I agree that Fed policy alone may not be enough to get the economy back on track, I've argued that for a long time. But tax cuts are not the only option for stimulating the economy, government spending can also be used, and in theory on short-run stabilization policy, a one dollar increase in government spending has a bigger impact on GDP than a one dollar tax cut. Infrastructure is an obvious target for spending, it's surely needed, but there are other areas that could use help as well.
The idea that we should use emergency infrastructure spending as a stimulus is gaining strength among liberals. As the daughter of a transportation guy, I can certainly vouch for the fact that many areas of American infrastructure are in dire need of improvement.
However, as the daughter of a transportation guy, I regret to report that the idea of using infrastructure spending as a stimulus is a complete fantasy. This is not your grandfather's stimulus spending. FDR could spend whacking great sums on dams and roads and rural electrification, and hope to have an immediate effect, because FDR was working on a multi-year depression, and in the pre-1960s regulatory environment.
Between the environmental impact statements, public review periods, and byzantine bidding process, the development cycle for anything more complicated than painting a bus station is now measured in decades, not years. This wouldn't even work to get us out of the ten-year Great Depression, much less the more modest recessions of today. As my father likes to point out, if Bush had come into office declaring that his number one priority was shoring up the levees in New Orleans, by the time Katrina hit they might, with luck and a huge amount of political pressure, have been ready to put the EIS out for public review. More likely, they would still have been wrangling over the funding mechanisms and which state and federal agencies had exactly what authority*.
The reason we rely mostly on monetary policy and tax cuts for stimulus is that it is possible to rapidly implement whatever stimulus you decide on. With the exception of a few transfer programs such as food stamps and unemployment insurance, which are hard to funnel very large sums of money through, there is nothing on the spending side that matches tax cuts for speed. You could allocate the money, to be sure, but by the time it actually hit an agency and went through the bureaucratic procedures necessary to actually spend it, the window for effective stimulus would have passed.
We could improve matters by ripping out all of the procedural hurdles and community review procedures we've forced on the government, and in my opinion, that wouldn't be a bad thing. But in my opinion, this is somewhat less likely to be achieved than my teenage dreams of becoming a rock star.
The other thing we might consider is just not having the stimulus. It seems to me that both monetary and fiscal stimulus at this point are trying to attack supply shocks by goosing demand. America is going to have to get used to consuming less oil and less cheap foreign credit some time, and maybe the best way to do that is to let the shocks work their way through the system.
The broken window fallacy is alive and well - it's the essence of modern liberalism, in fact.
I agree, except that I think we should be spending a much greater portion on infrastructure. Infact, I think this should be the largest part of our budget.
Megan,
I'm not sure if you and pops are aware of this, but all the highway funds are looking at insolvency.
http://www.foxnews.com/story/0,2933,274113,00.html
This isn't some koookie liberal "make work" program, this is about roads not crumbling and bridges not collapsing. And your long winded anecdote is just another example of why libertarians cannot be trusted to run the government.
Infrastructure spending reminds me of Japan during its slump. As does massive bailouts for banks and interest rate cuts. Do you think these things are what prolonged the Japanese slump, or was it just wasted money with no effect? Or did it actually help them avoid a crash?
@freddiemac: I'm even more libertarian than Megan. We have the technology now for unobtrusive toll roads. Bring them on!
@Michael: Which is why I will vote to keep you and your kind out of office forever and ever Amen. 4 more years? No thanks.
@Michael: Which is why I will vote to keep you and your kind out of office forever and ever Amen. 4 more years? No thanks.
@Michael: Which is why I will vote to keep you and your kind out of office forever and ever Amen. 4 more years? No thanks.
Why do you have an asterix after "authority" at the end of the third paragraph?
I've seen the claim that implementation times for infrastructure programs and many other projects have risen massively in the last 40 years quite a few times in many contexts. Is there any documentation for this? And, even better, any attempt to attribute these changes in implementation times to the many possible causes?
Finally, anything that can and should be done about this, on a grand scale?
I'm not sure if you and pops are aware of this, but all the highway funds are looking at insolvency.
Yes, because people are driving less, and the gas tax is a fixed ad valorem tax per gallon rather than a percentage sales tax. (A few states have a percentage, like New York.)
That has absolutely nothing to do with Megan's point, though, freddiemac. The highway funds had a certain amount of approved projects based on expected revenue; because people are driving less and consuming less gas, the revenue is below expectations. If gas consumption weren't down, the highway funds would not be looking at insolvency. Finding the missing revenue by, say, increasing the gas tax will do absolutely nothing to create more infrastructure projects or spending. Hence it won't be a stimulus, at least not compared to what was already planned.
Even if you did raise the revenue for the highway trust funds beyond their previous expected amounts, you still couldn't immediately spend it on very many things because of the EIS process and everything else Megan mentioned.
To be sure, there are some road projects with EIS already completed awaiting money to start construction. States almost always have a backlog of projects, and they do tend to pile up when states cut spending (like VA) during slowdowns. However, like anything else, you can't really advance the plan. Do the projects in the pipeline, and the pipeline will empty fairly quickly and you won't be able to build almost anything at all in a few years. You also certainly can't change your mind right now and build anything (such as, say, trains) that hasn't already been planned and studied for a decade.
Plenty. The most significant law is the National Environmental Policy Act of 1970. No one doubts that federal planners building the Interstate Highway System ran roughshod over the desires of locals in ensuring that the interstates got built to plan, regardless of what got demolished. There is a reason that NEPA got passed. It does, however, make it very hard to change things. Now that we have the interstates, it's much easier and quicker to widen an interstate than invest in new train tracks, for example. The train tracks would be something new and would require an EIS and take ten years, whereas widening an existing road is considered to have more minimal impact.
Note that plans like the Southeast High Speed Rail defend themselves with graphics and comments noting that 10 years is typical before construction can start on a major construction project.
"That has absolutely nothing to do with Megan's point, though, freddiemac."
How do you figure?
"Finding the missing revenue by, say, increasing the gas tax will do absolutely nothing to create more infrastructure projects or spending."
Talk about a Strawman, I didn't mention gas taxes now did I.
"Even if you did raise the revenue for the highway trust funds beyond their previous expected amounts, you still couldn't immediately spend it on very many things because of the EIS process and everything else Megan mentioned."
This sounds like utter bullshit to me. You're telling me that if the government raised money, they couldn't spend it? I found Megan's anecdote pretty unconvincing, and yours equally so.
It seems pretty obvious that America's infrastructure isn't where it should be. Improving basic infrastructure will increase commerce, and yet we can't even afford to maintain it? And you're telling me that nothing can be done, that we should stand idly by while our highway fund becomes insolvent and our roads and bridges collapse? This smells of typical conservative intellectual dishonesty to me.
In this context, I encourage contemplation of: the Albert A. Gore, Jr. plan to wean the US from fossil fueled power generation in 10 years; and, the T. Boone Pickens plan to replace gasoline with natural gas for vehicles and replace natural gas with wind for power generation.
I do not believe it would be possible to obtain regulatory approval, overcome regulatory challenges, prepare environmental impact statements, resolve environmental group litigation and obtain construction permits in the US, under current circumstances, within 10 years. That does not even consider the lead times required to obtain, install and commission the equipment.
In addition, there is the minor issue of storage of power produced by these intermittent sources, when available, for later use when little or no power is being generated.
Don't begin vast programs with half-vast ideas!
Shouldn't we make a distinction between spending to create new infrastructure and spending to repair existing infrastructure? One would think that repairing an existing bridge or resurfacing an existing road would require a shorter regulatory approval process than building a new one.
If you are going to talk about spending as a stimulus, it is necessary to talk about where the money for the stimulus spending comes from
Isn't the (Keynesian) theory that it takes *deficit* spending to stimulate the economy? No one is mentioning raising revenue to pay for the stimulus, so I must assume that we are talking about deficit spending.
Since we are and have been deficit spending for some time now - haven't we already stimulated the &!^%$ out of the economy (at least in theory). Why should anyone think that more deficit spending would have anymore appreciable impact than the deficit spending we are already doing?
Stimulus programs are nearly always convenient excuses to enact whatever policy preference the party in power prefers except for one-time rebates, which are just bi-partisan panders.
Both freddiemac (in his first post) and Megan have valid points.
Megan's point focuses on new projects, and it tracks well with my understanding of what would be involved in kick starting a new project. I can't imagine someone trying to argue differently. I would disagree about the desirability of scrapping all review processes, but there's no question that the process in aggregate could be usefully streamlined and made more deterministic.
Buried in all his invective and name calling, freddiemac raises the interesting possibility that simply increasing (or reinstating, or guaranteeing) funding for maintenance and existing projects that are already in the pipeline could have a stimulus effect.
I think Megan would likely agree that -- independent of the stimulus effect -- restoring funds for maintenance to previous levels and preventing exisiting projects from being scrapped would be a Good Thing.
That said, I have a lingering concern that we're not so much facing a demand shock as a supply shock, and given the increased global competition for, e.g., steel, cement and oil (asphalt), this approach could worsen the supply shock. So it's not clear that a demand stimulus is even desirable.
Freddiemac, this isn't an anecdote. Please, go look at any federal project you choose, and see when it was authorized, and when it was completed. The Southern High Speed Rail project that Mr. Thacker mentions was first authorized in 1994; I believe the current thinking is that it will actually be completed sometime late in the next decade. That Federal infrastructure projects take more than a decade to complete is not in the least bit controversial. But my Dad was on the Senate's surface transportation finance commission--perhaps you'll accept his word as an expert?
Whether or not we need money for infrastructure--and I agree with you, in fact, that this is an area that the government should be working on--the point is, those can't be stimulus funds, because stimulus needs to be enacted immediately--it takes about 18 months to work its way fully through the economy. Even FDR would have been hard put to get money spent that quickly, but the Federal government simply isn't capable of it except in extreme situations, like 9/11, when the Senate essentially gave local agencies a blank check. That's not how the transportation sector works, and indeed, it shouldn't work that way--roads etc. need careful planning.
Both freddiemac (in his first post) and Megan have valid points.
Megan's point focuses on new projects, and it tracks well with my understanding of what would be involved in kick starting a new project. I can't imagine someone trying to argue differently. I would disagree about the desirability of scrapping all review processes, but there's no question that the process in aggregate could be usefully streamlined and made more deterministic.
Buried in all his invective and name calling, freddiemac raises the interesting possibility that simply increasing (or reinstating, or guaranteeing) funding for maintenance and existing projects that are already in the pipeline could have a stimulus effect.
I think Megan would likely agree that -- independent of the stimulus effect -- restoring funds for maintenance to previous levels and preventing exisiting projects from being scrapped would be a Good Thing.
That said, I have a lingering concern that we're not so much facing a demand shock as a supply shock, and given the increased global competition for, e.g., steel, cement and oil (asphalt), this approach could worsen the supply shock. So it's not clear that a demand stimulus is even desirable.
"We could improve matters by ripping out all of the procedural hurdles and community review procedures we've forced on the government, and in my opinion, that wouldn't be a bad thing."
How can you have grown up in New York City, a city where Moses devoured and destroyed a good number communities with transportation projects, and say this? Yes, community reviews can be tedious, and I certainly favor some sort of reform (perhaps another discussion), but simply ripping them out and letting government and public authorities have complete control over the what, where, and when of transportation projects is absolutely terrifying.
Given your feelings about unmitigated government power I have a feeling I am reading your statement the wrong way, but a clarification of how communities can stave off massive government projects without these reviews would be appreciated. Though poor, (and frankly often minority) groups have considerable power to block awful projects in large cities, this is not the case everywhere (i.e., the somewhat urban, somewhat rural south where I live where large projects like highways and dumps still always seem to be proposed for poor black communities).
In the early post-war period these transportation projects ripped families and communities apart, destroying the tenuous support systems that existed in poor urban communities and wreaking environmental havoc, and we are still dealing with the consequences. While I like to think that government has come to its senses in many ways (could the cross-bronx expressway be built today?), I don't really trust anyone with massive transportation funding in their pockets, and think that a review process is the closest thing we have to "checks and balances" in planning.
I'll agree with what Salguod wrote and leave it mostly at that.
"Infrastructure is an obvious target for spending" was the quote from Megan's link, and I do find it quite dishonest for her and other conservatives to equate increasing infrastructure spending to building brand new highways. Yes, building a brand new highway in Las Vegas would take years. Rebuiding bridges in Illinois or repaving roads in New York state...seriously how long would that take?
http://marketplace.publicradio.org/display/web/2008/02/01/transportation/
http://www.chicagotribune.com/news/local/chi-illinois-highway-plan_23may23,0,4440665.story
This whole post is just a big red-herring argument, as freddiemac says.
When I think of infrastructure spending, I think of rebuilding existing bridges and public buildings and repaving roads, upgrading existing subways and public transit, etc.
Is there a liberal out there who is proposing to stimulate the economy by doubling the number of highways we have? I don't think so. So why devote so much energy to knocking down a straw-man?
Is there a good libertarian argument against bridge safety, or in favor of potholes?
Ms. McArdle overlooks another entirely possible path by which new infrastructure can be built which starts to produce results on the ground rapidly, and has been pioneered by Boston's Big Dig. You start pretty fast and have ambitious completion deadlines but screw it up so badly by having failed to think things through, do your planning and win the public over, that you manage to stretch it out decades and screw up traffic in the meanwhile, and maybe if you're lucky kill a couple folk in the process. So, you know, there's alternatives.
There is nothing wrong with spending to maintain existing infrastructure- this is clearly an area that states and the federal government are doing a piss-poor job.
However, Megan is still correct- even this will come far to late to have any chance of "stimulus", and the funds to do this will, by necessity, have to be taken from elsewhere, so I don't believe in the stimulus part anyway- such calls are simply a way to get the increased government that the callers want, and I don't believe for one single second that such increased spending will be sunsetted like Thoma is proposing- it will be permanent, like most government spending.
If you want to help fix things, cut government spending, don't increase it. The next best thing would be to reorder government spending to more productive activities, like, for example, better public-infrastructure maintainence. Almost all of our usual responses are folly begetting more folly.
First of all, the main problem with infrastructure in the US is usually not that the roads are in bad repair--the Minnesota collapse turns out to have been a structural fault not detectable by engineering. Second of all, even those projects have to go through the federal procurement process, which even without an EIS takes way longer than mailing a check.
There' a reason why Megan et. al. discount maintenance as a means of stimulus: because it doesn't actually stimulate economic activity. If you pull forward maintenance projects, you've just done a GM 0% interest - sure you've increased revenues for highway firms in th short term, but you're not having any effect over the medium term.
I would be in favor of increasing the maintenance tempo, but that wouldn't be stimulating in the short term, just increase the long term maintenance spend. Anyways, to do infrastructure work you need plans. Maintenance work still goes through a rather rigorous approval and bidding process. If it wasn't on the schedule for this year, you can't just pull it forward. You could move things from 5 to 4 year out, or from 3 to 2, but beyond that you run into serious issues with the firms that will do the work and with the agencies that will oversee the work.
Freddiemac really doesn't know what the heck he is talking about - infrastructure takes a long time to get right, even without the process overload we currently have. A 3 year approval process is about what we should be aiming for - it lets all of the work get done and proper planning and logistics lead times, but not the enviro nut and NIMBY lawsuits.
Moses was a god and its too bad NYC doesn't have his like again. You will note that the WTC STILL isn't ready to begin reconstruction!
As to highway insolvency - there was $8B in earmarked pork in the highway bill last year. That's right about the current shortfall. If congress just spent the money on what they promised to, rather than on pork, there wouldn't be a problem.
It seems a shame, though. As Mary pointed out community reviews became necessary because of public infrastructure projects running amok. I don't know New York very well, but transportation projects certainly ripped apart Kansas City, where I live today.
It's an interesting catch-22 where bureaucracy becomes necessary to combat private interests, but this then enmeshes the system in a situation where it's too slow to be effective against rapid social changes and economic pressures.
@Megan
I think the original point by freddiemac (at least as I understood it) was that it would be a net stimulus to not cut back on or postpone existing plans to complete projects or perform maintenance.
If budget crises are in the process of causing cutbacks on maintenance and projects in the near term, it actually might be a _quicker_ stimulus than mailing out checks, which was not exactly a speedy process.
@Bulging Bracket
The whole point of a "stimulus" is to even out economic performance. All stimulus plans involve some degree of converting expenditures in the long term to expenditures in the short term. Megan's point is that a new project -- or any project that hasn't already been approved, etc. -- won't do a good enough job of moving expenditures from the long term to the short term because it will take years and years to get the approvals needed to spend the money.
My point (and that of others, I think) is that swift intervention to prevent cuts in already planned expenditures can relatively quickly prevent a decrease in demand, which amounts to a net stimulus.
@All
I continue to remain sceptical that a stimulus is what we need -- so I end up agreeing with Megan's conclusion that we should probably just suck it up and give the economy time to take into account permanent increases in commodity prices. This isn't a situation where commodities and services are sitting around unsold and unconsumed, as in the Great Depression, it's that demand for commodities has dramatically increased and the shocks are rippling through the economy.
For those inclined to "do something," IMHO the short term answer is to mend the safety net for those whose lives will be disrupted by these shocks, rather than a broad-based stimulus (which will only further overload demand for already scarce commodities).
Are you kidding me? Really?!?!
Did someone suggest the government is not spending enough? Maybe if we spend more things will get better?
HUH?
On one hand we have people saying Bush is driving up the deficit. The only way you can do that is.... SPENDING. On the other these sample people say we need to spend more to help the economy.
It shouldn't surprise that these same people say we need to deal with global warming NOW, and then get all made and blame Bush and "big business" for high gas prices...
1. Increase federal spending on make-work projects to $700billion at least.
2. Raise taxes on the wealthy big time.
3. Cut the military down to 0.
4. Impeach shrub/
Yipee, I've solved the problem.
What we need to get out of this economic doldrum is having house fall into an inventory-clearing level. Free Market works. Once inventory cleared, home construction can pick up again. We don't need a government plan.
There are two major mistakes going on here. I think people here are really missing the difference between repairing existing infrastructure and creating new infrastructure. Additionally, the goal of this infrastructure buildout is to provide long term stimulus to the economy, not prevent a recession in 2008.
Currently, our infrastructure is bad enough that simply repairing it would be a huge boost to the economy. Yes, it takes time and lots of engineering to plan some of these repairs, but repairing highways could easily provide some stimulus next year and the year after. These reparis will be needed no matter what our energy plan is going to be to deal with 20 years from now issues. These repairs can occur while the engineering, planning and permitting on other major infrastructure needs is done.
We don't really have to build anything new, just repair what we have, for a substantial amount of stimulus to be effected. Also note, that while the permitting is being done, there is lots of engineering to do.
Then, evaluating these plans against the fact that they take decades to complete is doesn't make any sense. The stimulus liberals are excited about is the jobs it creates over the next 40 years, not the jobs they might create in 2009. Don't evaluate Obamas plans on what some diarist on Kos wrote for their fanclub.
Once again, sweeping assertions with no research beyond "I talked to someone once". And as usual, wrong. States have backlogs of infrastructure projects that are already approved, on the shelf, but not funded. Give them the money and work can start within a few months. That's especially true for infrastructure repair projects, which can easily be moved up.
This economic slowdown is going to last a while, a year at least. There are plenty of infrastructure projects that will be hiring in time to provide stimulus.
How fast can we implement a program to effectively time traffic lights?
The Japanese had highly efficient and effective high-speed rail systems ready for the Tokyo Olympics in 1964.
We have one high speed rail system, the Acela, that runs intermittently, in the BosWash Corridor. To expand the system, the EIS would take, as Megan pointed out once, about ten years. Who wants to wait that long for a return on investment like that when the Chinese offer a quicker rate of return?
The paperwork maze is but one reason we don't get something like that here; so people get to satisfy themselves in sardine cans at 38,000 feet. As long as we value a byzantine governmental structure over actually getting things done, Big Project money will go to Asia.
Period.
A couple of points are worth making.
The first is that many of the larger rehabilitation projects that use federal funds are covered by NEPA and require compliance. Agencies ,to minimize their own burdens, have been consolidating jobs into larger and larger bidding and execution packages; to get under the NEPA limits they would have to go back and reengineer everything into smaller packages. The universe of rehabilitation projects that are exempt from NEPA after a Finding of No Significant Impact ( a FONSI),which itself takes some time to complete,is quite small.
And every project proposed for federal funding does require reviews by the FHWA or the FTA for design compliances,so unless the project is on the shelf and fully reviewed by FHWA or FTA already, it cannot go out to bidding, which itself is a time-consuming process.
Project award to the low bidder then requires a document review that is often at least 45 days long. And then the supervising agency has to have supervisory staff available before they can let the chosen contractor to start work. If the supervising agency has to contract for that staff, there can be further delays in getting projects actually started and paying wages to construction workers and having the stimulus impact. And the construction company has to be able to get the needed materials to start the job quickly, while not disrupting the existing market by paying premiums that get passed on to all active jobs then underway.
It is not that construction won't put good wages in the pockets of workers who spend, it is that the process of actually getting to that first paycheck to the worker is much longer than most people realize,even in the best of circumstances. For major projects, whether new or rehab, NEPA does impose substantial process reviews that take an average of 4 years longer to complete than the comparable review processes of states like California and New York. Using federal dollars does impose substantial time costs.
The second point to be made is that there are ways to get very small projects into the stimulus mix, but it generally requires waivers of procedure and great institutional efforts by the government. In the late 70s there were two rounds of infrastructure spending funded for stimulus purposes, but they both required that the local agency actually put people to work in very quick order (90 days,as I recall)so that paycheck would get into the economy. It ended up that most jurisdictions pulled out small rehab jobs,like park bench fixing, that required very little design and low levels of direct supervision. And even then many smaller communities just didn't have the administrative power to use the money quickly. These projects do useful things,but they aren't creating the great new projects that everyone envisions. They take care of past neglect by local government or advance small maintenance projects that would have been done over the next year or so.
Megan's example of the time line of the Washington-to-Charlotte high speed rail project is instructive. It was first designated in 1993. It will not get to the final EIS until 2010. It will then have to find construction funding, permits, and land acquisition before construction can start. So the first riders may board in 2018.
Think of all the lost opportunities for people who travel between Washington and Charlotte. And then remember that the New York City subway system, which underpins our knowledge economy and Wall Street, was built without any NEPA processes and probably couldn't be built today with it. I suspect that those who ride every day give not one thought to the fate of all the families that were ruthlessly displaced to create the subways. And it would be worthwhile to track down those families and those who were displaced during the creation of similar projects,such as the South Bronx, to find out what happened to them in the long run.
We do need the infrastructure,new and rehabilitated. The Highway Trust Fund is suffering from the slowdown in the economy and the suppression of gasoline demand by the $ 4 price. Unless there is a Congressional fix, spending next year on federally-aided projects, most of which are already in the final design stages, will be reduced and employment will suffer during FY 2009 and beyond. But that's not an issue people are really thinking about now, unless you are in the industry.
When most people are thinking about stimulus, they are thinking about how paychecks are put into peoples' pockets for back-to-school and holiday shopping. the usual infrastructure project pipeline just doesn't solve that problem.