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Howard's Daily: Finding Infrastructure in the Stimulus Plan

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Yesterday's White House report, claiming 6 million jobs saved by the $800 billion stimulus plan, predictably prompted partisan debate on fiscal waste. I will not tread into the foggy land of economic theory, except to note that spending more money intuitively always stimulates economic activity -- but at the cost of economic health in the future if the money isn't invested to stimulate future growth (which economists call a "multiplier" effect).  

Probably the wisest investment is in rebuilding America's decaying infrastructure. This was the focus of the president's push for the stimulus back in 2009, and also the headliner in the report issued yesterday: The stimulus "initiated more than 15,000 transportation projects, which will improve nearly 42,000 miles of road, mend or replace over 2,700 bridges, and provide funds for over 12,220 transit vehicles," plus improving 6,000 miles of rail. 

These all sound like good investments to me, but I was curious how much of the stimulus plan went to these transportation infrastructure projects. Toward the back of the report (Table 8 on p. 34) there's a chart that gives the number: $30 billion. That's a little more than 3 percent of the total stimulus plan. 

Three percent!! American infrastructure recently received a D+ rating from the American Society of Civil Engineers. All those repair projects, listed above, only scratch at the surface of America's decaying infrastructure. Why wasn't more spent on this urgent need? Modernizing American infrastructure will improve competitiveness, create a "greener" footprint, and has a high "multiplier" on each dollar invested. We know that's what President Obama wanted at the outset. Why didn't it happen? 

Let's break this down into two questions. First, how did the headline goal of the stimulus -- rebuilding infrastructure -- become a small footnote? Because, as Obama subsequently discovered, "there's no such thing as shovel-ready projects." The approval process for any significant project (a new road, or power line, or pipeline) approaches a decade, and often longer. An impenetrable legal swamp stands between America and a modern infrastructure.

Second, if not infrastructure, where was most of the stimulus money spent? About $500 billion went to tax cuts, unemployment benefits, and "state fiscal relief" (shoring up insolvent state budgets). The remaining $300 billion was spent on actual projects, of which the big beneficiaries were: (i) subsidies for clean energy ($78 billion), (ii) subsidies for education and child support ($50 billion)(student loans, special ed, and support for disadvantaged children), (iii) health and health IT ($32 billion), (iv) transportation infrastructure ($30 billion, as noted above); (v) environmental cleanup ($28 billion), (vi) new buildings ($24 billion), (vii) scientific research ($18 billion), and a few other categories.

Look at where the stimulus money was spent. Virtually none of the stimulus categories require a significant government approval process. The conclusion is unavoidable: Government is unable to pursue vital public investments because government has lost the authority to approve them. It's pathetic: Government can't get out of its way. If America really wants to rebuild the economy with modern infrastructure, the first task is to rebuild its own authority structure so that approvals take 12 months, not 12 years. See here and here.

For more Howard's Daily posts, visit commongood.org/blog.