Infrastructure Spending and Obama’s Vision Thing

Transit advocates have been especially frustrated, as the rhetoric from the Obama administration often refers to transit, but its $9 billion in total mass transit funding, especially when compared with $30 billion for highways, is considered somewhat marginal.

“Our focus has been trying to bump up the transit number and it’s been a frustrating process,” said Bob Yaro, president of the Regional Plan Association. “Every time they [in the Obama administration] have an opportunity to talk about this, they talk about infrastructure and transportation, and we’d like to see transportation be more than 5 percent of the total.”

There had also been numerous calls by elected officials, from Mayor Bloomberg to Senator Chris Dodd to then Senator Obama, to create a more rational way of allocating transportation and infrastructure money than the traditional formulas; such hopeful change was apparently pushed to a later date.

And while lengthy projects that expand the economy in the long term, such as the Second Avenue Subway, will probably have to wait for a later spending bill, a notable shortcoming of repair-focused infrastructure spending is that it tends to be inefficient at stimulating the economy in the immediate term as well, economists say. In terms of bang for the buck, infrastructure spending tends to be one of the more effective forms of economic stimulus, but only once all the money is spent (food stamps and funding for unemployment programs are generally considered the most effective).

Given the lengthy and seasonal nature of projects like road and bridge repair, even if a job can be awarded to contractors within 90 days, the payments to those contractors can go on for a few years. A Congressional Budget Office analysis of the House stimulus plan, for instance, showed that only about $20 billion of the $60 billion for transportation and housing would be spent by fall 2010.

Further, construction prices in New York City are among the highest in the nation as supplies and labor are still in relatively high demand (the construction industry estimates they will remain so for 2009, given that many ongoing projects were started before the economic crisis, though they will fall after that). While costs have stopped their rapid increase of recent years, each dollar of stimulus money toward construction is sure to go less far locally than nationally, where prices are generally lower.

 

OF COURSE, all of this is not to say that hundreds of millions to repair New York’s subway stations, renovate its schools and pave its highways would by any means go to waste. City and state officials, activists and construction industry executives are all eager to get any money that Washington will throw their way. Further, though they are not a majority, some of the projects in line for funding would significantly expand capacity, such as the planned set of new rail tunnels under the Hudson River.

And while the construction employment is still high—the New York Building Congress projects that employment in construction will be similar in 2009 to 2008, though it could subsequently drop—industry officials note that thousands of jobs could be lost once current projects are completed.

“Without the economic stimulus program, you would see a significant contraction on the heavy, core infrastructure side, which is one of the reasons that we’re advocating so strongly,” said Denise Richardson, managing director of the General Contractors Association.

As for spending on larger projects that don’t fit the requirements of the stimulus, Mr. Nadler, no friend of supply-siders, predicts that Congress will need to be back with hundreds of billions more.

“We should be doing about twice as much in terms of really getting ahead of this economy,” Mr. Nadler said. “We’re going to have to do a lot more.”

ebrown@observer.com