Region is ready for economic stimulus
President-elect Barack Obama and his economic team have added their voices to the growing chorus of policy experts, state officials and industry representatives calling on Congress to include transportation infrastructure spending as part of an economic stimulus package. The New England Council agrees, and we urge Congress and the administration to act quickly and decisively to reverse our economy’s downward spiral.
Support for such a measure is based on historical precedent. Congress relied on such increased spending to create and sustain employment during economic recessions in the 1960s, mid-‘70s and early ‘80s. Public investment in transportation infrastructure is particularly effective in boosting the economy because it is directed at those industries – heavy construction, building materials, and durable goods manufacturing – that usually suffer the most during an economic downturn.
And these industries are suffering. The stagnant residential real estate market and negative fallout from the sub-prime mortgage crisis – particularly reduced credit availability from banks and other lenders – has resulted in a dramatic drop in employment within the construction industry. According to the Bureau of Labor Statistics, the construction industry is experiencing its largest sustained decline in business over the last four decades, with unemployment jumping to nearly 11 percent in October 2008 – the highest unemployment rate of any industrialized sector.
Simultaneously, federal, state and local officials have warned of a critical need for transportation infrastructure modernization and replacement as roads, bridges and other infrastructure, some of which was constructed more than 100 years ago, deteriorate or become obsolete.
The Federal Highway Administration estimates that $1.25 billion in highway infrastructure spending creates or supports some 34,779 jobs, producing employment income of $1.3 billion. These jobs include the construction workers and engineers associated with an infrastructure project funded by this spending, the suppliers and manufacturers of materials, goods and services used in the project and all of the jobs supported by the consumer spending generated from wages earned by these employees.
But critics contend that transportation funds are used slowly, with only one-third spent during the first year of authorization and one-half within two years. Thus, any increase in federal transportation spending would not have an immediate impact, with much of the positive economic benefits occurring years later.
The U.S. House of Representatives addressed that criticism by passing the “Job Creation and Unemployment Relief Act of 2008” in late September. The bill provided $30 billion in additional transportation infrastructure funding, including $12.8 billion for highways and bridges and $4.6 billion for transit projects, and gave funding priority to those projects able to begin construction within 120 days. The House Transportation Committee determined that the $30 billion in transportation infrastructure funding provided would create or sustain some $834,000 jobs.
While the legislation stalled, it has served as an excellent model, with a growing consensus that funding the “ready-to-go” transportation infrastructure projects will quickly provide a jump-start, or quick economic boost.
Targeting this spending on such “ready-to-go” projects encourages new activity when it is most needed, during the immediate down period when the economy is vulnerable.
And we know that insufficient funding is the only obstacle preventing construction from commencing on thousands of these “ready-to-go” projects, and keeping hundreds of thousands of unemployed workers from jobs.
Within New England, there are 170 “ready-to-go” highway and bridge projects requiring $1.615 billion to construct. We know that the federal aid required to complete these projects would create or support close to 45,000 jobs while producing employment income of $1.7 billion – jobs and revenue that the region desperately needs. Credit markets are immobilized, the stock market continues to decline, unemployment continues to increase, housing value continues to decline, and consumer spending continues to shrink.
Economists agree that a large economic stimulus package is necessary to stimulate spending by businesses and consumers. But recession knows no holiday. George Canning, British Statesman and Prime Minister said that “indecision and delays are the parents of failure.” Congress must act sooner rather than later.
James T. Brett is president and chief executive of the New England Council.