be careful what you wish for

Economist.com - Infrastructure

Be careful what you wish for

Feb 5th 2009 | CHICAGO AND NEW YORK
From The Economist print edition

Spending on infrastructure could easily run amok

“WE WILL create millions of jobs by making the single largest new investment in our national infrastructure since the creation of the federal highway system in the 1950s,” declared Barack Obama back on December 6th. The words rang blissfully in the ears of enthusiasts for public works across the country.

AP

Not all the money will be wasted

Then came the stimulus proposals in Congress. On January 28th the House passed an $819 billion bill with about $100 billion devoted to infrastructure, according to the American Society of Civil Engineers (ASCE). The Senate’s version, at around $900 billion, is still under debate. Whatever emerges from Congress, it will be merely a “down-payment”, says Ed Rendell, Pennsylvania’s gravel-voiced governor.

A main conflict lies between the need to spend quickly and the desire to spend well. Much emphasis has been placed on projects that are “shovel-ready”, and with good reason. Every $1 billion spent on transport infrastructure creates 35,000 jobs, according to the Department of Transportation. The rush to spend, however, may exacerbate a troubling trend. For years federal money has been distributed haphazardly. Now, as David Paterson, New York’s governor, dryly puts it, “Everyone with a shovel says they’re shovel-ready.” A few bad projects are seeking new life from the stimulus. Connecticut is rumoured to be reviving an old plan to build a road long dismissed as unnecessary.

There is at least one way to reconcile speed with strategic investment. Robert Puentes of the Brookings Institution, a think-tank, suggests that money should be spent only on maintaining existing assets such as pipes, roads, public transport and bridges. Money would not be thrown at unworthy new projects. Fixing old roads also supposedly creates 9% more jobs than building new ones. Such a provision, however, is not in place. The states have almost complete jurisdiction over how the stimulus money is spent; Congress is not even earmarking funds for particular purposes.

Some states are planning well. Others are more problematic. Almost half of Massachusetts’s transport request is devoted to buses and trains, which create 19% more jobs than investing in new roads. All the money for roads will go towards maintenance. The transport requests of 19 states are public; of these, more than half have asked for 80% of the funding to go to roads, mostly towards new ones.

One advantage of the stimulus, according to Mr Puentes, is that it will track where money is spent, so that politicians will see which investments are still needed. This presumes that the stimulus is only the beginning of a larger, more strategic plan. Robert Yaro, of New York’s Regional Plan Association, is concerned that there is still no national vision. On January 28th ASCE estimated that $2.2 trillion is needed over the next five years to raise the nation’s infrastructure from a “D” to a “B”. The House bill has only $9 billion for public transport and $30 billion for highways. An amendment to add $25 billion in infrastructure spending to the Senate’s bill failed on February 3rd. This may be a blessing, given how the money is likely to be spent.