Antirecession Assistance Is Helping but Distribution Formula Needs Reassessment

GGD-77-76: Published: Jul 20, 1977. Publicly Released: Jul 20, 1977.

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The antirecession assistance program is helping many areas in the United States, but in some respects, the objectives of the Congress are not being met. A review of this program was conducted at 52 governments, including States, counties, and cities, which received $363 million, or about 31%, of all antirecession funds distributed for the program's first four quarters.

Antirecession assistance was found to have varied effects, from preventing tax increases or employee layoffs, as intended, to enlarging surpluses. Needy governments, especially cities, are receiving assistance on the premise that their problems resulted from the recession. Often the problems sprang primarily from other causes, such as long-term erosion of tax bases and inflation. Many governments receiving antirecession payments were not greatly affected by the recession, and assistance probably was not needed to combat recession-related problems. Several governments took no immediate action to stimulate the economy. Giving antirecession assistance to governments which do not have an immediate need may limit the intended stimulative effect on the economy, which could result in their spending the funds when a restrictive Federal fiscal policy is desirable. "Excess employment," as defined in current legislation, is not a reliable indicator of recession's effect on governments. A better formula for distributing antirecession funds is essential for the program to be more effective.

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