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Haste Could Make Waste on Stimulus, States Say

By Lori Montgomery and Michael D. Shear
Washington Post Staff Writers
Wednesday, December 3, 2008

With President-elect Barack Obama vowing to plow hundreds of billions of dollars into the nation's infrastructure, some state officials are warning that public works projects will fail to effectively lift the country out of recession unless they are chosen carefully and implemented rapidly.

In a private meeting yesterday in Philadelphia with 48 of the nation's governors, Obama stressed the importance of identifying projects that could put people to work quickly, participants said. He raised the specter of Japan, which languished in a decade-long recession in part because massive spending on construction projects in the late 1990s flowed too slowly to boost economic activity.

During the two-hour meeting, governors from both parties assured Obama that they could break ground almost immediately if Washington were to put up the cash to make up for state budget shortfalls. But less than half of the $136 billion in projects they said were ready to go could get underway within the next six months, according to the National Governors Association. And choosing among those projects could prove politically difficult, some governors said.

"The problem is going to be deciding in a rational and targeted way how to spend that money," Virginia Gov. Timothy M. Kaine (D) said in an interview. "We all know about the bridges to nowhere. But we also know the projects that are critical to moving people around."

With the nation's economy in recession, Obama has pledged to create or preserve 2.5 million jobs over the next two years, primarily by dedicating federal dollars to rebuilding the nation's roads, bridges, schools and airports and to expanding sources of alternative energy. Democrats hope to send a spending package that could exceed $500 billion to the White House by Jan. 20, when Obama takes office.

In a recession that lasts only a few months, economists say spending on infrastructure would do little to revive the economy; public works projects typically take years to get underway. Even with projects that are ready to go -- meaning they have been designed, engineered and have cleared environmental and other bureaucratic hurdles -- only about a quarter of the overall cost is spent within the first year, according to the Transportation Department.

Because this recession is projected to extend well into 2009, many economists see infrastructure spending as a viable way to put people to work and keep money circulating domestically. Unlike tax rebates, which might be spent on foreign goods or used overseas, money for road projects would be used to hire U.S. workers and to purchase domestic gravel and steel.

The need for infrastructure improvements is enormous. Federal transportation officials have estimated that the nation should spend $225 billion a year to modernize and maintain its crumbling roads, bridges and transit systems.

But with 41 states facing budget shortfalls, many governors are cutting scheduled projects. Maryland and Virginia recently cut more than $1 billion each from their six-year transportation programs. North Carolina expects to cut $200 million by next June. And New York plans to eliminate 10 percent of its projects, according to the American Road and Transportation Builders Association.

The slowdown in public spending, combined with the worst housing bust in a generation, has devastated the construction industry. The unemployment rate among construction workers was 10.8 percent in October, well above the national average of 6.5 percent. Currently, nearly 1.1 million homebuilders, steelworkers and highway contractors are out of work.

"This is not going to be a situation where we're going to be putting money into something the contractors can't handle," said Bill Buechner, chief economist at the American Road and Transportation Builders Association. "There's plenty of capacity, and there's a lot of workers."

The devil, however, is in the details. What emerged yesterday in Philadelphia, and in ongoing discussions in Washington and in state capitals, is the concern that injecting such huge sums into public works projects could prove more complicated than anyone yet imagines.

Answering the simplest questions -- which projects are ready to go? -- can be surprisingly difficult.

The governors yesterday offered school, road, transit, wastewater and airport projects that California Gov. Arnold Schwarzenegger (R) said could be ready soon, "literally, putting shovels into the dirt within a few months after the administration starts."

But David Quam, director of federal relations for the National Governors Association, said many of the projects would take 24 months. Less than half of them -- projects worth about $57 billion -- would be ready to go within 120 days, Quam said, the time frame set in a stimulus bill that passed the House in September. An Obama aide said money dedicated to infrastructure should be spent within 24 months, not devoted to projects just getting underway at the end of 2010.

The NGA proposals, moreover, were assembled from lists prepared by other organizations. The most commonly cited was created last January by the American Association of State Highway and Transportation Officials. It offers more than 3,000 highway projects that theoretically could put $18 billion to good use within 90 days.

But that list is now nearly a year old, and for some states includes construction and repaving projects that could not begin in the winter months. For other states, including Maryland and Virginia, that list does not necessarily represent specific projects, state officials said.

In an interview, Maryland Transportation Secretary John D. Porcari identified some "critically needed projects" that could get underway quickly, including improvements to bottlenecks at the intersection at Georgia Avenue and Randolph Road in Montgomery County and the intersection of Route 4 and Suitland Parkway in Prince George's County.

Virginia officials said they are still working on their list. But the projects they select will depend on what restrictions Washington places on the money, one Virginia official said. Projects with huge political support, such as the construction of a Metro line to Dulles airport, would not be good candidates for quick construction, the official said, while more routine projects such as the completion of the Fairfax County Parkway between I-95 and Rolling Road or the repair of the VRE rail infrastructure might make the grade.

Aides said Obama's transition team is trying to craft a strategy for prioritizing projects at the national level, relieving state officials of that responsibility. But the best candidates for stimulus spending are likely to be the least glamorous projects, the ones unlikely to thrill members of Congress, several transportation officials said: Bridge repair. Bus purchases. Filling potholes.

"It's not as if people are going to say: 'You know what? We got some money. We're going to go build a bridge.' For one thing, bridges take 13 years, start to finish," said Janet Kavinoky, a transportation expert with the U.S. Chamber of Commerce. "The dollars are for real basic work that needs to be done to maintain the system we already have."

Several governors were quite specific about their needs yesterday. Montana Gov. Brian Schweitzer, the incoming chairman of the Democratic Governors Association, said his state had $200 million in projects ready to go, including some to retrofit several state-owned buildings to make them more energy efficient. West Virginia Gov. Joe Manchin III (D) said he hoped to secure $600 million for road and bridge repairs "that could start tomorrow."

But several Republican governors challenged Obama's call for massive government spending, saying it could saddle future generations with debt without easing the country's current economic problems.

"I think we ought to have our eyes open. These steps come with a cost," said Indiana Gov. Mitch E. Daniels Jr. (R). "Therefore, let's try to make certain that they are well conceived, that they are really aimed not at bailing out excesses in states that should have known better, but aimed at putting people to work."

Staff writers Ceci Connolly and Anthony Faiola contributed to this report.

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