The Highways We Don’t Need
The CBO’s analysis of the House stimulus plan resulted in a Lori Montgomery Washington Post article that was, I think, written in a manner that’s likely to cause confusion as to what the report said:
Less than half the money dedicated to highways, school construction and other infrastructure projects in a massive economic stimulus package unveiled by House Democrats is likely to be spent within the next two years, according to congressional budget analysts, meaning most of the spending would come too late to lift the nation out of recession.
A report by the Congressional Budget Office found that only about $136 billion of the $355 billion that House leaders want to allocate to infrastructure and other so-called discretionary programs would be spent by Oct. 1, 2010. The rest would come in future years, long after the CBO and other economists predict the recession will have ended.
Over at The Weekly Standard, Mary Katharine Ham wastes no time in confusing the meaning of this, writing that it proves that “Obama’s proposed, gianormous stimulus plan is really just a proposed, gianormous spending plan.” In fact, the report didn’t analyze large portions of the stimulus plan at all—including those portions that were designed to be fastest acting. Among other things, the “gianormous” stimulus plan includes a hefty dose of tax cuts which can hardly be characterized spending.
But there is a real problem here.
For example, when I was busy being disappointed that the highway-transit funding ratio in the fill was 3-1—not very different from the 4-1 ratio entrenched in our current crappy SAFETEA-LU law—my understanding was that part of the rationale here was the general paucity of genuinely “shovel ready” infrastructure projects. But insofar as some of the highway projects envisioned in the bill can’t fit within the two-year stimulus window, we ought to drop the projects. And insofar as lawmakers are interested in sneaking some 2011 and 2012 transportation infrastructure spending into this bill they may as well forget about shovel readiness and identify useful transit and intercity rail projects.
29 Responses to “The Highways We Don’t Need”
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January 21st, 2009 at 2:22 pm
…but before the project starts in 2012 all sorts of other work has to be done. Engineering, surveying etc. Those people will need support staff, all that work creates lots of paper and telephone calls etc…. There might not be as many jobs in doing the prep work but it’s jobs that wouldn’t be there if we didn’t allocate some money now. And in 2012 we have a better idea of work that should be done and can make decisions about what is our highest priority.
January 21st, 2009 at 2:30 pm
Still more abbreviated … if they had allocated $15b to buses, $10b to passenger rail and $5b to general rail network improvements, that might be testing the limits of “shovel ready” projects in terms of getting work started (order placed, ground broken, etc.) within the next three to six months.
But $6b for buses, $4b for rail? Given the massive capital backlogs and Transit Authorities stealing operating funding to make critical major maintenance, and then having to cut back services … that only exhausts “shovel ready” projects if, indeed, the benchmark is how long time takes when the DoT is focusing hard on slowing work down.
January 21st, 2009 at 2:43 pm
In the pure theory of stimulus, “quick” is much preferred to “useful”. As Keynes suggested, burying gold and then hiring people to dig it up would be a viable stimulus measure. “Useful” is icing on the cake, but should obviously be pursued where possible.
January 21st, 2009 at 2:55 pm
a hefty dose of tax cuts which can hardly be characterized spending.
Except of course that, since we’re running a deficit, they CAN be characterized [as] spending. Or at least as essentially equivalent to it. Mary Katherine Ham wouldn’t make such a characterization, but you ought to.
January 21st, 2009 at 3:19 pm
I would be infavor of spending on buses provided that they were built in the US and used electric/natural gas hybrid technology to eliminate diesel fuel as a source of energy.
January 21st, 2009 at 3:31 pm
How about they sell the Highways to private business to pay off the 10.5 trillion dollar deficit. That would be a real solution.
January 21st, 2009 at 3:35 pm
So we are going to spend 135 billion on immediate infrastructure related stimulus projects, with another 219 billion in medium to long term. What exactly is the problem here? So we have a 135 billion dollar stimulus that will be implemented almost as fast as Bush’s tax rebate, but will be much more effective because, rather than a one shot, it will generate commerce for years to come. And then we will follow that up with more commerce generating infrastructure spending. Can’t we just point out how vapid these paleo-conservatives are and move on?
January 21st, 2009 at 3:42 pm
Taking the numbers at face value (and I’m not entirely sure we should), there’s still a lot missing from this analysis.
Remember a recession is the period when the economy is shrinking. There’s a long period after the economy stops shrinking before the economy gets back to potential output. There’s even a period after the economy stops shrinking when we still have a growing output gap (because growth is positive but below long-run trend).
So it would be nice if everything were ready to go now. But the Romer-Bernstein forecast last week has the economy restored to potential output in 2014 even with the stimulus plan. So spending that comes through in 2010 or 2011 is just as helpful in getting the economy back toward potential output.
January 21st, 2009 at 3:58 pm
So what you saying is, you can fix it, but you have to elect me again to see the results?
Reminds me of a really fun experience in the Iraq desert.
January 21st, 2009 at 4:10 pm
“…but before the project starts in 2012 all sorts of other work has to be done. Engineering, surveying etc. Those people will need support staff, all that work creates lots of paper and telephone calls etc…. There might not be as many jobs in doing the prep work but it’s jobs that wouldn’t be there if we didn’t allocate some money now.”
Actually, in some construction projects, the non-construction expenses (outside of materials and actual direct labor) are just as high as the direct construction expenses. It’s true that they weren’t roads, but I worked on a condo building whose direct construction costs were about one-third of the total budget.
January 21st, 2009 at 4:28 pm
I’d rather my state got not a single penny of any stimulus monies. The state legislature cannot tolerate the transit needed by the large cities (rail is especially horrible – I think they imagine such trains will have sleeping cars and everything, and cannot understand this is commuter rail), but spends significant sums on meaningless “development” highways in rural parts of the state. The thought seems to be that big factories or something will locate there and the locals can be hired to push brooms around. The Census Bureau’s “years of school completed by persons over the age of 21″ is not good for these counties, but that is not seen as relevant. The highways do make it easier to get out, but this leaves an older, poorer, and less educated group behind. “improving education” is talked about a lot, but nothing is done. I see no reason for the rest of the country to indulge the genial, corrupt legislature. If other states have good ideas, they should run with them. A boondoggle that will evaporate when fuel gets back $4+/gal is a poor use. OTOH, some folks can get very rich off it, so there is that to consider.
January 21st, 2009 at 7:56 pm
The strange thing is that projects don’t become shovel ready unless the funding is there years in advance. You have to do engineering studies, you have to acquire land, you have to go through environmental review, you have to settle lawsuits.
Of course repair of bridges and roads might not fit into that category, assuming that the repair doesn’t require any changes in the structure of the bridge or road. But these infrastructure projects usually requires significant modernization, and the modernization usually requires significant rework.
In Seattle we have many bridges due to the soil type and geography. Over the last ten years we have strengthened many of these structures by adding a new reinforced concrete layer around the support columns and wrapping with steel sheet.
We’ve also sculpted out new HOV lanes in the existing right-of-way. But individual projects take at least a year, maybe two, we have a relatively long road construction season, which can extend year round, not every area can count on this. So smallish projects take a year or two just for construction. Large projects take many years, for instance our new light rail service.
Here is an idea for a project we need very badly: planning and staging for natural or infrequent disaster situations.
For the last two years a 20 mile stretch of I-5 was under water for days at a time, rerouting causes a near 500 mile detour. The cost to commerce is a few tens of millions a day, a lot, but far less than the cost of elevating the interstate 15 feet over 20 miles. But as a national security issue, it seems important to keep a major supply line open to Seattle from the rest of the US.
Elevating an interstate in rural Washington is near shovel ready, costs a lot, generates lots of jobs, and serves a national purpose, unlike a lot of urban construction.
January 21st, 2009 at 10:43 pm
This sounds very much like condemning them on the basis of having both short term and long term employment benefits.
There is, that is, nothing wrong with spending that has “only some” immediate employment effect per dollar, when the spending is useful investment in its own right rather than government consumption? The government consumption in the stimulus bill ought to meet a higher standard of immediate employment impact than the complementary government investment in the stimulus bill, since the government consumption is what we would, in a structurally balanced budget, be “paying back”.
The way to tell that “shovel ready” is first and foremost an excuse to deploy is that it has been used to constraint spending on shovel ready projects.
January 22nd, 2009 at 12:09 am
I heard some anti-stimulus commentator say that infrastructure spending was not a short term investment because the infrastructure continued to exist for many years.
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