Intelligence Squared US held a good debate last night on whether or not President Obama’s economic policies are working. The participants — three for the president’s policies, three against — focused a big part of their discussion on what the White House has done about state and local budget deficits.

Lawrence Mishel, president of the liberal Economic Policy Institute, spoke up in favor of the president’s economic policies. He said that the fiscal stimulus was “bold and effective” partly because it transferred so much money to state and local governments. “When you give them the money, they don’t cut [their] programs,” he observed.

To Mishel, the state-bailout aspect of the stimulus was positive. But to Allan Meltzer, a Carnegie Mellon economist and adviser to Presidents Reagan and Kennedy, who participated in the other side of the debate, it’s part of the stimulus’ failure.

The money that went to state and local governments only “transfers the deficit,” to the federal government, Meltzer said. The feds fund the transfer with borrowed money.

It’s worse than that. The feds missed an opportunity to push states to make long-term reforms to things like public-employee compensation in exchange for the money doled out earlier this year, 70 percent of which went toward healthcare and education.

So, the feds have taken on some of today’s deficits with money from tomorrow’s taxpayers, but made tomorrow’s state and local deficits, driven by unreformed costs, even bigger, a double hit for the taxpayer.

Former New York Gov. Eliot Spitzer chimed in against Obama’s policies, too. He said that state and local governments are “going bankrupt” next year, despite the federal influx of money.

Without quite saying so, Spitzer seemed to imply that states and cities could stand to cut back, saying that New York, under his administration, had managed to “bend the curve” on healthcare costs (if New York under Spitzer is a good example here, we’re all in trouble).

Spitzer also said that money to bail out the “wrong banks for the wrong reasons” was money that didn’t go into infrastructure — although he didn’t mention that money to bail out states’ special-interest-driven education and healthcare budgets is the same thing.

Obama’s approach toward state and local deficits seems to fit into the “structural failure” that Spitzer diagnosed for the economy in general last night.

Let’s see if the feds’ approach to State and Local Stimulus 2.0 next year is any better.