Economy & Budget

Shovel ready: Obama’s big infrastructure myth

Shovel ready: Obama's big infrastructure myth

President Barack Obama is reportedly ready to pivot back to the topic of jobs (again) in his State of the Union — which means he won’t be pivoting away from the myth that more “investments” will help stimulate and  “grow the middle class.” That’s the plan. That’s been the only plan.

No doubt, there is a substantive debate to be had over infrastructure spending. What sort do Americans need and want? Do we want expensive and inefficient trains and more green energy projects? Do we want “investments” allocated locally rather than nationally? We can debate those topics, and many other things, but there is no evidence that government infrastructure projects have sparked economic growth.

In his first State of the Union address, Obama claimed that, “Over the next two years, this plan will save or create 3.5 million jobs.  More than 90 percent of these jobs will be in the private sector – jobs rebuilding our roads and bridges; constructing wind turbines and solar panels; laying broadband and expanding mass transit.”

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But none of his promises came true.  Obama is around 8 million in the hole when it comes to jobs, but let’s focus first on the president’s malleable definition of  “infrastructure,” which is ideologically driven. After all, when Democrats had a chance to spend on legitimate infrastructure they didn’t; the priority was elsewhere. A study by John Taylor at Stanford found that out the total $682 billion package, federal infrastructure spending was just $0.9 billion in 2009 and $1.5 billion through the first half of 2010—or less than four-tenths of 1 percent.”

A year after the stimulus passed, the Associated Press reviewed Transportation Department data on more than $21 billion stimulus projects across the country, and the unemployment data to “assess the effects of road and bridge spending on local unemployment and construction employment.”

Here’s what it found:

A federal spending surge of more than $20 billion for roads and bridges in President Barack Obama’s first stimulus has had no effect on local unemployment rates, raising questions about his argument for billions more to address an “urgent need to accelerate job growth.”

An Associated Press analysis of stimulus spending found that it didn’t matter if a lot of money was spent on highways or none at all: Local unemployment rates rose and fell regardless. And the stimulus spending only barely helped the beleaguered construction industry, the analysis showed.

Furthermore, the Heritage Foundation identified 19 bankrupt green energy companies (“infrastructure”) were unable to be profitable even with $2.6 billion in financial assistance from Washington.

As Investors Business Daily reported in 2011:

In 2009, Obama dedicated $7.2 billion of stimulus funds to build “clean tech” jobs. He vowed to create 5 million jobs over the next decade.

So far, that effort has “created or retained” just 7,140 jobs, according to the Environmental Protection Agency. That’s about $1 million per job. The number is actually down from last year, when the EPA claimed 16,605 green jobs.

Spending $1 million per job might not bother the Krugmanites in Washington, but the only thing that kind of money has stimulated is the imagination of Greenies, not the economy.

Here is a piece by Keith Hennessey detailing some of the problems with Obama’s thinking on infrastructure.

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