– Sugar Rush Stimulus

The Federal economic stimulus package is at the top of the news. Everyone is looking to Washington DC to spend our way out of a deepening recession.

And we’re all going to be disappointed. After the disappointment, local and state governments will have to pick up the slack.

The Fedgov can pass an 800+ billion dollar stimulus package (here’s a fascinating graphic of the package) .

It can be full of tax breaks and grants and “shovel ready” projects. And – hopefully – that will lessen the effect of this recession. But after that, the Feds will be tapped out. Because the $800 billion comes on top of a $700 billion TARP financial-system rescue on top of a two trillion dollar war on top of a 10 trillion dollar national debt. This “stimulus” is also full of tax breaks which put more money in the pockets of Americans and businesses. But there is no guarantee we’ll actually use that money to buy things and pump up the economy. Consumption accounts for over 70% of the GDP (according to the Federal Reserve) up from 62% in 1970. And consumer debt has skyrocketed – while personal income has risen about 500% since 1980, household debt has risen over 1000%. It is just as likely Americans will pay down their debt as opposed to “spend and stimulate”.

After the “sugar rush” of the stimulus projects is over, what can local and state governments do to address the frightening prospect of middle-class white collar recession plus 10% unemployment? We need some longer term, more sustainable programs.

I attended a brainstorming session with some City and non-profit leaders this past week, and here are some random thoughts and facts about from the “other Washington” (State):

1. Consumer spending may be down, driving down the economy, but people are contributing in other ways. In Seattle we had 130,000 people visiting and using food banks and meals programs in 2008. But Puget-Sound area people also have contributed two million more pounds of food to Food Lifeline over the last 7 months, and volunteerism to support food banks is breaking records.

2. In parallel to that, we’re seeing increased use of City facilities. Use of parks is way up, perhaps because people can’t afford expensive days out of town. Library circulation is up 10% to 15%, as is library walk-in traffic. Free public computers in libraries are booked all day, perhaps by job-seekers and resume-writers, but also by the homeless. Community technology centers are doing a land-office (as in “Hooverville“) business.

3. We need a local stimulus package. And the people of Seattle have continually stepped up to this challenge. Seattle-area voters have approved a number of taxes and levies over the past few years, which will pump more work into the local economy. These include:
•   Sound Transit. In November, 2008, voters approved a $17 billion expansion of light rail, adding 36 miles to the system.
•   Pro-Parks Levy. This levy passed in November 2008 and will fund $146 million in parks improvements over the next six years.
•   “Bridging the Gap”. In 2006, Seattle voters approved $365 million for street, bridge, sidewalk and other transportation improvements.
•   Housing Levy. Seattle voters have twice approved levies to create affordable housing, the latest one in 2001 for $76 million.
•   Fire Facilities Levy. In 2003 Seattle voted $167 million to remodel or rebuild every fire station in Seattle. In 2008 we opened a new Fire Alarm Center and Emergency Operations Center as just one of the projects funded by that levy.
•   Pike Place Market rebuild. This $73 million levy also passed in November 2008 and funds a rebuild of the 101 year old historic market.

4. This morning (Wednesday, February 11th) Mayor Greg Nickels will announce a further set of local stimulus ideas and projects.

We’re losing both blue collar and white collar jobs – construction and high tech and aerospace jobs. We’ll need every one of those projects above and even more initiatives to put Seattle and the Puget Sound back to work to move us out of this recession.

The bottom line is simple: the Fedgov stimulus is an important blood transfusion for an ailing economy. But the patient is very sick, and the transfusion will be a sugar rush. It will be up to state and local governments to keep the medicine coming until the economy regains strength and becomes robust again.