CONGRESS HAS NOW made up its collective mind to authorize another $4 billion for public works, to crank up the economy and generate jobs. The present quarrel is over the formula to divide up this massive lump of money among the states.The outcome will be an important signal regarding future inflation. If Congress insists on voting Sen. John Heinz's amendment into the bill, it will significantly increase the inflationary impact of this money.
At best, public construction is not a particularly good way to fight recessions. The pace of these big projects means that most of the money is spent, typically, long after the recovery has picked up momentum. The money in this particular bill would be spent over the next three years and, if the Carter administration's strategy is successful, economic activity will be rising briskly well before the $4 billion has been spent. The challenge here is to prevent it from aggravating inflation in 1979 as unemployment drops and labor markets tighten.
The original form of the bill - vigorously supported by the administration and the congressional leadership - offers at least a partial solution. While two thirds of the money would be distributed in proportion to the number of unemployed people in each state, one third would be reserved for those states with the highest unemployment rates. It would give disproportionately large shares to those states where the suffering is most severe. That's an important provision. For contrast, the Heinz formula would put more of the money into states with relatively low unemployment rates and healthy industry. Mr. Heinz's state of Pennsylvania, and 23 others, will get a bigger piece of the pie if the amendment goes through.
One particularly dismaying example is the state of Texas. Under the Heinz amendment, it would get $155 million of his new public works fund - compared with only $97 million under the administration's version of the bill. But in the Houston and Dallas areas, unemployment in the construction trades is already far below the national average. If it drops much farther, there will be danger of new inflation as the amount of work outruns the labor force available to do it.
The House passed the bill at the end of February with the Heinz amendment in it. The Senate committee first embraced the amendment, then reconsidered and reported the bill without it. The full Senate is scheduled to vote on the amendment within the next few days. Ordinarily, this kind of struggle is merely a routine test of strength among the states. But this time there is something more at stake. As Congress enacts this year's bills for economic recovery, is it willing to think ahead and build in safe-guards against future years' inflation?