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Thursday, March 11, 2010
Stimulus Package Revisited
President Obama’s administration and his allies in Congress are touting the benefits of the year-old federal stimulus package. While blithely tossing out estimates of 2 million jobs created or saved by the $787 billion American Recovery and Reinvestment Act – a figure disputed by most Republicans, many economists and just about anyone who examines or works in the construction industry – they hedge their bets by heralding the stimulus’s other accomplishments.
The stimulus has helped by “providing a $250 check last year to seniors and disabled veterans,” Congresswoman Debbie Wasserman-Schultz (D-Fla.) wrote in an essay to Broward.net defending the package.
“A cut in personal income taxes through a ‘Making Work Pay’… totals up to $400 per year for an individual…in 2009 and 2010,” noted Senator Ben Nelson (D-Neb.). I hope you socked away that $7.69 a week. Just think how bad things would be without that extra $1.10 coming in every day!
These measures may look good, but they are tantamount to giving a cardiac arrest victim a facelift. Jobs are the only CPR that will save the patient, and the construction industry’s defibrillator has yet to be plugged in.
Mike Pickett, CEO of Seattle-based consultant Onvia, said once the final stimulus installments are released, the real number of jobs created or saved will number around 1.6 million. That’s $787 billion for 1.6 million positions, or $492,000 per job. Given the choice, I think many American workers would take the lump sum option and take their chances with the Sunday want-ads rather than relying on the federal government to create or save their jobs.
Construction – the life blood of the economy – is seeing only 5 percent of its jobs affected by the stimulus package Ken Simonson, chief economist for the Associated General Contractors of America, told USA Today. The simple truth is a jobless recovery cannot be sustained, and ARRA is not doing enough to create jobs. Every U.S. state but one lost jobs in 2009, while the national debt piles up and the mortgage on the country’s future builds. That isn’t to say the stimulus program hasn’t helped at all. Throwing nearly a trillion dollars at any program can’t help but foster some improvement. The discrepancy is one of impact and focus. The stimulus is inefficient and nibbles around the edges of the problem.
Public works projects – especially road construction and repair – remains one of the few bright spots ARRA has provided the construction industry, infusing more than $20 billion into the economy and putting 280,000 workers on the payrolls. Perhaps the best part of these projects is that they result in tangible assets for communities, assets that will streamline commerce once the economy hits its stride. Still, stimulus-funded capital improvement projects are mere Band-Aids, and without tangible, long-term solutions, there benefits will evaporate along with the federal funding – setting the stage for yet another round of construction firm bankruptcies and layoffs in an industry already mired in 25 percent unemployment.
It’s not too late, according to equipment manufacturer Caterpillar, but it will require a retooling of the stimulus package to focus on the infrastructure projects that will create construction jobs.
Caterpillar supported the Obama plan in 2009, and believes it has helped.
“A year ago there was a tremendous amount of economic uncertainty, and it was something we needed…but felt it needed more of an emphasis on infrastructure, including highways and airport runways and ports,” Caterpillar spokesman Jim Dugan explained.
China adopted that strategy and has emerged from the worldwide slump thanks largely to a $468 billion investment in roads, rail, seaports and other capital projects. Compare that to the $70 billion earmarked for infrastructure in the U.S. stimulus package.
“Continued investment and reinvestment in infrastructure is very important. It makes us more competitive as a country. That's the reason why today we advocate a robust highway spending bill, which is up for appropriation by Congress again,” Dugan said.
In my last look at the American Recovery and Reinvestment Act a few months ago, I agreed with AGC’s Simonson that America’s comeback won’t start until the construction industry heals itself: “The problems facing the construction industry aren’t just devastating construction firms and construction workers. These problems are crippling our broader economy. That is because construction spending accounts for 8 percent of gross domestic product. Simply put, you can’t fix our economy until you fix the construction industry.”
I predicted the construction industry will see real long-term recovery only when the unemployment rate eases and state tax revenues rise as a result of sales taxes on construction materials and a boost in the industry’s workers’ disposable income.
I see no reason to amend those predictions. And, sadly, I see no reason to be optimistic about their realization before the end of the year.
The stimulus has helped by “providing a $250 check last year to seniors and disabled veterans,” Congresswoman Debbie Wasserman-Schultz (D-Fla.) wrote in an essay to Broward.net defending the package.
“A cut in personal income taxes through a ‘Making Work Pay’… totals up to $400 per year for an individual…in 2009 and 2010,” noted Senator Ben Nelson (D-Neb.). I hope you socked away that $7.69 a week. Just think how bad things would be without that extra $1.10 coming in every day!
These measures may look good, but they are tantamount to giving a cardiac arrest victim a facelift. Jobs are the only CPR that will save the patient, and the construction industry’s defibrillator has yet to be plugged in.
Mike Pickett, CEO of Seattle-based consultant Onvia, said once the final stimulus installments are released, the real number of jobs created or saved will number around 1.6 million. That’s $787 billion for 1.6 million positions, or $492,000 per job. Given the choice, I think many American workers would take the lump sum option and take their chances with the Sunday want-ads rather than relying on the federal government to create or save their jobs.
Construction – the life blood of the economy – is seeing only 5 percent of its jobs affected by the stimulus package Ken Simonson, chief economist for the Associated General Contractors of America, told USA Today. The simple truth is a jobless recovery cannot be sustained, and ARRA is not doing enough to create jobs. Every U.S. state but one lost jobs in 2009, while the national debt piles up and the mortgage on the country’s future builds. That isn’t to say the stimulus program hasn’t helped at all. Throwing nearly a trillion dollars at any program can’t help but foster some improvement. The discrepancy is one of impact and focus. The stimulus is inefficient and nibbles around the edges of the problem.
Public works projects – especially road construction and repair – remains one of the few bright spots ARRA has provided the construction industry, infusing more than $20 billion into the economy and putting 280,000 workers on the payrolls. Perhaps the best part of these projects is that they result in tangible assets for communities, assets that will streamline commerce once the economy hits its stride. Still, stimulus-funded capital improvement projects are mere Band-Aids, and without tangible, long-term solutions, there benefits will evaporate along with the federal funding – setting the stage for yet another round of construction firm bankruptcies and layoffs in an industry already mired in 25 percent unemployment.
It’s not too late, according to equipment manufacturer Caterpillar, but it will require a retooling of the stimulus package to focus on the infrastructure projects that will create construction jobs.
Caterpillar supported the Obama plan in 2009, and believes it has helped.
“A year ago there was a tremendous amount of economic uncertainty, and it was something we needed…but felt it needed more of an emphasis on infrastructure, including highways and airport runways and ports,” Caterpillar spokesman Jim Dugan explained.
China adopted that strategy and has emerged from the worldwide slump thanks largely to a $468 billion investment in roads, rail, seaports and other capital projects. Compare that to the $70 billion earmarked for infrastructure in the U.S. stimulus package.
“Continued investment and reinvestment in infrastructure is very important. It makes us more competitive as a country. That's the reason why today we advocate a robust highway spending bill, which is up for appropriation by Congress again,” Dugan said.
In my last look at the American Recovery and Reinvestment Act a few months ago, I agreed with AGC’s Simonson that America’s comeback won’t start until the construction industry heals itself: “The problems facing the construction industry aren’t just devastating construction firms and construction workers. These problems are crippling our broader economy. That is because construction spending accounts for 8 percent of gross domestic product. Simply put, you can’t fix our economy until you fix the construction industry.”
I predicted the construction industry will see real long-term recovery only when the unemployment rate eases and state tax revenues rise as a result of sales taxes on construction materials and a boost in the industry’s workers’ disposable income.
I see no reason to amend those predictions. And, sadly, I see no reason to be optimistic about their realization before the end of the year.
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