The dictionary defines fungible as:
- Returnable or negotiable in kind or by substitution, as a quantity of grain for an equal amount of the same kind of grain.
- of goods or commodities; freely exchangeable for or replaceable by another of like nature or kind in the satisfaction of an obligation
Synonyms: changeable, commutable, compatible, converse, convertible, equivalent, exchangeable, interconvertible, mutual, reciprocal, reciprocative, same, substitutable, synonymous, workalike
“People think this tax is for Social Security. But tax monies are really fungible. They get raided all the time.”
— Eugene Ludwig
Example 1: The Obama Administration has been trying to trumpet the “success” of the Obama/Geithner Stimulus billion dollar boondoggle officially know as the American Recovery and Reinvestment Act (“ARRA”) and the push for “shovel ready” jobs in which to invest. The most touted and visible projects were highway and roadway infrastructure projects famous for their large, $10,000 signs proclaiming ARRA as the funder. Obama promised that this massive infusion of tax money would improve our crumbling infrastructure. The “brightest” president and treasury secretary seemed to have forgotten the basic principle that money is fungible and can move around.
Two economists, Timothy Conley and Bill Dupor, took a detailed look at ARRA and its impact on spending and jobs. What they found is a perfect demonstration of the fungibility of money,
“Upon acquisition of ARRA funds for a specific purpose, a state or local government could cut its own expenditure on that purpose. As a result, these governments could treat the ARRA dollars as general revenue, i.e. the dollars were effectively fungible.”
In other words state and local governments did not increase their spending on infrastructure with the ARRA money, but used the ARRA money INSTEAD of their local dollars for infrastructure and redirected the local dollars that would have been spent on infrastructure on other budget shortfalls,
“States were able to re-purpose some ARRA dollars. For example, despite the fact that the ARRA gave states $22 billion, of the total $28 billion available, through September of 2010 to spend on infrastructure, the number of highway, bridge and street construction workers, nationwide, fell dramatically over the past several years.”
Here are some examples of what the states were able to do upon getting loads of ARRA money;
- In Texas, ARRA dollars arrived and simultaneously the number of Texas highway, bridge and street construction workers declined. Employment in that sector fell from 34,600 workers in May of 2008 to 28,500 workers in May of 2010. Total capital outlay on highways in Texas ( scal year ending on August 31) went from $3.38 billion in 2009 to $2.82 billion in 2010. This decrease in state expenditures occurred even though Texas spent $0.70 billion in ARRA highway funds during 2010. The Texas government responded to its receipt of ARRA highway dollars by cutting Texas’ own contribution to highway spending, which freed up state dollars to boost suffering state finances.
- The State of New York provides a second example. For the year ending in May 2009, which contains only three months of the ARRA period, the New York Department of Transportation capital project spending was $3.42 billion. For the year ending in May 2010, in which ARRA spending was in full swing, this spending was $3.47 billion (i.e. nearly unchanged). On the other hand, the US Department of Transportation reported that it outlaid $522 million in ARRA monies to New York by May of 2010. Interestingly, the reduction in state transportation dollars simultaneous with its spending of ARRA dollars may not have been planned in advance by the state government; the planned 2009-2010 budget allocated $3.95 billion towards transportation capital spending. This was nearly $500 million more than it actually spent.
- Michigan provides another example. For the fiscal year ending on September 30, 2009, Michigan’s revenue from Federal aid had increased by $189.2 million over the previous fiscal year; however, over the same horizon, capital outlays had risen by only $17.4 million. What might explain this gap? Taxes and miscellaneous revenues received by the Department fell by $140.6 million relative to the previous scal year. The US DOT reported that it outlaid $110 million to Michigan through September 2009, $105 million of which was FHA money.
- The Ohio Department of Transportation (2010) provides spending details for its 2009 fiscal year, which began on July 1, 2008. It reported $935 million in ARRA stimulus dollars for scal year 2009, which represented a 54 percent increase in Federal funding relative to 2008. However, capital outlays increased by only $183 million over the same period.
Basically the fungibility of money allowed the states to substitute the ARRA money for the state money which was used elsewhere. If that isn’t bad enough Conley and Dupor estimate that ARRA created/saved 450,000 jobs (these were limited to public sector or government jobs) while Obama/Geithner eliminated/forestalled ONE MILLION private sector jobs. We need more stimulus like we need more rain.
Example 2: Politicians like to walk the fine line between many issues trying to both please one constituent while not ticking of another. One area where they are, on paper, consistent is when swearing that federal tax dollars will not be spent on abortions. Remembering that money is fungible this statement, on paper, is perhaps true, but providing tax dollars to agencies that perform abortions allow them to move their other dollars to fund abortions and using federal dollars for other services. Planned Parenthood is the larges abortion provider in the country. The most recent annual report available (FY 08/09) show revenues of nearly a billion dollars with the government contribution of over $360 million. Do you have any doubt that should Planned Parenthood lose their government money, fewer abortions would be performed? Why don’t we try it for a year and see what they do?
Example 3: I know that he is dead, but Yasser Arafat is a good example of a third world scum bag who provides a good example of money’s fungibility. It is estimated that the Palestinians receive over ONE BILLION DOLLARS in foreign aid each year. No one is quite sure where that money goes and somehow Arafat accumulated a great deal of wealth before his death. You could easily substitute Mr. Arafat for Saddam Hussein of Iraq and the “Oil for Food” program,
“It began as a U.N. humanitarian aid program called “Oil-for-Food,” but it ended up with Saddam Hussein pocketing billions to become the biggest graft-generating machine ever and enriching some of America’s most forceful opponents at the United Nations. Plus, some evidence suggests that some of the money ended up in the hands of potential terrorists who are opposed to the United States.”
We need to remember this the next time our government give aid to dictators in Egypt, Syria, Pakistan, Mexico, etc…and especially the United Nations.
Example 4: This last example is the sad, sad story of former Republican Congressman Tom DeLay. In DeLay’s case the fungibility of his money (campaign contributions that he administered) was deemed “money laundering” and was recently convicted in Texas.
“In the trial, DeLay’s lawyer argued that the $190,000 in corporate donations that DeLay gave to to the Republican National Committee (RNC) through his state political action committee, Texans for a Republican Majority, was not the same money that the RNC later sent to state candidates in Texas at DeLay’s direction. The jury disagreed, essentially deciding that DeLay attempted to use the RNC as an end run around Texas campaign finance laws.”
I have known non-profit groups that maintain numerous bank accounts keeping thier money separate in an attempt to comply with the constraints of different funding sources and to hide the fact that…
MONEY IS FUNGIBLE!