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XMFSinchiruna (27.34)

What Happened to the Infrastructure Stimulus?

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January 29, 2009 – Comments (10)

Funny, I could have sworn Obama said in the campaign something about a giant investment in infrastructure to kick-start the American economy, did he not? :P 

False campaign promise #1.  He is allocating only 5% of the $819 billion to infrastructure investments, leaving any of the company's you were looking to play on a stimulus boost out in the cold.

Are they not aware that expectations were for a much larger investment? The ramifications for companies like CX, X, AA, are enormous in the near term... at least until they are forced to come up with yet another stimulus package for infrastructure. They are going to spend our dollars into oblivion. Those who think inflation won't soon follow as an epic currency event are in for a rude awakening, IMHO.

http://www.boston.com/news/nation/washington/articles/2009/01/29/only_5_percent_of_819b_plan_would_go_toward_infrastructure/

WASHINGTON - Five weeks before becoming president, Barack Obama urged passage of a massive economic stimulus package, vowing that it would "create millions of jobs by making the single largest new investment in our national infrastructure since the creation of the federal highway system in the 1950s."

But the bill passed by the House yesterday dedicates only about 5 percent of the $819 billion measure to highway, mass transit, and rail projects, analysts said. That has prompted even some Democratic supporters to complain that the transportation spending was gutted by Republicans who insisted on more tax cuts - none of whom voted for the measure anyway - and by Obama advisers who shifted priorities to advance policy goals.

Many economists have argued in recent weeks that spending on infrastructure would do more to quickly create jobs and pull the country out of recession than tax cuts for individuals and businesses, or investments in healthcare and alternative energy - such as grants for health information technology and for a smart electricity grid. The tax cuts and investments are now sizable elements of the recovery package, with Obama's assent.

Representative Michael Capuano, a Somerville Democrat on the House Committee on Transportation and Infrastructure, said he has watched with frustration as spending for rapid transit and rail dropped during negotiations over the bill. For example, after an initial burst of enthusiasm for inter-city rail projects, the amount was reduced to $5 billion and then to $1.1 billion, he said.

The bill has $30 billion for roads and bridges and $12 billion for rapid transit, with decisions on specific projects to be made by state and local officials. But that's far less than originally sought by some Democrats, and could make it more difficult to fund some Massachusetts projects, such as work on roads, bridges, and the MBTA system, or a proposed extension of the commuter rail line from Lowell to Manchester, N.H.

"Priorities changed," Capuano said. "Someone says, 'How about food stamps, how about early childhood education?' "

Nonetheless, Representative Edward J. Markey, a Malden Democrat, praised the bill last night and said it would provide more than $6 billion for Massachusetts and could save or create thousands of jobs.

Capuano said he still supported the bill because it provides much-needed money for an array of interests, but said he would have preferred some of the tax cuts were replaced by transportation spending. He compared $1.1 billion for rail projects with $145 billion to provide $500-per-taxpayer rebates. "I know it is politically popular, but I don't think it will stimulate the economy," Capuano said of the tax relief.

The chairman of the transportation panel's subcommittee on highways and transit, Peter DeFazio of Oregon, became so angry about the reduction in transportation spending that he recently accused Obama's top economic adviser, Lawrence Summers, of arguing against such funds because he "hates infrastructure."

White House spokeswoman Jen Psaki responded yesterday, "Before he joined the administration and since, Larry Summers has consistently supported infrastructure funding as a means of stimulus." Psaki said that the stimulus bill has "a significant investment in infrastructure" and will be followed by other legislation, adding, "The goal has never been to accomplish every legislative goal in one fell swoop."

White House spokeswoman Jen Psaki responded yesterday, "Before he joined the administration and since, Larry Summers has consistently supported infrastructure funding as a means of stimulus." Psaki said that the stimulus bill has "a significant investment in infrastructure" and will be followed by other legislation, adding, "The goal has never been to accomplish every legislative goal in one fell swoop."

But in a sign of dissatisfaction among members of both parties with the amount of transportation spending, an amendment to increase the total from $9 billion to $12 billion passed by a voice vote yesterday.

The bill is expected to be reshaped further in the Senate in coming days, but it is not yet clear whether the transportation funding will grow.

Senator John F. Kerry, a Massachusetts Democrat who has been pushing for a $25 billion national high-speed rail network, said yesterday that he hopes the stimulus bill will provide an opportunity to get the plan underway. So far, Kerry said, he and other supporters have secured $2 billion for high-speed rail in the Senate bill, but he said "we have to do much more."

The American Society of Civil Engineers said in a report released yesterday - ahead of schedule to try to influence the stimulus debate - that the nation's infrastructure is so degraded that it gets a grade of "D." The report urged $2.2 trillion in spending, not including money for high-speed rail, which Obama and his vice president, Joe Biden, have said is a priority.

"Our greatest concern is that Congress is going to pass the stimulus and think that they have checked the box on infrastructure, when in reality there is much more to be done," said Janet Kavinoky, director of transportation infrastructure for the US Chamber of Commerce.

Shortly before Obama outlined his stimulus plans in a Dec. 6 radio address, the nation's governors told him that they had about $150 billion in transportation projects ready to build. It was estimated that each $1 billion of spending would produce 40,000 jobs. John Krieger, the federal transportation policy analyst at the US Public Interest Research Group, said that while his groups supports the bill, Obama initially left the impression that it would have such a massive component of urban transit and high-speed rail that it would lead to a "generational change" in transportation comparable to that of the interstate system of 1950s.

An analysis of the stimulus bill by Mark Zandi, chief economist of Moody's Economy.com, says most of the infrastructure spending will not occur until 2010, while some tax cuts might have more immediate impact.

That study, however, also found that a cut in corporate taxes would have an impact of 30 cents for every reduction of $1 in the coming year, while infrastructure spending would result in a payback of $1.59 for every $1 spent. The biggest impact could come from items that had been inserted into the bill with relatively little fanfare but which could be quickly enacted. The extension of unemployment benefits would have a payback of $1.63 per $1 spent, and an increase in food stamps would pay back $1.73.

 

10 Comments – Post Your Own

#1) On January 29, 2009 at 4:18 PM, DemonDoug (77.67) wrote:

I would have had no problem with a bill that authorized 1T directly to infrastructure investment.  The amount they are putting out wouldn't even pay for California's infrastructure needs for half a year.  This is a horrible bill, it's just as bad as the TARP bill and every other bailout bill of the past year.

I am praying for gridlock and Republican filibuster.

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#2) On January 29, 2009 at 5:46 PM, outoffocus (22.73) wrote:

Two party system sucks. 

I am praying for gridlock and Republican filibuster.

Oh yea, like the republicans have any better ideas?  They are just mad because there aren't enough "corporate tax breaks".  Cut me a break. I mean seriously.  The only thing the government should be doing right now is going after the filthy crooks that started this mess. PERIOD. But I guess that would create too much of a conflict of interest...

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#3) On January 29, 2009 at 5:50 PM, kdakota630 (29.48) wrote:

Oh yea, like the republicans have any better ideas?

Regardless of political party, preventing the pi$$ing away of $819 billion ($1.2 trillion if you read my blog about the real cost) is a good idea.

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#4) On January 29, 2009 at 5:55 PM, XMFSinchiruna (27.34) wrote:

kdakota,

I agree! And I vehemently opposed the TARP find as well and have repeatedly pointed out the folly of the entire strategy being pursued by Fed, Treasury, etc.

BUT...

Given that a stimulus is a foregone conclusion and a political reality at this point... it would have been a much lesser evil in terms of being less wasteful spending if more had gone into infrastructure to jump-start some actual demand for goods and services... cause everywhere I look there is none... and the job losses are going to continue to file in until -- very unfortunately -- the next round of stimulus will be floated by Congress, at which point maybe then they'll get around to the infrastructure investment that should have been 75% of the original, present plan.

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#5) On January 29, 2009 at 6:00 PM, kdakota630 (29.48) wrote:

If it was an actual infrastructure stimulus bill, much like DemonDoug, I'd have had no problem with it at all.  But as you pointed out the infrastructure is only 5% of the bill, that to me leaves 95% complete and utter waste.

- sexually transmitted disease prevention... 400 million bucks.

- fish barriers... 20 million bucks.

- ATV trails... 25 million smackers.

- honeybee insurance (WTF?)... 150 million dollars.

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#6) On January 29, 2009 at 6:05 PM, columbia1 wrote:

How do you get back $1.73 for every dollar spent providing food stamps? 

 Do you mean for ever dollar the government spends on food stamps it returns $.73 to the economy. With $.27 loss in handling fees. If the Government can take one dollar and produce $1.73 out of it, I think I found the solution to this debt problem. 

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#7) On January 29, 2009 at 8:34 PM, rd80 (98.28) wrote:

"What Happened to the Infrastructure Stimulus?"

Change you can believe in.

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#8) On January 30, 2009 at 6:33 AM, TheGarcipian (58.86) wrote:

Sinch, thanks for the graph. I'd not seen the full breakdown until now, but I had read parts of it. In particular, I read about the Moody's Economy.com report, which I included in my blog entry here on the Obama Stimulus Plan (see the 2nd or 3rd paragraph).

Yes, I'm a bit disappointed too about the stimulus package. We really need to apply much more money to infrastructure than to tax relief. As the Moody's report shows, it's the best way to grow the GDP by far. I'm with you, kdakota630, and DemonDoug: I'd not pass this bill in its current form until more than half of it (at least!) were for infrastructure. But I also believe there will be more stimulus packages, perhaps 3 or 4 more over the next 2-3 years. The problem is that with Obama kowtowing to the (minor) Republican interests in an attempt to show a willingness to reach across party lines, he risks losing the inertia that carried him into office. Surely when the next bill comes up and it's for even more money (oh, you bet it will be, for as Demon pointed out, the current one's not even enough for CA's half-year needs), the Republicants will dig their heels in even further, crying for even more non-productive tax cuts. The solution is clear to me: put the money where you get the biggest bang for the buck, into infrastructure spending.

An aside to columbia1: you get back more money in terms of GDP growth just as in the following scenario. You have the choice of: (a) feeding one man a $100 steak dinner, complete with appetizers and wine and rich desserts, or (b) feeding 10 people each a $10 meal at a local diner. Now, to pay off their debt to you, each debtor will help build a house for you (or car, or engage in some otherwise productive work). From which are you likely to get more return on the $100 you spent? This is why you get more GDP growth when funding food stamps and insurance benefits because fuller, healthier, non-hungry people make for better, more productive workers. People who only believe in tax cuts as a means for growing the GDP don't see the big picture, IMO. Just as they teach you here on the Fool, there can be a thing called "good debt" (food stamps, college loans, unemployment benefits) if it's used correctly. Unfortunately, we are in a period of "required debt", and like Sinchy says above, inflation is going to come roaring back after we pass these kidney stones and people get back to work. In 2-3 years, inflation is going to be very ugly, Griselda Fishfinger-ugly.

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#9) On January 30, 2009 at 10:15 AM, kdakota630 (29.48) wrote:

President Obama should put together the infrastructure bill that he promised and have a vote on it.  If he wants all this other "stimulus", put it in another bill subject to a separate vote.

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#10) On January 30, 2009 at 11:26 AM, jgseattle (33.78) wrote:

kdakota -

I agree that the current stimulus package should be several different bills with seperate votes.  I had this conversation with my brother and he pointed out why risk not getting something you want passed by allowing a seperate vote on its merits alone.

Politics at its best!

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