Overview from the issue on Public-Works Projects (2/20/2008)

by Marcia Clemmitt

Matthew Sinkovec, a truck driver for an excavation company in northeastern Ohio, used to have plenty of work hauling materials to home-construction sites. But as the economic crisis battered the Cleveland area, work dried up.

“Instead of four jobs lined up, I’d get one and then wait for another,” he said. Eventually, “the bottom just fell out,” and he was laid off last November. Now, he mostly stays home, trying to conserve money, and hopes to find another construction job before his unemployment checks end. “I try not to think about this lasting too long,” he said. “That is a real scary thought.”

The construction business was among the first to slow drastically as the United States entered a recession in December 2007, but most other industries now also have slowed – with accompanying layoffs. In January 2009 alone, 598,000 people nationwide lost their jobs, the biggest monthly total since 1974. And in some places, net job loss has been a long-term phenomenon. Hard-hit Ohio, for example, has lost nearly a quarter of its manufacturing jobs since 2000 and 5 percent of its jobs overall.

In response, President Barack Obama and congressional Democrats developed the American Recovery and Reinvestment Act and declared the so-called stimulus package their first major legislative priority of 2009. Enacted by Congress on Feb. 13 and signed into law by Obama on Feb. 17, the act is designed to pump additional demand for goods and services into the economy, partly by creating jobs and retooling infrastructure for the future. It is “the most sweeping economic recovery package in our history . . . putting Americans to work . . . in critical areas . . . that will bring real and lasting change for generations to come,” Obama said.

Parts of the bill’s economic-stimulus provisions are familiar – tax cuts and boosts in aid programs such as unemployment benefits and Medicaid. But it’s the first major economic-recovery plan to include federal spending for public works like highways and energy-efficiency upgrades for buildings since President Bill Clinton proposed, but ultimately dropped, such a proposal in 1993.

Conservative analysts and most congressional Republicans were quick to denounce the public-works spending provisions as a waste of taxpayer dollars that won’t help the economy.

“We have no evidence from recent or distant history” that public-works spending creates jobs or spurs the economy, says Ronald D. Utt, a senior research fellow at the conservative Heritage Foundation. The Obama plan is partly modeled on the Depression-era job-creation initiatives of President Franklin D. Roosevelt’s New Deal. “I don’t know that that many people were ultimately employed” by those 1930s programs, Utt says.

Obama says the programs will benefit the economy both in the current recession and long term. For example, grants to weatherize homes – modifying them to reduce energy consumption – will “immediately put people back to work,” he told CBS News. “And we’re going to train people who are out of work, including young people, to do the weatherization. “Not only are you immediately putting people back to work, but you’re also [helping] families on energy bills and . . . laying the groundwork for long-term energy independence.” Other projects would repair highways, create high-speed rail systems and make public buildings energy-efficient.

A stimulus package similar to the one Congress approved should create between 3.3 million and 4.1 million jobs over the next two years – around 1.3 million of them from public-works programs – according to Christina Romer, chair of the White House Council of Economic Advisers, and Jared Bernstein, chief economist for Vice President Joseph Biden. More than 90 percent of the jobs created will be in the private sector, about a third of them in construction and manufacturing.

Nevertheless, the plan can’t possibly create enough jobs to offset the losses the economy is suffering, Romer and Bernstein caution.

About 11.6 million people were unemployed in January – 4.1 million more than a year earlier – and job losses are expected to continue into 2010, according to the U.S. Bureau of Labor Statistics.

Our $15-trillion-per-year economy has taken at least a 5 percent hit – $750 billion – in the demand for goods and services that keeps business humming, says James K. Galbraith, an economist and a professor of government at the Lyndon B. Johnson School of Public Affairs at the University of Texas, Austin. “Infrastructure is not going to make up a $750 billion to $1 trillion hole in economic activity,” he says.

Infrastructure experts also caution that the country’s longtime neglect and underfunding of infrastructure maintenance and planning means that some public-works projects will suffer some delay before they’re up and running.

“Up to a point, public works are a good way” to stimulate job creation, says Richard G. Little, director of the Keston Institute for Public Finance and Infrastructure Policy at the University of Southern California. However, in the present workforce we don’t have the welders, the heavy equipment operators and other skilled workers we need, he says.

“A stimulus package with real sticking power should support training in the construction trades for the vast number of young and underemployed people for whom college is not the career solution,” Little said.

The key question for many is whether infrastructure spending that creates jobs quickly can also be visionary enough to strengthen the nation and economy long term.

Public-works spending can contribute toward stabilizing the economy in the short term, depending on how quickly the money can be spent, “but, much more important, the public works of today will redefine how we live in the future,” says Galbraith, noting that the Interstate Highway System launched by President Dwight D. Eisenhower in the 1950s created America’s suburbs.

When it comes to federal infrastructure spending, “forget about stimulating the economy over the next year,” says Robert P. Inman, a professor of finance and economics at the University of Pennsylvania’s Wharton School of Finance. “The rewards should be found in the project itself,” and, ideally, the benefits should be national, he says.

For example, “if you give money to Pennsylvania to invest in education, their kids will be more productive, and they’ll end up living everywhere in the country,” benefiting the whole nation, he says. In the best-case scenario, the dollars would go to inner-city and other poor schools, he says, thus aiding a cause “that we value but that wouldn’t have received help otherwise” – a good test for the worth of government spending, he adds.

There’s tension between projects that will give local economies a quick boost and those that would best serve future needs, says Anthony Shorris, a fellow at the liberal Century Foundation think tank and former executive director of the Port Authority of New York and New Jersey. “The fastest thing to build is a new road, but it’s the opposite of everything we want” in the long run, producing more sprawling development and more carbon-emitting automobiles, he says.

“If the wrong things are done, they may do damage with this [stimulus] bill,” says John Norquist, president of the Congress for the New Urbanism, a Chicago-based nonprofit that promotes walkable environments and sustainable development.

“It’s crucial to think beyond the current crisis,” says Guian A. McKee, an associate professor of history at the University of Virginia. “What do we want the structure of this economy to be 10 to 15 years from now? Do we want mass transit, alternative energy?” If so, then it’s time to focus on such projects, he says. “While we need the shovel-ready stuff for the crisis, we shouldn’t neglect the long-term things,” he says.

At present, though, “we haven’t really developed a vision of the 21st-century U.S. economy, so we don’t know what infrastructure we need to support it,” says Armando Carbonell, a senior fellow at the Lincoln Institute for Land Policy, a think tank in Cambridge, Mass. To create a vision for the transportation system, for example, “we need to know where the current system breaks down” and stymies important travels, he says. For example, highways and air travel are congested and frustrating in the Northeast Corridor, so we know that providing a rail alternative is a good possibility, he says.

“You need the target, and you need the vision, because tomorrow is going to be different from today,” Carbonell says.

“If we’re going to have an infrastructure feeding frenzy, make sure government builds public works that will make us more productive as a nation,” such as roads, bridges, mass transit, integrated information technology in public industries like health care, and military recapitalization, said New Hampshire Sen. Judd Gregg, top-ranking Republican on the Senate Budget Committee. “This is about bringing the nation out of this recession in a manner that makes us more competitive in the international market.”

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