As Congress took up the debate on the President's massive
stimulus plan, the American Recovery and Reinvestment Act, efforts
by skeptical Members of Congress to subject the package to
committee hearings and a thorough debate were rejected, including
the simple request that Members be provided with enough time to at
least read the 407 page bill. Those in favor of haste argued that
the nation confronted a time of grave economic peril and that even
a day of delay could mean catastrophe for tens of thousands of
ordinary Americans who were at risk.
If Members had read the bill before voting on it, they might
have seen that the claims of immediate economic activity through
infrastructure spending are less than the Administration
Time Is of the Essence?
President Obama told an audience in Elkhart, Indiana:
We have inherited an economic crisis as deep and as dire as any
since the Great Depression. Economists from across the spectrum
have warned that if we don't act immediately, millions of more jobs
will be lost. The national unemployment rates will approach double
digits not just here in Elkhart, [but] all across the country. More
people will lose their homes and their health care. And our nation
will sink into a crisis that at some point we may be unable to
reverse. So we can't afford to wait. We can't wait and see and hope
for the best. We can't posture and bicker and resort to the same
failed ideas that got us into this mess in the first place.
Well, chief among the failed ideas is the notion that a nation
can spend its way to prosperity, despite abundant evidence to the
contrary. Massive government spending under the New Deal did not
end the Great Depression of the 1930s, nor did an ambitious
infrastructure program help the Japanese to avoid the "Lost Decade"
in the 1990s, which is more accurately described as the Lost Two
Decades. Nonetheless, a majority in Congress passed the stimulus
bill in February 2009, and in early March, President Obama claimed
that the act's transportation component alone will create or save
150,000 jobs in the first year.
This seems unlikely, however, given the leisurely pace the act
allows for all of the infrastructure spending authorized in the
legislation. As the language of the act reveals, some of the
unemployed may have to wait until 2012, or even later, for their
piece of this pie.
The Road to Recovery?
The largest infrastructure component of the bill is the $27.5
billion for highways, most of which will be distributed by existing
formulas to the states, territories, and Indian tribes. The delay
begins with the provision that states have up to one year to
obligate the money, meaning only that they have to identify
a project and set aside money for it. Still to be done might be the
design and engineering work, request for bids, and the selection of
the winning contractor.
Under this new law, projects that should be given "priority" are
those that can be done within a three-year timeframe, but the
definition of the timeframe is never specified, in contrast to
other limits in the bill that define it as beginning with the
enactment of the act. However lax this definition might be, the
three-year limit is merely a legislative preference, not a
requirement, and there is no prohibition against approving projects
that may take longer.
Funding in Transit
A new program is created to provide another $1.5 billion for
surface transportation programs that will be allocated as
competitive grants. Since the program does not now exist, the U.S.
Department of Transportation (USDOT) will need to draw up the rules
and guidelines (90 days are allowed), time must be allowed for
states to submit proposals (180 days), and USDOT must be given time
to pick winners (up to one year after act's enactment). Thus, the
approval process can take up to a year for projects that are
expected--but not required--to be completed within three
The $1.1 billion for Grants-in-Aid for Airports allows the USDOT
secretary up to one year to make grants "with priority given to
those projects that demonstrate to his satisfaction their ability
to be completed within two years." Again, no requirement, just a
Transit programs (buses, commuter rail, trolley cars, etc.)
receive $6.9 billion in capital assistance, and states and urban
areas have up to one year to obligate the money, but that could be
extended if certain problems are encountered. Reflecting the long
lead time involved in many transit projects and the difficulties
getting them approved, the new law includes no time limit on their
High-Speed Rail on the Fast Track
One of the big surprises in the bill was the $8 billion it
commits to high-speed rail (HSR) corridors--the House bill included
nothing for HSR, and the Senate bill included $2 billion.
Apparently the $8 billion was added at the last minute in
conference, allegedly at the request of President Obama, despite
his commitment to "transparency." In 1991 legislation was enacted
to permit the Federal Railroad Administration to designate 10 high
speed rail corridors. Because of the exceptionally high costs and
limited benefits of HSR (the California proposal is optimistically
estimated to cost $42 billion for a system that will achieve
surface speeds of up to one-fourth that common to commercial
aviation), nothing has ever been done to get anything underway on
any of these corridors--until now, that is.
The definition of HSR, as applied to those in European and Asian
countries, is passenger rail service that averages more than
150 miles per hour, which can only be achieved on very expensive,
dedicated lines that serve only HSR. Since no such lines exist in
the U.S., any HSR would have to first acquire a right of way, buy
the land in it, lay the very costly track, and buy the new
Under the circumstances, the $8 billion is woefully short of
what is needed to complete a single system, and the President and
Congress know it, which is why the $8 billion should be viewed as
little more than an amuse-bouche to keep the nation's
influential rail hobbyists happy and content. Indeed, the law
recognizes the folly of the aspiration by allowing the money also
to be spent on intercity passenger rail service (Amtrak) and
"congestion" grants. And the act includes no time limits on when
these projects are to be completed; it states only that the money
will remain available for three and one-half years.
Don't Get Your Hopes Up
Several of the other infrastructure components of the act
(public housing, for example) are also permitted a lengthy period
of time to get underway and be completed. As a consequence, these
costly components of the bill will do nothing to alleviate the
immediate downward slide in economic activity--and little or
nothing to support jobs during the current year.
Ronald D. Utt, Ph.D., is Herbert and Joyce
Morgan Senior Research Fellow in the Thomas A. Roe Institute for
Economic Policy Studies at The Heritage Foundation.