» The projects funded will be mostly roads-based. How about a series of grants to public service agencies instead to keep up operations?
Even as the nation’s GDP expands, job losses continue to mount; the stimulus earlier this year wasn’t large enough to offset the mammoth effects of the recession. Faced with the possibility of devastating losses in the 2010 mid-term Congressional elections, Democrats have no choice but to focus next year on job creation.
Nancy Pelosi had it right when she argued that “The debate between deficit reduction and job creation is not a real choice, because we’ll never have deficit reduction unless we have job creation.” Indeed, the U.S. government must push for measures that will increase overall employment, both for the health of the Democratic Party and that of the federal budget.
As a result, some members of Congress are looking to a second stimulus in the form of major spending on infrastructure as the right solution, since construction efforts are some of the most employment-heavy investments possible. Senator Richard Durbin (D-IL) has proposed a $150 billion “front-loaded” infrastructure stimulus for early next year that would move forward some of the $450 billion proposed by the House for transportation spending over the next six years. In other words, the U.S. government would invest $150 billion in one year, versus $75 billion planned. That is, assuming most of the money will be headed towards transportation.
At the moment, the government lacks the money to finance the bill and would have to rely on further deficit spending to produce the cash. This makes the plan unlikely, since the Obama Administration is currently attempting to cut department allocations across the board, not increase them. If the government wanted to find a new source of revenues, an increase in the gas tax is a possibility, though the idea has been repeatedly dismissed by both Congress and the White House. Another possibly more politically feasible option is a small tax on stock transactions being proposed by Oregon Democratic Representative Peter DeFazio. If implemented, that source could provide up to $150 billion in money annually.
But even if the funds were reserved for transportation, the front-loading of spending is problematic. If $150 billion of the bill is spent next year alone, investments in each of the other five years will diminish to an average of only $60 billion. This means that investments in the transportation bill will automatically privilege projects that are ready for construction now, rather than those that may be buildable two to five years from today.
For transit advocates, this is a huge problem. Agencies do have capital projects in which they’d like to invest, but few major expansions are ready for construction next year. On the other hand, states have a huge surplus of easier-to-plan road work they’re ready to get done. This means that a $150 billion immediate investment in transportation would probably mean a lot of new highways — and not much new transit. A bill with investments pushed toward the end of the six-year spectrum would actually be best for public transportation, especially if the government encouraged municipalities to begin planning big projects now, with construction ready in a few years.
Of course, “back-loading” infrastructure spending isn’t really an option because it wouldn’t result in the job-producing effects desired by Democrats desperately holding on to their congressional majorities.
But there’s an alternative: promoting spending on operations needs of state and local agencies that are currently suffering from huge decreases in tax revenues as a result of the recession. The University of California’s recent layoffs and tuition increases were the most obvious sign that the public sector has been unable to maintain its spending at stable levels. The difficulties many transit agencies have had keeping service at continuous levels is a similar manifestation of the same problem. As a result, one option is for the federal government to spend money on operations rather than capital expenditures. If the U.S. government wants to spend $150 billion to create jobs, the money could go out to hire more bus and train drivers and keep those who are currently employed from being laid off.
On the other hand, if a front-loaded infrastructure stimulus means much more spending on roads and little on transit, it would be good for the jobs market but terrible for transportation.