Infrastructure was among the cornerstones of President Barack Obama’s $787 billion stimulus bill which was enacted in February of last year to aid the economic recovery. Democrats promised historic investments in roads, bridges and railways which, in many states, had become victim of neglect. Eighteen months later, with midterm elections for Congress due to take place within a week, just how much progress had been made?
The Associated Press found earlier this year that the surge in infrastructure spending had had no effect on local joblessness. In fact, unemployment rates rose and fell regardless of how much stimulus money Washington poured out for transportation.
More recently, The Economist similarly reported that unemployment in the construction sector hasn’t decreased. Infrastructure on the whole is still in need of investment. “The stimulus bill’s spending on infrastructure may have been doomed to mediocrity from the start,” notes the paper.
Even if the administration likes to boast that a third of stimulus spending went to infrastructure, The Economist knows that just $64 billion was actually allocated to roads, public transport, rail, bridges, aviation and wastewater systems.
Moreover, because the bill prioritized “shovel ready” plans, few new initiatives were undertaken. “The attempt to begin work hastily meant that both good and bad projects have moved forward.”
Chris Edwards and Peter Van Doren of the Cato Institute, a free market think tank, warned in December 2008 that this would happen. “The main problem with current government infrastructure spending,” they wrote then, “is not its magnitude but its lack of efficiency. More roads and transit capacity may or may not make sense depending on whether the benefits exceed the costs.” The best way to find out is to privatize infrastructure projects and let the market run its course.
Privatization of federal and state infrastructure makes sense for many reasons. First, privatization would reduce the responsibilities of the government so that policy makers could better focus on their core responsibilities, such as national security. Second, there is vast foreign privatization experience that could be drawn upon in pursuing US reforms. Third, privatization would spur economic growth by opening new markets to entrepreneurs.
With government involved, scores of otherwise unnecessary but costly projects are being funded. As Mike Brownfield of the Heritage Foundation reports, the promise of “free money” from Washington is proving irresistible to local authorities.
In Detroit for instance, a $500 million light rail train is under construction to connect the downtown area with outlying suburbs. “Critics say that the train is inadequate because it’s not part of a regional transportation system and that it will, in effect, be a train to nowhere,” according to Brownfield.
Voters are increasingly skeptical of such wasteful spending. Republicans running for governor in California, Florida, Ohio and Wisconsin have criticized plans for high speed rail links in their states claiming that they will quash or delay the projects if elected, even if it means losing out on billions of dollars in stimulus money.
President Obama is now touting another $50 billion infrastructure spending bill which, he believes, “will not only create jobs immediately; it’s also going to make our economy hum over the long haul.” But administration officials have already been backtracking on that promise with one telling The Washington Post bluntly that, “We don’t have a jobs estimate for that.” With Republicans expected to take control of the House of Representatives this fall, it seems unlikely that such massive new stimulus measures will be approved by Congress.