Haste Could Make Waste on Stimulus, States Say
By Lori Montgomery and Michael D. Shear
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.
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.
Hmmhmmh ... China makes 38% of the world's steel compared to 7% for the U.S. The U.S. is the world's largest importer of steel already, and China is the world's largest exporter. With China's building boom slowing down, I suspect that Chinese steelmakers will try hard to supply a big share of Obama's infrastructure plan's steel needs.
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.
Actually, that sounds exactly like the kind of projects you can quite reasonably put off for a few years during an economic crisis. Let's pause for a moment and notice just how counter-intuitive this whole infrastructure spending mania is. The concept is that there are a whole bunch of expensive projects that, back when we had a lot of money, didn't seem worth doing; but now that we're broke, it's a great time to blow a big wad of dough that we don't have anymore on projects that we could, quite easily, put off until we're not so broke again.
Now, there are some advantages to doing big projects during an economic collapse -- the price of Chinese steel is likely to be lower. And there will presumably be some "stimulus" effect somewhere down the road. But, let's be honest, this is basically Carnival in Rio Economics -- all the rules of common sense are suspended and we're just going to magically make up some money and spend it and not worry about how we'll pay it back when Ash Wednesday comes.
The real reason our infrastructure is pretty cruddy compared to other First World countries is because, as the Big Dig fiasco in Boston shows, we're bad at it. And the reason we're bad at efficiently spending big piles of government money on infrastructure is because of all the shakedown artists and leeches -- the unions, the politically connected contractors, the community organizers, etc etc -- that have to get their cut. (For example, to finish the Century Freeway to the LA Airport in 1988, CalTrans paids off hundreds of "community" groups to get them to stop protesting it, including an AIDS project 10 miles to the north in West Hollywood.)
Now, we've gone and elected a shakedown artist as President. Who knows, maybe that will work on the "It takes a thief to catch a thief" principle. Perhaps Obama will pardon Tony Rezko and install him in the West Wing to ram infrastructure projects past all the leeches with their hands out.
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.
That's basically what you or I do when we've had an economic setback -- we paint the house less frequently and otherwise scrape by until we can afford to fix things up right. Of course, for the government, the rules are completely different. Yeah, right ...
The idea is that improving infrastructure will make the country more efficient through faster transportation and the like. Okay, but, keep in mind that it will make the country less efficient during the economic crisis because of the huge traffic jams caused by infrastructure projects.
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.
I know a way to lower the unemployment rate among construction workers, but it will be a long, long time before it occurs to the Washington Post: send the illegal immigrant construction workers home.
... 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."
California needs over $30 billion to balance its budget for Fiscal Year 2009 and it could get a lot worse than that. California and its counties and municipalities should not be worrying about starting expensive new construction projects. They should be worrying about meeting payroll in 2009 and 2010 for firemen, policemen, schoolteachers, and the like. I wouldn't be surprised if a year from now we see giant piles of Chinese steel sitting on the docks of Long Beach collecting dust while new California construction hiring is postponed indefinitely and Obama's infrastructure money is diverted to keeping current civil servants employed. Teachers and prison guards and the like will be renamed "human infrastructure."
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.
Yeah, Obama is going to get a lot of solar-powered magnetic levitation commuter rail systems built within 24 months...
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.
$18 billion is 3.6% of the $500 billion they're talking about spending.
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.
There are two seasons in Chicago for commuters: snow and ice season and road repair season. Obama probably figures he can Chicagoize all of America. But what else does he know other than the Chicago Way?
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." ...
That's how my neighbors, who mostly have a lot more money than I do, feel about repainting houses and cars. If their Infiniti's paintjob has lost a little luster in the three years they've had it, they trade it in for a new Lexus. On the other hand, my 11-year-old Accord's paint has completely eroded away from most of the roof and parts of the trunk and hood, but, guess what, it still takes me from point A to point B. Maybe I'm not traveling in style, but I like to think of myself as fashion-forward -- in a couple of years, lots of people will be driving cars that look like mine.
"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."If Mitch is thinking about stepping up to being a major Republican national figure, I've got three words of advice for him: Run against California.
All my life, everybody in America hates California because the weather is so nice. And now they've finally got a good reason for hating California: California basically got us in this mess.
The way I see the politics playing out is that Gov. Arnold will become Obama's new best friend in order to get California bailed out by the federal taxpayers. In return, Obama will get to claim that he's fulfilling his campaign pledge to move beyond partisanship. Look how much the Republican governor of California loves him! The media will chime in with how all the Republicans should become just like Arnold and Obey Giant Obama -- that's their only chance of survival.
This will create an opening among ornery Republican voters who hate the media and Hollywood movie stars for an anti-Schwarzenegger Republican to emerge, presumably a governor with a record of prudent administration, to run against the country bailing out California.