The Historic Keynesian Infrastructure Kick That Wasn't

DEMOCRATS, Republicans chant, are irresponsible big spenders. But in the run-up to the mid-terms, the Democrats ought to have had one example of spending at its best: investment in infrastructure. When they passed the $787 billion stimulus bill in February 2009, they promised an historic investment in roads, bridges and rail. It would put Americans to work quickly and raise productivity in the long term, a Keynesian kick with benefits for years to come. But this ambitious plan has had middling results. Infrastructure is still in need of investment; unemployment in the construction sector was 17.2% in September. Barack Obama is touting a new $50 billion infrastructure proposal, but as the mid-terms loom, it is probably too late.

The stimulus bill's spending on infrastructure may have been doomed to mediocrity from the start. First, and most important, a relatively small share of the bill was actually devoted to infrastructure. Mr Obama called the bill "the largest new investment in our nation's infrastructure since Eisenhower built an interstate highway system in the 1950s."� But even on the broadest definition of the term, infrastructure got $150 billion, under a fifth of the total. Just $64 billion, or 8% of the total, went to roads, public transport, rail, bridges, aviation and wastewater systems.

Second, hopes for an immediate jolt of activity were misplaced. The bill prioritised "shovel-ready"� plans. States did have a backlog of maintenance projects, such as repaving dilapidated roads. Nevertheless, work moved more slowly than some Democrats expected. By October 2009 even the fastest programmes"”those under the highway and transit headings"”had seen work begin on just $14.3 billion-worth of projects. Spending has since quickened. Of the money appropriated to transport, 83% has now been allocated. But it is unclear that the money spent has been money spent well. The attempt to begin work hastily meant that both good and bad projects have moved forward.

Meanwhile the bill's most notable project, high-speed passenger rail, threatens to become a debacle. It is fun to imagine trains whizzing across the heartland. But there is no urgent need for them. Freight companies worry that new passenger services will simply increase congestion. Any new rail service, meanwhile, is unlikely to be particularly fast. The Recovery Act dedicated $8 billion for high-speed trains, a sizeable sum but not enough for any train that is actually high-speed. Instead of being a selling point for Democrats, rail has become an easy target for Republicans. In Ohio, the Republican nominee for governor declares: "when I'm governor, the 39-mile-an-hour high-speed passenger train is dead."� Wisconsin's Republican nominee even started a website, Notrain.com.

Mr Obama's new $50 billion infrastructure plan has promising elements, such as a proposal for a national infrastructure bank. But his push may be for naught: Americans have become allergic to spending. Politicians are unlikely to rise the gas (petrol) tax to pay for it. Janet Kavinoky, transport director for the Chamber of Commerce, is one of many advocates who want a long-term transport bill. The trouble is, she reckons, that most people think the stimulus bill took care of all that.

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