolster its arts and theater community, including capital projects and grants to institutions designed to make the city “a thriving arts, museum and cultural environment.” Buffalo has traveled this road before. The city has been one of the largest beneficiaries of federal block grants; in the 1990s and early 2000s, it shelled out some $60 million in federal gifts, trying unsuccessfully to revive its theater district—“one of Western New York’s most heavily subsidized stretches of real estate,” as one paper put it.

The federal jackpot has also produced a spending frenzy on sports, recreation, and leisure projects. One category of expenditures that has particularly angered critics is on school sports and recreation equipment and facilities, drawn from the $130 billion sent to education districts, ostensibly to help them reopen and to aid students in catching up for lost classroom time. Congressional Republicans balked at the sum, saying that it was well beyond what the Centers for Disease Control estimated was necessary to reopen schools safely. Democrats proceeded nonetheless, “paving the way for rampant waste and abuse,” Virginia Foxx of North Carolina, the top Republican on the House Committee on Education and Labor, has said.

The CEO of a sports equipment company told the Associated Press that he’s seen some $25 million in spending from school districts looking to upgrade their high school weight rooms with pandemic money. Another said that he’s been calling school districts around the country, reminding them that they can spend the Biden money on such equipment. One Iowa district spent $100,000 of federal aid to double the size of its weight room and add a new floor with “customized school branding.” Schools are also refurbishing playing fields with funds that taxpayers would have hesitated to approve and finance. Federal grants gave a Wisconsin school district enough budget room to spend $1.6 million installing synthetic turf. A district school’s athletic director admitted that such a project might otherwise have been impossible, with taxpayers unlikely to vote for bonds to finance it. “I don’t see us being a district that would go to a referendum for turf fields,” he noted. By contrast, the district devoted just $400,000 of the federal money to tutoring and other aid for students who fell behind because of remote learning.

Cities, counties, and towns are taking a chunk of their $350 billion in Biden Bucks for similar outlays on sports, leisure, and parks. Communities are rushing to build courts for pickleball—a new sport that mixes tennis and other net games and is apparently storming the country. East Lansing, Michigan, is deploying Covid funds to build six new courts. Passionate players in Sidney, Ohio, petitioned for new courts; officials are giving them what they want with Biden money. A North Carolina county is also considering $345,000 in the federal funding for new pickleball courts.

New York spent $25 million in Biden Bucks for street artists and performers, many appearing at local festivals organized around the People’s Bus, a traveling community center. (IRA BERGER/ALAMY STOCK PHOTO)

Beyond pickleball, Colorado Springs is lavishing about $6 million in pandemic money on installing irrigation systems in two municipal golf courses. Buffalo will devote a mind-boggling $23 million in pandemic money to a parks reconstruction project that will feature “new athletic fields, a splash pad, outdoor pool, playgrounds, landscaping, shelter buildings . . . and construction of indoor sports courts, restrooms, locker rooms, concessions, and multi-purpose space.” Syracuse will spend $1.9 million upgrading its park system and another $2 million to develop and implement an “urban forest master plan” that will map the city’s “tree canopy” and add trees in areas seen as underserved.

Governments are also seeking to transform their communities into destinations for amateur and youth sports with construction projects and marketing plans bankrolled by ARPA dollars. Officials in Onondaga County in upstate New York have proposed spending $25 million on a giant recreation facility of soccer, lacrosse, softball, and baseball fields; officials say that it would attract 500,000 people a year to the area for youth sports events. The county’s executive has boasted that Onondaga could pay for it “in cash” with American Rescue Plan money. Montgomery County in Maryland is forking out $800,000 of its Biden money on marketing itself as a youth-sports destination; Washington, D.C., has earmarked $300,000 to study how to make the city “a nationally recognized locale for competitive high school and post-secondary athletes.”

Crises like the pandemic tend to create new calls for government action or intensify campaigns already under way. During Covid lockdowns, one new cause célèbre became Internet access. The rapid move to remote work and schooling throughout America during lockdowns suddenly made bringing Internet to every household in America a social justice crusade. The Biden infrastructure bill, passed in November, funnels some $65 billion to governments for building broadband networks. Further, these governments have allocated billions of dollars from the American Rescue Plan to programs that range from installing Internet in more public buildings to giving children laptops to adding Internet in remote areas to municipal broadband. There’s little sense of how well this money will be spent, or whether the programs will be effective.

Indeed, initial public forays into expanding Internet access have proved disappointing, a reality ignored in the current rush to spend. Rural Internet access has been an issue since the mid-1990s, when the federal government launched a program meant to replicate for the Web what the Rural Electrification Association did to power remote areas of America in the 1930s. After years of trying, however, the initiative has managed to connect only several hundred thousand people—partly because of a lack of interest by the very customers it sought to service.

Several academic studies, meanwhile, have examined how Obama administration efforts to subsidize Internet access for low-income households via municipal broadband networks have failed to generate much connectivity. Some studies have found that as few as 10 percent of people targeted by these projects signed up. That’s one reason that, pre-Covid, experts called for more experimentation to learn what kinds of programs might get people to connect. The pandemic has swept those concerns aside, and America is embarking on an untested, potentially $70 billion program to build out digital infrastructure that could wind up lightly used or quickly superseded by new technology.

As ineffective, or even frivolous, as some of this expenditure appears, at least it represents dollars invested in tangible items. One of the biggest categories of rescue-act spending is direct cash to individuals—money to extend unemployment benefits, or for cities and states to cut one-time checks to those who didn’t qualify for federal benefits. The 151 municipalities tracked in the federal database devoted nearly half a billion dollars to such payments, representing 2.5 percent of their total spending. At that rate, the entire stimulus package could easily include more than $8 billion in direct cash subsidies, coming after the government had already spent billions in enhanced unemployment benefits and one-time checks in the first two rounds of Covid aid. In late August 2021, the Treasury Department ruled that the terms of ARPA allowed local governments to keep paying additional benefits to those who were out of work beyond September 6, the date that federal benefits expired. Treasury’s ruling came as businesses struggled to hire workers and as some states that ended benefits early saw hiring upticks—making the need for the extra cash seem largely counterproductive.

Another big category of direct cash payments has been “excluded worker funds,” which states and cities are paying from ARPA money to those who didn’t qualify for unemployment benefits and other federal aid. Largely, this money is flowing to illegal immigrants. New York State, for instance, dedicated $2.1 billion to its controversial effort to provide one-time payments of $15,600 to approximately 90,000 unauthorized workers, which ARPA helped fund. Boston set aside $1 million for illegal-immigrant benefits, while Washington, D.C., kicked in some $17 million for a program similar to New York’s, paying in lump sum the equivalent of a $300 weekly check over the course of a year. New Jersey set its fund at $40 million.

Some communities are dispensing rescue-act money with zero strings attached. They’re funding experimental guaranteed-income programs, which pay nonworking residents, including the homeless, monthly stipends on top of other government benefits. The notion is that such payments would eliminate poverty in America simply by providing a basic payment to the poor. Chicago is giving $500 a month to 5,000 families to supplement current benefits. Minneapolis is spending $3 million on a similar program. Mayors describe these as “pilot” initiatives—which might, in turn, lead to a massive campaign to fund similar programs nationwide.

Because the money comes with no strings attached, it raises the question: Is poverty simply the absence of income, or is it also the result of habits and choices? And if such programs become widespread, would their funding essentially make much of unskilled, entry-level work unprofitable, denying valuable work experience to the unskilled and leaving them forever unemployable? That was what Maine senator Susan Collins had in mind when she said of such programs: “The federal government’s obligation is not fulfilled by simply sending a check, washing its hands of any responsibility to actually help people achieve self-sufficiency. . . . The time-tested way to achieve [such] goals for American families is by supporting and rewarding work.” Though advocates claim that these programs will help people gain the financial stability necessary to improve their lives, research has already shown otherwise. A study by academics at Harvard University and the University of Exeter found that low-income individuals receiving no-strings-attached grants during the pandemic earned less, and felt less satisfied by work, than those of similar demographics who didn’t get the handouts.

Defenders of the Biden spending point out that the money is funding many worthy programs. But much of that could have been done with taxpayer dollars from state and local governments already steeped in cash. Instead, the Biden rescue act reinforced an increasingly common view on the left: that deficit financing is benign because it’s basically “free” money. The result is the highest inflation in a generation. Though the Biden administration has tried to blame soaring prices on Russia’s attack on Ukraine, inflation on core items was already rising in the U.S. well before the war, and before inflation took off in other wealthy countries, too, most of which had provided far less Covid stimulus than the United States.

Acknowledging such skepticism, President Obama’s chief economist, Jason Furman, told a reporter in May that, though he had advocated stimulus, “quantities matter. It can’t just be that more is better.” In recent months, economists across the ideological spectrum have made a convincing case that ARPA has contributed several percentage points to our current inflation. Dean Baker of the Center for Economic and Policy Research put the number at somewhere between 1 and 2 percentage points. Michael Strain of the American Enterprise Institute has argued that it’s as high as 3 percentage points—meaning that it could account for more than one-third of the inflation problem.

These are some of the effects of a spending bill that allocated nearly $2 billion for counties that don’t exist or have no government budgets, according to the Tax Foundation. The total includes $691 million for nonexistent Connecticut governments and $205 million for Rhode Island counties that don’t have functional governments.

Fighting inflation is now a necessary but uncomfortable task. Federal Reserve rate hikes have already slowed consumer and business spending, causing market declines as the country heads toward an economic slowdown and possibly a recession. Americans have watched inflation eat into their savings and cut the value of their wage increases. Governments are feeling the bite, too. The $1 trillion Biden infrastructure program, combined with the rescue act, has driven up wages and sparked shortages in the construction industry—pumping costs up as much as 20 percent. Government workers are now demanding big, inflation-driven raises.

All this is making those surpluses that local governments were boasting about a few months ago seem more likely to vanish quickly as well as making many of the projects that government is funding with Biden Bucks needless and wasteful.

Top Photo: Communities are using Biden stimulus money to build courts for pickleball, the latest recreational fad. (DENNIS MACDONALD/ALAMY STOCK PHOTO)

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