THE STASH DECEMBER 1, 2009
When pulling together the stimulus bill earlier this year, the administration and congressional Democrats tried to focus spending on "shovel-ready" projects wherever possible--partly to defuse the flack from the right, and partly because the point of a stimulus bill is to start spending quickly. This decision has certainly yielded near-term benefits. The CBO announced yesterday that, as of the end of the third quarter, the stimulus had boosted employment by between 600,000 and 1.6 million above where it otherwise would have been and raised GDP (not GDP growth but the actual dollar amount) between 1.2 and 3.2 percent.
But, as the macro data trickle in, it does appear that a more sustained, longer-term effort might have been preferable when it comes to transportation projects. (Though the administration certainly stuck with that approach in other areas--almost three-quarters of the stimulus money has yet to hit the economy.) According to a piece in today's Wall Street Journal, the contractors that do road projects are seeing demand for their services dry up pretty quickly:
Without an infusion of federal funding, state transportation departments say they can't develop long-term roadway projects, which are critical to the industry. About half of states' funding for such projects comes from the federal highway trust fund, which is funded by the gasoline tax. ...
Industry executives say that the $27 billion out of the $787 billion stimulus package that went to highway construction went mostly to relatively small "shovel ready" projects, those that didn't require much lead time. The $27 billion—77% of which had been committed as of Nov. 13, according to the Associated General Contractors of America—has saved some jobs.
"But if I'm a big company, I need major freeway rehabilitation work and bigger projects," said Steve Simmons, deputy executive director of the Texas Department of Transportation. Texas's wish list is taking "a back seat because we have no funding for it," Mr. Simmons said.
My sense is that we'll see maybe $100-$200 billion in additional stimulus early next year, with an emphasis on things that can deliver the biggest bang for the buck, job creation-wise. A lot of that money will go to things like a job-creation tax credit or a temporary payroll tax holiday. (The House, Senate, and White House are all very much in the process of thinking through ideas.) But I'd be surprised if a substantial chunk didn't end up in the infrastructure account, too, given the straight-forward connection to job growth.
Update: On other thought: You could argue that the most efficient job-creation measure would simply be more aid to states, which will otherwise have to cut their payrolls in most cases and certainly won't be hiring at any where near the pace they normally would. (Recall that the amount of state aid was whittled down substantially in the making of the original stimulus bill.) And, of course, that's before you consider the contractionary (and therefore job-killing) effects of states slashing spending on government programs. But my sense is that cutting checks to states straight-up is a virtual non-starter on the Hill these days, and that the opposition is bipartisan. I've heard this from pretty much everyone I've asked about it, unfortunately--at least everyone who's close to the process.