Critics Say Roads Projects Won't Jump-Start Economy
Thursday, October 30, 2008
As congressional Democrats push for billions of dollars in new spending on roads, bridges and schools to create jobs and revive the economy, many economists are skeptical of the proposal, saying that public works spending is likely to trickle out too slowly to ease the effects of a recession.
"Changes in infrastructure spending are not an effective method of creating jobs or providing short-run fiscal stimulus to the economy," economist Alan D. Viard told the House Ways and Means Committee yesterday. "As many economists have noted, timing lags make it difficult to deliver the stimulus at the time that it is needed."
Viard is a former Bush administration economist now at the American Enterprise Institute. But he rattled off a list of other experts, ranging from those at the nonpartisan Congressional Budget Office to key Democratic advisers, who have reached the same conclusion. Among them: two former Clinton administration economists who wrote in January that spending on infrastructure is among the "less effective options" for forestalling recession.
"In the past, infrastructure projects that were initiated as the economy started to weaken did not involve substantial amounts of spending until after the economy had recovered," said a report by Douglas W. Elmendorf and Jason Furman. Elemendorf is now advising House Democrats; Furman is chief economic adviser to the presidential campaign of Sen. Barack Obama (D-Ill.).
"It's a tough call," agreed Chad Stone, chief economist for the liberal Center for Budget and Policy Priorities, which initially resisted spending on construction projects when Democrats first proposed the idea earlier this year. But now that economists are predicting a deep and long-lasting recession, Stone said, "maybe it's not a terrible thing if the money takes longer to get out there."
In an apparent nod to skeptics, Democrats have begun talking about the need for an economic recovery package that would create good jobs and steady paychecks, in contrast to the sugar rush of other modes of an economic stimulus, such as the tax rebates Congress approved earlier this year. Half of a $61 billion economic package that passed the House last month -- only to die in the Senate -- was devoted to such projects, with the rest of the money going to food stamps, extended unemployment benefits and aid to cash-strapped state governments.
House Democrats are now working on a package that House Speaker Nancy Pelosi (D-Calif.) has said is likely to be much bigger. Some economists are urging as much as $300 billion in new spending, though Democrats this week discussed moving a package of about $100 billion as soon as next month. Details are still being decided, but Pelosi has said any proposal is likely to be weighted heavily with new money for public works.
White House officials and Republicans in Congress oppose the effort, accusing Democrats of dressing pork-barrel projects in stimulus clothing.
"These projects take a long time to get approved, they take a long time for the money to get out into the system, and a lot of the claims that are made about how much transportation could actually help build the economy are overblown," White House press secretary Dana Perino said yesterday.
Without the cooperation of the Bush administration, Democrats said they are unlikely to act until a new president takes office in January.
Yesterday, at one of two lengthy congressional hearings on the subject, Rep. James L. Oberstar (D-Minn.), chairman of the House Committee on Transportation and Infrastructure, defended infrastructure spending.
"I've heard the same tired, old arguments: 'Oh, they're too slow. These infrastructure projects take too long to get going,' " Oberstar said. "You know, the trouble with those economists is that they've never had their hands on a number two shovel. They've never had a callous on their hands among them. . . . We know that we can put people to work in projects that are ready to go, designed, engineered, right-of-way acquired, and [environmentally cleared]. All they need is the money."
A parade of governors, union officials and at least one prominent Republican -- former Michigan governor John Engler, now president of the National Association of Manufacturers -- lined up to echo that sentiment. Thanks in part to the collapse of the housing market, the construction industry has lost more than 600,000 jobs over the past two years, and it now claims the highest unemployment rate, at 9.9 percent, of any industrial sector. With Virginia, Maryland, the District and dozens of other jurisdictions slashing capital spending, the industry's prospects are not likely to improve anytime soon.
"I hear from contractors all the time they don't have any private-sector work. So they're very hungry," Maryland Transportation Secretary John D. Porcari said. "To be blunt about it, it is so bad out there right now, we're talking about preserving jobs. . . . Additional work right now would be the difference between holding onto employees and letting people go."
Porcari testified on behalf of the American Association of State Highway and Transportation Officials, which conducted a survey this year in which state officials listed more than 3,000 highway projects that could be under construction within 90 days if funding were available, including paving projects, intersection improvements and the repair of hundreds of dilapidated bridges.
There is little dispute that the nation needs to spend more money on roads and bridges, economists said. But even projects that are "on the shelf" can't funnel money into the broader economy as quickly and efficiently as other types of spending, according to a January report by the Congressional Budget Office. Extending unemployment benefits or raising food stamp allowances, the report said, would be more effective.