If the 2009 sessions of most state legislatures are any indication, the Recovery Act played a pivotal role in helping states weather the economic storm. Although some states are still floundering in red ink, most have found a way to creatively combine new spending strategies, limited budget cuts, some tax hikes and stimulus dollars to craft balanced budgets. Moreover, states have emerged as the tip of the spear in our nation's response to the continued economic crisis.
Across the country state leaders are putting Recovery Act dollars to work in new and creative ways. In Indiana, for example, Governor Mitch Daniels has used $24 million in stimulus funding to employ 2,000 young Hoosiers to break trails and improve public parks. And in Georgia, $187 million in federal stimulus dollars will be used for 51 road, sidewalk and other transportation projects.
While the New Deal was about federal agencies, the Recovery Act is about federal partnership, with states leading the charge in providing essential services to the vulnerable while jump-starting economic growth. This means by necessity that much of the political risk for achieving results falls on the states, specifically governors. With the passage of the Recovery Act, the job of governor quickly became the second hardest job in America.
Within days of enactment, Vice President Biden read the riot act to state and local governments that "business as usual" would not be tolerated. Governors knew they would be held to unprecedented levels of scrutiny. They also knew that they would need to act quickly to ensure they maximized their state's share of the funds available. These pressures often left little or no time to accommodate appropriate legislative oversight or solicit broader public input into spending priorities. This left many state officials "flying naked" as they sought to embrace the opportunity represented by Recovery Act funds.
Despite these risks, states rose to the challenge, saving or creating thousands of jobs and rolling out infrastructure projects and other programs at unprecedented speed. If the figures quoted recently by the vice president are true that the Recovery Act added over 2 percent to U.S. economic growth in the second quarter, this result will be due in large measure to the leadership and vision of state leaders from both parties and in all corners of the country who have worked diligently to implement the Recovery Act even if they do not universally agree on the merits of all its component parts.
While the White House has worked closely with state leaders to navigate the challenges of the Recovery Act, the next phase of implementation will require a new tone from Washington. If the stimulus investment is to achieve more than just plugging budget gaps, states will need to channel multiple streams of Recovery Act funding, such as work force training funds and competitive grants for research and development or green energy, to focus on achieving a transformational change in key sectors of state economies.
In noting that critics fault the Recovery Act for containing too many small investments in scattered programs rather than large strategic interventions, the vice president said that the Recovery Act was not a "silver bullet," but rather "silver buckshot." If this is the case, there is a role for the states and the federal government to work together to ensure that enough individual pellets of funding are concentrated on a single target - such as fostering a new energy economy -- to deliver an economic punch.
Although the Recovery Act will not leave behind the infrastructure legacy of the New Deal, with such transformational public assets as the San Antonio River Walk, that doesn't mean it can't have a transformational impact. Just as an unexpected windfall of federal research funding for the space race provided the seed capital to transform a rural patch of North Carolina into the Research Triangle Park -- the Silicon Valley of the Southeast -- Recovery Act funding opportunities in green energy, biomedical research and other fields could propel new communities into an economic future radically different from the one they face today.
The public is entitled to accountability and the federal government is right to emphasize it. But when the main message to the states is a wag of the finger, the tendency is to play it safe rather than pursue creative strategies. If the feds wish to maximize the legacy of the stimulus investment and empower state policymakers to take the risks necessary to achieve transformational change, as North Carolina Gov. Luther Hodges did in the 1950s, they will need to convene and inspire state leaders to explore the possibilities that exist for spending stimulus dollars not just emphasize the consequences of failure.
Let's hope the administration and Americans are willing to look beyond the short-term and begin instead to look to the horizon. The hard work of addressing today's needs will continue in every state capitol, but the more imaginative, transformative opportunities made possible by this unprecedented federal investment must also be pursued if the full promise of the Recovery Act is to be achieved. That will require a new partnership between levels and branches of government. Thankfully, for both the states and the federal government, the risk of pursuing the possibilities is far less than the risk of failing to act.