Garett Jones, a professor of economics at George Mason University and former staff economist at the Joint Economic Committee of the U.S. Congress, spoke about this in his debate with Menzie Chinn (of Econbrowser fame), professor of public affairs and economics at the La Follette School of Public Affairs at the University of Wisconsin and senior economist for the Council of Economic Advisers under Presidents Clinton and Bush...
If the bill had focused on hiring West Coast construction workers and East Coast bankers, then they would’ve found a lot of unemployed people to hire. But Congress didn’t do that. Instead, they’re spending more on low unemployment sectors like science, education, and health care. It’s almost like they designed it to crowd out the private sector.
Chinn responded:
If the economy were at or near full employment, you could make that argument. But I suspect that for the next 18 months, there is going to be a lot of underutilized resources. The likelihood of crowding out is small.
Chinn posted yesterday on statement from the San Francisco Fed regarding this question, quoting Senior Economist Daniel Wilson as saying:
...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.
....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.
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