Paul Krugman published an excellent New York Times column yesterday on the need to ensure that the significant expansion of the federal government that will accompany Barack Obama’s recession-fighting agenda is itself accompanied by strong measures to avoid corruption and inefficiency.
Citing the FDR precedent, Krugman argues that Obama’s “bond” with the public depends on making government “good,” even in the emergency conditions he will face on January 20:

First, the administration of the economic recovery plan has to be squeaky clean. Purely economic considerations might suggest cutting a few corners in the interest of getting stimulus moving quickly, but the politics of the situation dictates great care in how money is spent. And enforcement is crucial: inspectors general have to be strong and independent, and whistle-blowers have to be rewarded, not punished as they were in the Bush years.
Second, the plan has to be really, truly pork-free. Vice President-elect Joseph Biden recently promised that the plan “will not become a Christmas tree”; the new administration needs to deliver on that promise.

I’d add two thoughts to Krugman’s very important provisos about stimulus spending.
First of all, the best way to ensure that a stimulus package does not succumb to the parochial constituency-tending or vote-buying interests of Members of Congress is to link it systematically to big national initiatives that not only stimulate the economy but also address overriding policy needs that would be compelling even if the economy were not in such bad shape–health care reform, “green” technologies, infrastructure repairs, and even educational improvements. That’s exactly what Joe Biden kept talking about in his recent press conference on the stimulus package–a point that largely got lost in media reports about his promise that the package would not include “earmarks.” Sure, earmarks typically represent parochial spending, but it’s entirely possible to waste large quanitities of money on less-than-priority investments without earmarks. If the entire stimulus package were devoted (for example) to road and bridge repairs and construction, it would involve a whole lot of pork, with or without earmarked appropriations.
Second of all, it’s important to comprehend that the stimulus package is going to represent a vast “good government” challenge not just for the federal government, or for Congress, but for the state and local governments that will inevitably (and properly) be the conduit for major elements of stimulus spending. And that’s why one of the more dangerous ideas kicking around Washington right now is a revival of the Nixonian concept of general revenue sharing for states and localities.
GRS, which was a big Nixon initiative in 1972, and finally expired during the first round of Reagan budget cuts in 1981, involves no-strings federal assistance to state and local governments. There were (and are) three commonly-heard rationales for GRS: (1) it reduces the dependence of state and local government on their own often-regressive and insufficient revenue sources; (2) it offsets the cost of “unfunded (or underfunded) mandates” imposed by the federal government; and (3) it eliminates the inefficiencies associated with bureaucracy-laden “categorical” grants to state and local governments, which often are too narrow to adequately reflect local needs and conditions.
All three rationales are flawed in that the “solution” is poorly tailored to fit the “problem.” States and localities benefitting from GRS have no incentive to address the inadequacies of the tax systems. The best way to deal with unfunded mandates (itself often a misnomer, since some “mandates,” like civil rights compliance or election reform, reflect fundamental responsibilities of government that shouldn’t have to be bribed into existence) is to reduce or eliminate them, not to offset them with untargeted dollars. And there is a vast middle-ground between the kind of maddeningly narrow categorical grants that were popular in the 1970s and GRS, which completely severs revenue streams from accountability for their use.
I couldn’t agree more that the stimulus package should address needs (e.g., health care, infrastructure and education) in which states and localities are heavily involved. And I also strongly agree that helping state and local governments is essential if you want to avoid the counter-stimulative effect of impending state and local cutbacks in services and investments.
But GRS is the wrong vehicle, and might, in fact, enable Republican governors, legislators and local officials to keep their budgets afloat even as they pursue ideologically-driven services cutbacks and stupid tax cut ideas.
It’s entirely possible to provide quick, flexible assistance to state and local governments while insisting on maintenance of their current services and investments and providing basic accountability for the specific results that the assistance is designed to achieve. Maybe that’s what some Democrats who are talking about “revenue-sharing” have in mind, but they need to be clear about it. Nothing would more thoroughly threaten the “good-government” character of Obama’s first big initiative than measures that would fully delegate the power to do good or ill to other levels of government where the kind of parochialism we associate with congressional earmarks are inherent to their scope of responsibility. And I say that as someone who spent more than a decade working at the state level, and harbors no bias against state or localities. While governors, legislators and mayors are typically no worse than their counterparts in Washington, they are hardly infallible, and cannot be expected to avoid the temptation of having their (no-strings federal revenue-sharing) cake and eating it, too.