House stimulus plan disappointing in the details

 

“It’s all pork.”

 

That was the conclusion of Rush Limbaugh last week, even before the House democrats unveiled their American Recovery and Reinvestment proposal, aka the stimulus bill. What was anticipated by the construction and infrastructure industry to become the next gold rush has, once the details were unveiled, become a major disappointment.

 

It looks like Rush was right. This bill is has so many recipients so many vaguely defined provisions that for all intents and purposes it is pork.

 

The House bill is slated at $825 billion ($550 billion in spending, $275 billion in tax cuts). How much of that will go to public transportation infrastructure?

 

Just seven percent, according to House Highwayand Transit Subcommittee Chairman Peter DeFazio (D-OR). USA Today calculates the total construction and infrastructure spending in this bill at 10 percent or about $90 billion. That breaks down into $30 billion for highways, $10 billion for rails and transit, $31 billion to “modernize federal buildings for energy savings.” And $19 billion for water projects.

 

Let’s put that in perspective. $30 billion is less that the annual federal outlay for road and bridgework. And that’s less than the $42 billion California, by itself, has on the boards and ready to build.

 

So where is all the rest of the money going? The top beneficiaries, by a huge margin, are going to be teachers and federal employees. As we predicted last week, this is a yuppie/civil service bailout. Let’s look at the numbers.

 

Education: $141.6 billion

It’s not clear if this includes any school construction. There is language about “school modernization,” what ever that is. The rest looks like it’s all bound for paychecks.

 

Health care: $111.1 billion

Four out of every ten dollars spent on health care already comes from the government. Is it any wonder why we have the most expensive and least effective health care system in the world? Some $20 billion of this health care stimulus is going to “computerize medical records to prevent medical mistakes.” This is just a gigantic give-away to the big computer and software companies. Medical mistakes are human mistakes. It makes no difference whether they’re made on a computer or on paper. Can you see surgeons calling the Dell helpline in Bangladesh in the middle of an operation?

 

Aid to the poor and unemployed: $102 billion

Works out to about $10,000 apiece for the 11-million people currently unemployed. I’m not going to quibble about this. Losing your job is tough.

 

Infrastructure: $90 billion

Notice (above) how the biggest chunk of that “infrastructure” spending provision, bigger than the highway funding provisions, is to make our federal buildings nice and cozy? How about wearing sweaters folks? The $30 billion for highways works out to about $10 per capita, a pothole apiece.

 

Energy: $58 billion

I’m all for energy efficiency and energy independence, but these allocations show no rhyme or reason. It includes $6 billion to weatherize modest-income homes. If you divide the $6 billion by the most dilapidated old homes (let’s say one quarter of the housing stock or 20-million homes) that only works out to $300 per house. Again, too small to make a difference. Testing a home just to find the leaks costs over $1,000.

 

But the nightmare really begins when you get down to the small change, things like $35 billion for “other” or $16 billion for science and technology. President Obama seems enthusiastic about science and technology, yet he’s picked John Holdren to head the Office of Science and Technology. Holdren, the guy who will decide how to spend most of these funds, has highly questionable judgment in important social issues. Jeff Jacoby at the Boston Globe points out that Holdren jumped on the zero population growth bandwagon in the 1970s predicting eminent ecological catastrophe. Holdren also said at one point that global warming will raise sea levels 13 feet…then said it would be 13 inches. And he is scathing in his criticism of anybody who questions global climate change—a narrow minded, ideological approach that doesn’t bode well for the kind free and open inquiry necessary for public-interest science. That’s not a good track record, much less the kind of personality or management style you want making funding decisions that will amount to billions of dollars of expenditures every day.

 

Construction industry response

Reactions from the construction and infrastructure communities to the American Recovery and Reinvestment act have been mixed. The National Utility Contractors Association said: “First and ten on the fifty and driving for the end zone!”

 

American Roadand Transportation Builders Association President & CEO Pete Ruane called it “a significant down payment on our most urgent challenges,” but added that it “should be followed-up later this year with robust, multi-year authorizations of the federal airport and surface transportation programs…”

 

A press release from the Associated General Contractors of America mildly notes that “details of the proposed stimulus package provide encouraging signs that Congress is willing to make significant, but essential investments needed to rebuild our aging infrastructure….”

 

More realistically, Ken Orski, writing in his January 18 Innovations NewsBriefs newsletter commented that the bill left few in the transportation community satisfied, citing informal conversations he had with members of the Transportation Research Board. Orski also points out that the aviation people think they’ve been slighted and the green groups don’t think it dedicates enough to rail and mass transit. This may be pointing to some knockdown, drag-out Washington D.C.in-fighting in the next few weeks. Orski, quoting Steve Sandherr, Associated General Contractors chief operating officer, writes:

 

“As one congressional source told us, the fight has only begun. Over the next several weeks we shall see some of the most intense lobbying in recent history. The stakes are extremely high.”

 

So what we have as of this date is a bill that will do very little to stimulate the economy, other than bloat the government payrolls. President Obama said the bill may require as many as 600,000 new federal workers. Yet federal employment is at an all time high. Just this week it was announced that the country now has more people employed in government than in construction and manufacturing combined. See the chart at the link.

 

Nor will it amount to much more than a drop in the bucket as far as our national infrastructure needs go. Nickel and dime infrastructure projects don’t stimulate the economy beyond the immediate and temporary construction jobs anyway. This Wall Street Journal  op-ed ought to be required reading for every incoming member of this new administration. It points out how the cities of Pittsburg, Baltimore and Philadelphia, much like today’s stimulus bill proponents, poured millions of public dollars into stadiums, aquariums and all manner of anchor projects for their downtowns only to see their downtowns continue to turn into blighted slums anyway.

 

Someone needs to point out to Congress and the incoming administration that infrastructure is a long-term proposition. It took Dwight Eisenhower a good portion of his eight years as president to plan, propose and get approval for the Federal Interstate program. The execution of that program took another three decades and it was funded out of gasoline taxes, not somebody’s income taxes as the current stimulus package will likely be.

 

That’s how you do infrastructure. That’s how you convince the citizens of this country that you’re serious and committed. Contractors aren’t going to invest in equipment, investors aren’t going to feel safe about buying stocks and foreign countries aren’t going to appraise the dollar any higher just because a bunch of over-achievers from a new administration ride into Washington with their Blackberries a’ blazing, promising to spend other people’s money.

 

One final note on Eisenhower. He too was hit up by throngs of special interest groups soon after taking office. The republicans wanted money for their defense contractor buddies, the democrats wanted money for social programs. And the clamoring for attention and money, then as now, was fierce. His response: Stuff it. We balance the budget, we build the interstate, and the rest will just have to take care of itself.  His final speech in office was a parting shot at those special interests, especially what he termed the “military-industrial complex.” The end result was the longest and strongest economic boom this country has ever experienced. Household incomes rose almost 40 percent in eight years and continued to rise for seven years after he left office. It took LBJ’s Great Society programs and the deficit financed Vietnam War to finally wreck Ike’s economic winning streak.

 

That’s how you do infrastructure.