Eye on the News

Nicole Gelinas
Stimulating Some Thinking
Get the infrastructure part of the recovery package right.
2 February 2009

Congress is hell-bent on getting the $819 billion stimulus bill done as quickly as possible—and President Obama is just as eager to sign it. But a few last-minute additions last week show that there’s plenty of room to improve how this massive spending plan treats infrastructure. Devoting a few more weeks to thinking about what we’re trying to accomplish would be good for the nation’s recovery and beyond.

The original bill, unveiled just two weeks ago, proposed little investment in transportation and mass transit. Yet these assets are the public backbone of our private-sector economy. Even where our roads, bridges, and subway systems aren’t actively deteriorating—and many are—we’re still way behind many European and Asian countries in modernizing and adding to our infrastructure to keep up with new technology and population growth. Indeed, on the same day that the House voted on the stimulus bill, the American Society of Civil Engineers announced a report projecting that we need to spend $116 billion more than we do annually to upgrade highways, and $28 billion more, again annually, to improve transit. Yet the original stimulus bill allocated just $30 billion to highways and $9 billion to mass transit—a measly 5 percent of the total package. Plus, the feds designed the stimulus so that states could use some federal infrastructure dollars to avoid spending their own money—a recipe for encouraging them to continue neglecting their infrastructure once the extra federal funding dries up.

The amended version of the bill, which the House has passed, is slightly better—but only slightly. An amendment sponsored by New York congressman Jerrold Nadler, a Democrat, adds another $3 billion for mass transit. Just as important, half of that new funding is marked for new projects, which can spur cities like New York to invest in new assets rather than coasting on century-old subway systems. Nadler’s amendment also got Congress thinking about how little the bill devotes to infrastructure. One Florida Republican, John Mica, even said on the floor Thursday that he was “offended” by the tiny infrastructure allocation.

Another good new provision, from Pennsylvania Republican Bill Shuster, prohibits states from using the federal highway-maintenance stimulus funds to replace their existing funds for such work. This provision would be difficult to enforce. But at least it acknowledges that the last thing states should be doing is cutting their own spending on infrastructure and replacing it with temporary federal dollars. They should be increasing such spending relative to spending on education and health care.

These improvements to the bill are modest. Moreover, a third new amendment makes the bill worse, cutting the time that states have to use half their federal infrastructure money from four months to three. Encouraging states and cities to spend money as quickly as possible won’t help them build the best long-term projects, and it gives contractors leverage that they wouldn’t otherwise have in this economic crisis, possibly making the projects more expensive.

But if Congress is suddenly so interested in speed, there’s room for people like Nadler to ask whether the federal bureaucracy has unnecessarily slowed down some important projects, making them not “shovel ready.” For instance, certain arcane environmental provisions apply only to transit projects, not to highways, putting transit projects at a possible disadvantage under the bill’s “use it or lose it” spending provisions.

To see how spending huge amounts of money on infrastructure without thinking it through can go awry, look to New York’s Fulton Street subway-station project. The current version of the bill will give New York another $500 million to build a fancy new subway station near Ground Zero and untangle the train lines that run beneath it. But the project has already consumed nearly $800 million, with huge cost overruns and design shortcomings. Congress should make sure that all state and local agencies getting the new money have clear, credible plans to budget and design projects so that we don’t start new Fulton Streets all over the country—and so that we don’t throw even more money away on the original Fulton Street project without assurance that we’ll get a finished product for the revised, higher price tag.

Overall, the scant debate Congress has allowed itself on the bill—and the modest changes that the House approved last week—show that there are a right way and a wrong way to spend nearly $1 trillion. But Congress and the president haven’t given themselves time to figure out the right way. An old proverb tells us that time is money—but in this case, another proverb applies: haste makes waste. Yes, it’s imperative to get some relief into the economy quickly. But on the all-important infrastructure part of the stimulus, we need more time to figure out how much to spend and what to spend it on.

Nicole Gelinas, a City Journal contributing editor and the Searle Freedom Trust Fellow at the Manhattan Institute, is a Chartered Financial Analyst.

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