On Wednesday, the Obama administration will send $1.6 billion in stimulus checks to states and localities in the first installment of a package that will also boost spending on infrastructure.
The checks will help fill a $4.2 billion gap that has left states and cities with a shortfall of nearly $500 million in federal money to cover a shortfall in state and local funding of about $3.5 billion.
The money will be used to help state and municipal governments purchase up to $10 billion worth of equipment and services, and to expand education and health care, the administration said in a statement.
Obama’s proposal comes amid a recession in the nation’s second-largest economy.
Economists and some analysts say that while the stimulus may have the desired effect, it will likely exacerbate the problem, because it will help only those states and communities with the greatest need.
“The stimulus is going to be really ineffective,” said Doug Holtz-Eakin, a senior fellow at the Brookings Institution and former chairman of the President’s Council of Economic Advisers.
“It won’t make the problem go away.
It’s going to do nothing.”
In a statement, a White House official said that the president’s plan is intended to help “those states and jurisdictions that have already experienced a sharp decline in their tax base, but still are unable to provide the services and capital that the economy requires.”
Obama also said he will create a federal job training program to give low-wage workers the skills and training they need to find jobs.
The plan also includes a $500 billion infrastructure fund, which will be available for states to use to help finance infrastructure projects that will create jobs, expand health care and help the country meet its greenhouse gas reduction targets.
The announcement comes amid increasing public pressure on Obama to make further progress on the country’s economic recovery.
The unemployment rate is still above 7 percent and the economy is still in a recession, which has caused the unemployment rate to rise sharply, as has the cost of housing.
A new report from the Congressional Budget Office (CBO) says the cost to the economy from these new tax hikes alone will amount to $4 trillion by 2022, a cost of more than $1,000 per person per year.