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Obama’s Public Works Plan: Trickle Up Economics?

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Folks, am just back from a quick turnaround trip to Vienna, which was educational and enjoyable (although I did not have the time to see a Van Gogh exhibition at the Albertina which reportedly has a large number of rarely-exhibited top quality works). Am on the verge of doing a face plant, so forgive me for being a bit terse.

Given that US infrastructure looks third-world by European standards, Obama’s plan to make it a focus of Federal stimulus/job creation spending sounds, at first blush, like a good idea. The money will be spent in areas that will improve productivity.

But will this massive rebuilding be effective as stimulus? Keynes stressed the the importance of a quick action to combat a big fall in demand. As much as Obama says he will move the program along quickly, I cannot see how large-scale hiring could take place in anything less than a year from now. Moreover, many of the newly or soon to be unemployed will not be suitable for this sort of work.

Let’s look at the New York Times’ recap:

President-elect Barack Obama promised Saturday to create the largest public works construction program since the inception of the interstate highway system a half century ago…Mr. Obama’s remarks showcased his ambition to expand the definition of traditional work programs for the middle class, like infrastructure projects to repair roads and bridges, to include new-era jobs in technology and so-called green jobs that reduce energy use and global warming emissions….

Mr. Obama’s plan, if enacted, would be in part a government-directed industrial policy, with lawmakers and administration officials picking winners and losers among private projects and raining large amounts of taxpayer money on them…. he said he would invest record amounts of money in the vast infrastructure program, which also includes work on schools, sewer systems, mass transit, electrical grids, dams and other public utilities. The green jobs would include various categories, including jobs dedicated to creating alternative fuels, windmills and solar panels; building energy efficient appliances, or installing fuel-efficient heating or cooling systems….

“We will create millions of jobs by making the single largest new investment in our national infrastructure since the creation of the federal highway system in the 1950s,” Mr. Obama said. He did not estimate how much he would devote to that purpose, but when he met with the nation’s governors last week, they said the states had $136 billion worth of road, bridge, water and other projects ready to go as soon as money became available. They estimated that each billion dollars spent would create up to 40,000 jobs.

What exactly does “ready to go” mean? Have they defined the project specification and requirements, and the criteria for selecting successful bidders? Have they chosen the architectural/engineering and construction firms (presumably, in the bidding process, they would have reached agreement on major project phases, deliverables, and costs)? Has the architectural/engineering firm yet developed detailed drawings?

Now that is probably not even remotely a complete list of what has to happen to bring a large civil engineering program into being, but hopefully you get the drift of the gist. You can’t say, “Gee, let’s upgrade our train terminal” and go out and hire a bunch of construction workers. A good deal of planning and vendor screening takes place before the labor-intensive phases move into high gear. And I have a sneaking suspicion that few of these ‘ready to go” state programs have gotten as far as detailed planning and designing (I have trouble imagining a state would sign up and spend meaningful money on consultants and designers and then halt the project. And if they aren’t that far along, they are a good way from hiring lots of bodies (although gearing up the planning/management apparatus does make an economic contribution).

Now go back and read the sorts of activity that Obama is calling for. Think any of those might be good next steps, say, for a middle aged bank employee? Someone who worked in a retail store?

By deploying dollars through existing companies, Obama will create a lot of construction jobs, and will greatly improve employment for engineers and skilled professionals already in the areas targeted (civil engineering, green technologies).

However, in our modern society, labor is far less fungible in the 1930s. The stigma of being unemployed was so great, and social safety nets were sufficiently weak that able bodied men would take whatever work was offered, even it if was a large step down from what they did before the bust. Today, no one would ask a former white collar worker to dig ditches. In the dot-com bust, for instance, the down and out in Silicon Valley sought work at Home Depot. And office workers now appear at risk of suffering the same fate as blue-collar workers who lost good manufacturing jobs: even if they find replacement work, it is likely to be with less pay and bennies than they had before.

So will Obama’s plan be trickle-up for all those downsized corporate employees? Is the hope that enough infrastructure spending will in the end provide enough of an economic boost so as to restore some of the service jobs that have been lost? That isn’t how the plan was stated, but I don’t see a strong link between types of jobs lost and the ones to be created.

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103 comments

  1. Anonymous

    seems that road building will only reinforce the hegemony of the automobile leaving the US with an even larger carbon footprint?

  2. Yves Smith

    Anon of 12:04 AM,

    I missed that. Good point, The NYT piece did mention public transit spending too, but the numbers were pretty puny by comparison.

  3. Anonymous

    This bold imaginative plan illuminates the truly great vision of the president for change. Please stop carping about petty practical details. More roads are what is desperately needed and we have to get on with it as soon as possible.

  4. Anonymous

    Much quicker to move it in.

    I worked under the last clinton administration in the Civil Engineering Sector. Ready to go means that they are not really going to do anything. They will, most likely, add new buildings/infrastructure, that are usually very heavily dependent on Energy. Sewage treatment plants are the top pick. Most of the dollar value of these types of projects is in the stuff they simply move into place. Tanks, huge motors, electronic control systems. Most of the Production of these ‘high tech’ toys is based in Europe. Most of the engineering firms themselves are usually somehow related to the firms that will be making and delivering the machines.

    I can’t stress this enough, it will be new stuff, not re-engineering and re-placing the existing. Much cheaper that way, and there is no actual engineering that has to be done. They usually design the systems around the machines, not the machines around the systems. Simply take the plans out of the drawer and put new stamps on them. Charge for design that someone else already paid for.

    That is what ready to go means. They are just going to waste a whole lot of money on stuff that uses electricity, which causes its own problems down the road. They then take most of the money back with them, and you get a machine that has a life of ten years.

    No need to hire ditch-diggers when you can make a while lot more money flying the ditch in. Its also a lot quicker to do this today. This is a prefect example. Instead of a ditch, they build a pumping station and holding tanks. What used to be accomplished with gravity now requires a massive power bill.

  5. Anonymous

    This blog is a real den of nattering naybobs of negativism. Give the new prez a chance, would ya.

  6. Anonymous

    I heard that they will give money to governors for projects that passed the ‘technical phase’ but that required financing.

  7. eightnine2718281828mu5

    Build a national wifi infrastructure.

    Of course that won’t happen, but it’s an example of a balanced white/blue collar project since it’s both tech and construction.

  8. Anonymous

    @Anon 1.14
    “This blog is a real den of nattering naybobs of negativism. Give the new prez a chance, would ya.”

    Meaning don’t criticize.

    Why?

  9. Anonymous

    Wifi is a bad idea. Not really and “infrastructure” and a lot of machines.

    Fiber to every home would be the best money spent in this realm. Everyone who has tried to do that on a local level gets killed by the telco and cable lobby in the state and federal legislatures. They are making a lot of money off of that stuff. They pay well to be a monopoly.

  10. CrocodileChuck

    What the US needs most(Upper Midwest in particular) is a revitalised rail network-freight and passenger.

    But since there’s ALREADY been a bubble in railroads (1870′s) is this disqualified from consideration?

    CrocodileChuck

  11. DragonScholar

    I’m concerned about how fast it can move as well, but then again we’ll see. Right now I think there’s at least definite psychological value – but that has to be followed up by action.

    I’ve never considered the question if people will “lower” themselves to the jobs created (no matter how fast they come). We’ll have to see – but I would say expect a lot of recent grads to be trying to get these jobs since they’ll at least be available.

  12. Anonymous

    Burlington, VT is the only city that I know of that has been sucessful in deploying their own fiber network. The existing cable and telcos then compete for access to the hub.

    If you want FIOS from verizon in your area, all you had to do was get a story in the local paper about a local muni network being considered. Verizon then would come into the ‘high rent’ neighborhoods and run fiber to the houses. Less affluent neighborhoods would be left with nothing. In NY it was done at a state level that gave verizon a statewide charter. Really ticked the Cable co’s off.

    It also got rid of competition. Verizon and all of the telcos were required to grant access to their COPPER networks with the deregulation of the 90′s. Their Fiber last mile networks are now safe.

  13. Yves Smith

    I should have parsed the issues out better on taking ‘lesser” work. I think there are at least 3 separate but overlapping considerations:

    1. Blue collar v. white. class issue, which was mentioned. A white collar worker is more willing to trade down, say, to a retail store job (in part because he believes it is easier to trade back up) than get a better paid blue collar job (say, a unionized bus driver or a plumber).

    2. Manual labor. Manual labor was seen as honorable work in the 1930s (for the most part); it rarely is today.

    3. Health. How many people over 35 are overweight, out of shape, diabetic, or have other health issues that would preclude them from doing work that was physically demanding? A lot of people who might be willing to do a construction job may not be able to.

    And we have issues from the employer side. How often are people turned down for private sector jobs because they are overqualified? Will that apply here?

  14. baychev

    the big mismatch between the qulifications of the unemloyed and to be unemployed on one side and the need for construction workers on the other side makes this plan hardly workable.
    only way out of it is bringing the army home and introducing conscription after high school to get the necessary workforce.

  15. Yves Smith

    I may be wrong here, but the “green” white collar jobs don’t strike me as being in an area where employment is scarce, and perhaps more important, most of those jobs will require special skills (engineering knowledge?) which will put them out of the reach of the great majority of the population.

    The point of workfare is to employ the unemployed (and big numbers of them), like mortgage brokers, Wall Street back and front office types, people who worked for restaurants and retail stores that have folded or cut back on staffing.

  16. ndk

    The money will be spent in areas that will improve productivity.

    I don’t know if that’s your assessment too, but I have to disagree with this, Yves. Productivity is a very difficult thing to force. I see four or five priority areas, and at best, one of them seems likely to increase productivity.

    Mass transit: The U.S. has a terrible physical footprint for outfitting with mass transit (and I personally never drive a car, despite being in one of those cities not well designed for it). I’d hold up LA’s attempts at development of a metro system as an example. My colleagues there would love to take the train to work, but it doubles or triples their commutes. If we had less ‘burbs and more Tokyo, it would be a different story.

    Schools, sewer systems, electrical grids, dams, other public utilities: This is great stuff from a humanitarian point of view, and sorely needed in a lot of areas. I’m particularly fond of the electrical grid. None of this increases our productivity.

    Green jobs: This could reduce our long-term dependency on fossil fuels, which would thrill me. But it will reduce our productivity in the medium term, because the ROI on a new NG power plant and shale drilling is much greater than that of a solar panel. This might be offset somewhat by decreased energy intensity from the other programs, but doesn’t much help productivity.

    Improve IT for medicine: I’ve got a lot of personal experience here that you could wrench out of me with enough beer. Suffice it to say, there’s a lot of room for improvement, and this could go a long way towards increasing the productivity of medical workers. That implies far fewer grunt jobs in the medical sector, but it could decrease health care costs overall. This gets into your retraining point.

    Broadband and computer improvements: Again, much personal experience. My day job involves running and selling extremely high bandwidth and low latency networking for T1 research universities. They generally don’t need, with the exception of LHC and other big science, what we can deliver. In fact, given students’ tendencies, many CIOs actually worried back in the day about increased exposure to RIAA and MPAA lawsuits if they did have more bandwidth…

    I don’t think this will do much to increase productivity, honestly. Most fields involving computer-based work can get their job done just fine on any old beater at this point.

    I remain quite skeptical that fiscal stimulus will pull us out of our current situation.

  17. ndk

    What the US needs most(Upper Midwest in particular) is a revitalised rail network-freight and passenger.

    CrocodileChuck, I think better freight is a great idea, but I’m not sure we can do good passenger rail here. Though a big railfan — the 2 day trip from Chengdu to Urumqi is mindblowingly cool — passenger rail really struggles to compete with air travel and private vehicles. This is true even in places like Europe and Japan, where the physical layout makes much more sense. The Shinkansen is about the same price as flying, and either a little faster or a little slower depending on how far you’re going. Colleagues in Europe regularly prefer to fly to intra-continental meetings, and it’s usually cheaper.

    Jim Hill had a great line from the perspective of the railroad operator: “A passenger train is like the male teat — neither useful nor ornamental.” While from my perspective, it beats flying every time just for the experience, it’s lost out in practice and general use.

  18. Andrew Bissell

    “Given that US infrastructure looks third-world by European standards … “

    It’s pretty amazing to me how quickly this idea has congealed into consensus. Yes, there are some dilapidated schools and hospitals, especially in the inner city, which need to be renovated or replaced. The electric grid absolutely needs to be improved. And given the ongoing decline in world oil production, a revitalized rail network is very important.

    Yet, the first thing on Obama’s list of infrastructure to build is roads and bridges. I’m sorry, but the idea that America’s road infrastructure is in urgent need of an upgrade is absolute malarkey. One high profile bridge collapse does not a crumbling road infrastructure make.

    Far from “encouraging,” I believe these early indications of Obama’s plan indicate potentially tragic mistakes are in the works.

  19. Yves Smith

    ndk,

    I was trying to look not completely negative about a game plan everyone seems to think is a good idea. I do recall evidence that people work harder in better kept offices (not neat, but better lit, fresh paint). That may just be Hawthorne effect, however.

    It may be my imagination, but the populace at large does seem more chipper when they are in pleasant settings, even the stereotypically pessimistic Germans. But given our fondness for quick fixes, Prozac in the water would probably do the job almost as well.

  20. Yves Smith

    Andrew,

    I have visited 6 European countries in the past couple of years, and more than one city in most. My sample isn’t exhaustive, but it isn’t chump change, either.

    Our airports for the most part, are not up to par, (there are some that are very presentable) and our public transit is terrible.

    However, I must beg to differ with you about bridges. A 2005 study found that over 1/4 of the US bridges were structurally inefficient or functionally obsolete.

  21. Richard Kline

    I’m not defending ‘fiscal stimulus;’ that said, let’s put this proposal in context. To begin with, the bulk of the jobs we have seen lost are most unlikely to be concentrated in financials and white collar positions. Bear in mind that construction and it’s attendant design skilled trades and professions was the big gainer in employment in the last six-seven years, and has been a colossal loser. Manufacturing is under major pressure. A ‘dig a ditch, pull some wire’ program does put some of those folks on work at public expense. To be sure, retail is entering massive job losses, and few of those folks or real estate agents are going to apply for the field jobs of this program—although they should, some will be well paid.

    The real point of fiscal stimulus, though, is the ripple effect. Those on work spend a little, or at least keep pushing payments up their personal debt mountains of mortgage + plastic rather than default. That ripple means money moves in the consumer economy (in theory) as those put on work spend, creating income opportunities for those ‘service workers.’ Repeat that, because we will be hearing much of this over the coming twelvemonth: Jobs in the dirt create spending for jobs behind counters. Now, there is something to be said for preventing, or trying to prevent, the _collapse_ of demand in the US (which I won’t say here, since that’s another commentary).

    Will it work? No. Japan’s experience with just this kind of effort is not encouraging. They built a ton of infrastructure, much of which they didn’t really need, but got no push on growth. A further issue is that those hired to be diggers to start the ripple know that these jobs are _not_ lasting but a stop-gap; a couple of years at most before the funding gets pulled, then what? That is not a prescription for said diggers to, say, take out a new mortgage or the like, but rather to pay down debt and build up savings. This may be part of why Japan got little momentum from its massive deficit spending on infrastructure: Big Construction siphoned off moolah to stopgap their Big Debts from the boom, while the workers stayed away from stocks and property while repairing their own finances. For ten years. Just like we will.

    Then there is the issue that these massive projects are _not_ going to be run by the Guvmint, ostensibly a non-profit; they are going to be steered to Big Diggers, who very much are for-profit enterprises. Which high-lights another point about The Stimulus: It’s a bailout bonanza for big construction contractors drapped in the lambskin of Saving the Public. As mentioned above, it will take quite a long time to get these programs up and working.

    This plan is announced because it is imperative for the _political_ health of those coming into office that they be seen Doing Something. So they are visibly, er, talking about doing something. It doesn’t matter what. And for 2009, it won’t matter anyway. We will have unemployment north of 10%, and spend most of the year trying to keep from being buried by the rubble of the banking system, having to do over the bungled bailout of the last year, and far higher cost.

    And for the yob Anon in comments above, many of us did give the New Guy a chance—and he expended it with his first dozen hires. It’s plain that he plans to change nothing except the marketing strategy, which now will include a green ribbon on the same old system. Profoundly unimpressive. Nice talk about ‘guaranteeing a college education for all,’ except he didn’t say anything about ‘public funding,’ so what he means is ‘New and Improved Debt Opportunities for Taxpayers in Training.’ Show me different, and I’ll believe it. I’ll still be waiting at the end of _either_ of his Administrations.

  22. homebody at heart

    Lots of infrastructure projects (hospitals, hiways, school improvements) have been in the works for years here but not funded (bonds not approved by the voters or lack of funds in the state budget). The guys who would do those “blue collar” jobs are the ones that used to do that blue collar work building homes. And, skilled labor wages are pretty decent for state jobs because prevailing wages (heavy equipment operators can make as much as ($50+/hour including bennies) are required on government projects in California (any project costing $1,000 or more). As far as white collar workers lowering themselves to do blue collar work, many of them already have (I actually know a mortgage broker who made the move to “digging ditches” and is very happy to be doing it. Contrary to the recent anouncement of our recession starting last December, the slowdown here in California in the building trades is more than 2 years old. Interesting, there were just 14 help wanted adverts in the local newspaper this week, where most recently, there have been 2-3 full newsprint pages. If other states are like California, I’m sure they’ll be getting their lists together to submit to the Fed.

  23. ndk

    I was trying to look not completely negative about a game plan everyone seems to think is a good idea.

    We would do well to revisit how the New Deal was received in its own time, and how perception of it changed over time. From what I know, there was some controversy. We are a deeply divided country at this point, and I worry that such a sweeping program in this environment might be controversial.

    I hope a strong, shared sense of optimism about the future grows from this. It would then have been worth every penny. I don’t see that as the most likely outcome, though.

  24. Andrew Bissell

    Yves,

    A fair point on bridges, I haven’t spent all that much time on the subject. I still don’t see the need or economic value for new roads, unless you subscribe to the Keynesian notion that digging holes and filling them back up again can be a net win for the economy.

    As far as public transit, I definitely agree that ours is not up to European standards, and there’s some room for improvement there. But it would be a fool’s errand for us to attempt to *match* the public transit standards of a continent so much more densely populated than ours.

    I spent the last couple years doing some international work as a management consultant, so I definitely know my airports, including a few European ones such as Heathrow, Luton, Charles de Gaulle, and Frankfurt.

    Let’s just go down the list:

    Heathrow: Great place to travel through if you don’t mind waiting a couple weeks for your luggage to catch up with you.

    Luton: Not too many complaints here, except that it’s waaaaay too far outside London and underserved to be an effective alternative to Heathrow.

    Charles de Gaulle: The airport with a death count. An absolute dump.

    Frankfurt: You’d better like walking 1.5 miles under exposed ductwork reminiscent of the film “Brazil.” Then you get to wait for your flight in little cattle pens.

    LHR, FRA, and CDG are arguably the three most important hubs in Europe, and if I could trade our security screeners for theirs, I would take ORD, SFO, ATL, or LAX over any of them. LGA and JFK are probably a wash. If the TSA is any indication of how the Federal government plans to “improve” our airports I’ll pass.

  25. nirad

    are you aware that a large portion of the jobs lost in this economy so far have been in the construction field? unemployment in construction is estimated at 12% and rising fast, so this is the logical place to add jobs to the economy. your editorial completely missed this.

  26. ndk

    Frankfurt: You’d better like walking 1.5 miles under exposed ductwork reminiscent of the film “Brazil.”

    That’s hilariously accurate. It’s been that way for literally years, too, so I’m becoming suspicious that it’s deliberately thematic. I’ll praise DEN and SEA in addition to ORD, SFO, and ATL, but I think LAX is an abomination. 7 random concourses, no walkways, bizarre layout.

    If you want to see true airport luxury, though, check out the new PEK in Beijing. It’s absolutely spectacular, and a welcome relief from the “helpful” panhandlers trying to escort you through the old labyrinth for yuan. Also, Haneda in Tokyo is quite literally two-thirds shopping mall, one-third airport. The place always cracks me up.

  27. ndk

    are you aware that a large portion of the jobs lost in this economy so far have been in the construction field? unemployment in construction is estimated at 12% and rising fast, so this is the logical place to add jobs to the economy. your editorial completely missed this.

    I only see 12.4% of total current unemployment in the construction sector. No doubt there’s a bad unemployment rate in construction right now, but the number of people employed in construction overall is dwarfed by that in other sectors, at 5.1% of the current workforce. Leisure and hospitality has twice that number. Yes, that’s a little messed up, but it’s who we got.

  28. Yves Smith

    nirad,

    The infrastructure program is being presented as a big component (the component?) of “2.5 million jobs in two years” gameplan.

    Even though construction has been very hard hit, the US is still a service economy, and so a solution that appears to be directed largely at construction and related consulting/oversight/engineering businesses misses major areas of employment.. Construction got hit first, deeply, but the other sectors of the economy are hard on their heels.

    According to the BLS, construction has 7.7 wage and salary jobs, plus 1.9 million self employed and unpaid family workers. Retail “trade” employs 8.1 million and wholesale, another 5.9 million. Food services is 9.4 million workers. Banking employs 1.8 million, insurance 2.3 million, and securities and commodities, over 800K. However, the financial services jobs are disproportionately well paid, so the economic impact is (was) more significant than the headcount numbers suggest.

    Andrew,

    We are talking apples and oranges a bit. Many US airports call themselves international when they aren’t, they don’t have the space allotment for the passport/customs drill. So you are comparing major domestic hubs to airports in Europe that have both domestic hub activity and serious international inbound flights (one indicator: can you take a shower at any US airport? I know you can in Honolulu….)

    If you are going from domestic to int’t, LAX is no party, it’s as bad to get from one terminal to another as CDG.

    ATL doesn’t count, and I am not a huge fan of it. MIA, which is a better comparable, is a nightmare. Agreed SFO is fine.

    Aside from the self-imposed baggage wound, I avoid Heathrow due to the UK security regime, That is not an infrastructure issue. And Gatwick is not at all bad.

    AMS and BCN are fine. Haven’t been in Dulles in years, so can’t comment, and JFK is a disgrace.

  29. a

    “passenger rail really struggles to compete with air travel and private vehicles. This is true even in places like Europe and Japan, where the physical layout makes much more sense.”

    WTF? The French TGV competes effectively with air travel on all its major routes, including Paris-Marseilles. You have to go to Paris-Nice (which the TGV doesn’t serve for the entire route) before air service becomes practical. The Eurostar, in spite of all its problems, competes effectively on the Paris-London route. Even Paris-Amsterdam is dominated by the Thalys.

    The problem for the U.S. is it would need to lay new tracks in high-density corridors, and that’s just not going to happen quickly; so the attempt is never made, because the American political process has the concentration skills of a two-year old.

    “What exactly does “ready to go” mean? Have they defined the project specification and requirements, and the criteria for selecting successful bidders? Have they chosen the architectural/engineering and construction firms (presumably, in the bidding process, they would have reached agreement on major project phases, deliverables, and costs)? Has the architectural/engineering firm yet developed detailed drawings?”

    Sadly, I think the Democrats may have learned from the Republicans’ handling of the Iraq War. Use a “crisis” to ram through whatever policy you wanted to do anyway, and then use it again to avoid normal processes which dissuade corruption and instead award your political friends.

  30. wunsacon

    >> eightnine2718281828mu5 said…
    >> Build a national wifi infrastructure.

    Get this: I momentarily misread your post and thought you wrote

    "…a national WII infrastructure…"

    Hahaha! :-)

    Imagine the possibilities! A generation of gamers will get off the couch to build "virtual" ditches while "really" exercising and beating off diabetes type 2.

    I wonder if Nintendo will sell a fake plastic shovel to enrich the experience.

  31. bg

    I would give Europe an A- on mass transit and airports, and the US a B+ (mass transit isn’t relevant outside of a few elite urban cores).

    Japan and Eastern China get an A.

    These are all good grades. Infrastructure is not holding us back much. For that you need to go to India.

    The infrastructure is so bad, that 40% of the cost of doing business involves hiring cars for your employees, and providing meals they cannot get on their own away from their homes. There are no highways, and airports are masses of humanity pouring through a series of small rooms.

    If building roads, airports and sewers in the US is the path to salvation, god help us. Its not us that needs them.

    Welcome back, Yves, You were missed.

  32. Andrew Bissell

    With respect, Yves, I think you’re cherry-picking the airports that support your thesis. I’ve visited dozens of U.S. airports over the past couple years, and MIA is hands down the worst. I knew I was in for trouble and had to call my travel agent within *minutes* of stepping off the plane.

    ORD and SFO are not both domestic and international hubs? That’s news to me, as I used them for precisely that purpose many times.

    To put things in perspective, I was working in London and later South Africa and traveling back and forth to the U.S. about once a month. I *routinely* checked bags, and flew exotic routes like JNB-FRA-IAD-DEN-FCA, or JNB-FRA-ORD-OKC, and even JNB-FRA-JFK, LGA-PWM-ORD-SFO. Perhaps my experiences were colored by the fact that most of the international flights were in business class, but I experienced no issues with the “basics” of airport service including baggage handling. Honestly, my biggest complaint is that most U.S. airports seem to intentionally restrict the supply of power outlets. (By the way, if you’re willing to pay the fee for access to a lounge, you can take a shower in most of them. Not the most egalitarian solution, but I certainly shudder to think of what egalitarian airport showers would look like.) But taken as a whole, and given the logistical challenges they face, I found that our airports actually seem to do quite a stellar job. If anyone in the world should have developed a hatred of the allegedly subpar American airports, it was me. Perhaps it’s another sign of the emerging banana republic that we heap such scorn on one of our most capable industries and look to government to fix the imaginary “problem.”

    At any rate, given trends in world oil production, I think we ought to be seriously pondering the possibility of a greatly shrunken air passenger system over the next few decades. I’m not making any complaints about the moves to subsidize alternative energy (yet) because I hope that it will succeed. I say “yet” because, to me, these proposals from Obama show a lack of the kind of imperative and urgency that produced the Manhattan and Apollo Projects. So I think that on the alternative energy front we’re likely to see more boondoggle than boon.

    I oppose stimulus per se, but if we *had* to have it, I would think expanding the supply of nuclear power would be a fantastic use of the funds. You would get that white/blue collar mix and could reemploy all those Wall Street quants in designing and managing the systems. Who else understands so well the dangers that can come from putting overconfident demands on a highly complex system? But I haven’t seen any mention of nuclear power in the plans discussed so far. (I’d greatly appreciate it if anyone could direct me to that.)

    Dulles is an absolute disgrace, with its “mobile lounges” and 1970s technocracy esthetic, but I take some pleasure in the fact that its weaknesses are visited upon the one city that most richly deserves them.

    Aside from MIA, can you cite any other airports that you believe are most comparable to European ones and demonstrate the system’s need for improvement?

    Thanks

  33. datadave

    I am underwhelmed by Obama’s plan too. I do work in construction (only work I could find after Reagan’s rise back in the day), and know that the jobs will go to mostly heavy equipment guys, established construction people and some civil engineering firms and already employed office workers but not in a quantity needed as the workers already in the construction field are already underemployed and will then be ‘over-employed’ if the infrastructure deal goes thru…meaning 50-60-70 hour weeks for those already in the field…and little gain for new workers. As the Unions are now weak and little enforcement of hours of work and overtime rules are gone… and the present construction guys and gals Want the higher hours to make up for past losses….as a result job growth will be underwhelming. It might be good for me…being underemployed as a ‘free agent’ self employed ‘sub’, but that’s a minor point.

    Some sort of CCC or WPA thing for the really unemployed is maybe in order: babushka’s cleaning streets? Hate to say it….but this does look like a Naomi Klein kind of Shock Capitalism coming home to roost …I confess not reading her stuff except on the web…but it seems so logical concerning what people like Larry Summers, Bob Rubin and Henry Paulson are doing. It’s feeling like that what happened to Russia in the early to mid 90s).

  34. Anonymous

    The outcome could be a lot of bridges to nowhere. Do not forget that a lot of the money spent in the Great Depression was for power generation. Every cent of this public works program should be spent on building new plants that generate electricity. With the electric car coming online we will need it. Using the conversion of 746 watts for one horsepower and an average of 80 horsepower for all vehicles (probably low) I come up with more than 1,193,600,000,000watts needed for the Los Angeles area (assuming 20 million vehicles). Of course this number does not tell the whole story, since the time each vehicle is driven per day is critical to the final determination. But with numbers of this magnitude, the precise details do not matter. In my opinion, without extreme development of new power generating capacity, electric cars will drain the power grid so fast it will make your head spin.

  35. Blissex

    «many of us did give the New Guy a chance—and he expended it with his first dozen hires.»

    The good spin for this is that the next 1-2 years are going to be very very bad, and whoever gets the Treasury, State and Defense during them is going to have their reputations burned to ashes, deservedly or not.

    «It’s plain that he plans to change nothing except the marketing strategy, which now will include a green ribbon on the same old system.»

    Well, the problem with any change is that one cannot change policy without changing voters, and many/most voters in the USA are fully invested in politics as usual, as they are largely rentiers or wannabe rentiers.

    The only change they want is more bubbles, more immigration, more offshoring, more wars, more welfare cuts, more healthcare for seniors only, more socially reactionary policies.

    Blue dog democrats and movements republicans rule because a majority of voters vote for them. Liberals and progressives, please keep asking yourselves why Faux News and wingnut radio are so wildly popular.

    Obama is principally a realist, a very cinical, skilled realist, and he knows that to raise campaign funds and to get votes he has to pander shamelessly to the mean, avaricious rentier (or wannabe rentier) median voter; that’s what triangulation means.

  36. Andrew Bissell

    Anon, do you think that fuel cells could be a workable solution rather than electric cars? I fear the predictions of guys like Kunstler may be accurate, but I’d love to see him sent packing by the development of a viable hydrogen economy.

  37. Blissex

    «love to see him sent packing by the development of a viable hydrogen economy»

    I guess that he would love that too, as it would neatly solve a lot of issues, too bad that there is always the storage and distribution problem.

    The great, great thing about liquid oil based fuels is that they have a high energy density and they are trivially easy to store and transport and subdivide. In this they are unique.

    The overall problem with liquid oil based fuels is that they are not “economic goods”; they are more like irreplaceable works of art, because the overall supply is finite.

    And imbecilic societies do tend to mine their “works of art” (forests, environment, fossil fuels, …) far faster than is overall optimal.

  38. wintermute

    New roads are not a solution for 21st century road traffic. Neither are railways. The solution is automated driving systems for cars. This technology has sky-rocketed in the last few years – witness the Darpa challenges.

    With computers driving cars over 3x as many can fit into the same stretch of highway. Many traffic lights can be ripped out completely. Making the existing road network function better is much smarter than spending billions re-doing the 1930′s, 1950′s road infrastructure. Sure, spend money on maintenance – but money spent on tax breaks for the technology companies of the future is the way forward…

  39. Anonymous

    Baychev plumps for “introducing conscription after high school.” I’m sure Der Chosen One will get there quick enough without cheery freelance appleseed broadcasts.

    Glad to have you home safe, Yves, if safe is applicable anywhere in the US next year.

    I think the “public works” program goes like this: give money to GS and JPM as usual, to administer or expedite the management of something. Presto! – white collar workfare public works program.

  40. Anonymous

    Sure sounds like PORK solves all. Ever hear of “earmarks”—-this is just a big bunch of “earmarks”. Whoever believes that this is an efficient use of tax dollars must have never heard of HALLIBURTON, KBR or the infamous BIG DIG in Boston, home of FBI instigated MOB Murders.

    More tax dollars down the toilet. Onward to collapse.

  41. Erich Riesenberg

    Relax anonymous folk worried about too little power to recharge electric cars, most cars will be recharged at night, when what percentage of electrical generation capacity is not used? Hopefully by the time this is a real issue, electricty will have price tiers so people will be motivated to set the recharge at the “lowest cost” option.

    Eventually, infrastructure has to be fixed. Perhaps it would be best if the current, wretched administration had begun preparing when the credit crisis began in the summer of 2007, but they are crony capitalists with more important things to worry about than people who they do not know. I would rather have unemployment checks go out for another six months while we prepare to fix some bridges than give $300 billion more dollars to Citibank.

  42. Anonymous

    Yves, thank God you’re back. I missed my morning fix -and afternoon, and evening.There’s a pretty decent Van Gogh exhibition at MOMA.

    Where’s Paulson? When does his immunity end?

    Great new American political concept -permanent?

  43. russell1200

    I hope this link works. It is from Engineering News and Record (ENR). An industry shill publication.

    http://enr.construction.com/news/othersources/article.asp?SMDOCID=ap_2008_12_06_ap_worldstream_english_D94TJ5A01_news_ap_org_anpa&SMContentSet=0

    The article states that there are $64.3 Billion State level projects ready to go if the Federal government will fund them.

    I imagine that many of them will be the usual politically contrived projects that State Departments of Transportation come up with, but there are a some bridge repairs in there as well.

    If the Feds set aside some of the money for infrastructure repair you would probably see useful movement in about 4 quarters on the "low hanging fruit."

  44. Don Swanbeck

    I believe the United States has a window of opportunity to reap environmental, economic, and national security benefits from a multiyear tax on gasoline. I understand that in the midst of this recession we are trying to pump money into the economy to stimulate investment and employment and taxing people seems to be counterintuitive. But there are so many benefits to this action and the political context may never be as favorable as right now.

    Despite the severe economic downturn that Americans are experiencing, one can almost sense the collective sigh of relief on America’s roadways. When gasoline hit $4.09 per gallon nationally in early July, Americans could probably never imagine that we would currently have gasoline prices under $2 per gallon. Yet, many people correctly realize that the current decline in gasoline prices is only temporary.

    Even though the entire world will experience some form of an economic slowdown, global economic activity will eventually pick up led by the emerging economies in Asia and Latin America. Their thirst for oil and gasoline will only exert upward pressure on crude oil prices and eventually our increasing reliance on imported oil will make us vulnerable again.

    As a society, if we were willing to look ahead and sacrifice for the future, we would support a gradual, multiyear increase in federal gasoline taxes. An increase of 10 cents per year for ten years seems affordable with some of the revenues going into the highway trust fund for the repair of roads and bridges and some used to create an alternative energy trust fund to finance wind, solar, or even help automakers produce compressed natural gas vehicles. Congress could make sure that many alternatives receive funding. This way, competition would keep a lid on price increases for any one alternative. We could distribute the money to the states (maybe each state should get the same percentage revenue it generates in gas tax collections) and let them decide which type of alternative energy source makes sense for that state.

    Imagine the benefits of extra billions in capital every year! Employment in alternative energy industries would soar. We would reduce our “carbon footprint” significantly. We would more steadily pressure Russia, Iran, and Venezuela to avoid risky foreign adventures. In fact, speculators would stay out of the oil markets knowing the world’s largest oil consumer was determined to lower its demand. In this way wholesale oil prices would remain lower and we would feel less impact from the increased taxes.

    We probably should initially exempt diesel fuel from the new taxes because of its impact on truck drivers and the cost of basic goods like food. Using some of the new tax revenues to support a new trucking fleet based on compressed natural gas, which burns cleaner than gasoline and is more widely available domestically, would further enhance employment and energy security. We could phase in the tax on diesel more slowly.

    Finally, for those who chant “drill, baby, drill,” and think that domestic offshore drilling is the answer to our problems, how many oil companies are going to employ the capital needed to drill in deepwater and other expensive, hard-to-reach fields with gasoline under $2 per gallon? Many unconventional oil projects from Canada to Asia and Africa have been postponed in the last six months due to lower oil prices Do you think Americans are going to buy American-made small cars with gasoline under $2 per gallon. What are the prospects for a return on the bailout of the auto companies under these circumstances? It would be rather foolish of us to bail out the auto companies only to have Americans shun fuel-efficient cars because of low gasoline prices.

    Now is a very propitious time to enact this measure. A very large stimulus package is about to get passed and there is an urgency about improving the economy. Why not enact a multiyear gas tax as part of a package? It could be sold as part of a down payment on paying off the debt from the stimulus and a gasoline tax would subsidize the types of spending going into the stimulus. Americans would hardly notice a small increase in the gasoline tax at this point, especially if it took effect on January 1, 2010 when the economy should be more stable. Are we going to wait until the economy starts growing again and the urgency is gone and the dramatic decrease in gasoline prices has worn off?

    The big question is whether America is up to the task. The new administration will have to act decisively and creatively to avoid a severe recession in 2009. Similarly, will we support bold and innovative ideas to secure our energy future? Will we have the attention span to “keep our eye on the ball” now that gasoline prices are much lower? Will we be smart and start to wean ourselves more aggressively away from an oil-dependant transportation system? Or will we wait until the next run-up in oil and gasoline prices and then whine and complain when it is clear we have very little control over our destiny and we are even more vulnerable to OPEC and Russia?

  45. Anonymous

    We dont need those middle aged bankers anymore, ever again, they better learn to do something actually productive.

    Our biggest problem is we have greatly reduced our manufacturing here in the US. Less than 1 in 10 is involved in manufacturing something.

    How can you stimulate Finance, Insurance, and Real estate employees? Except thru a housing bubble, and we already tried that. It didnt work out so well.

  46. artichoke

    People will just have to get over their ideas of what work they are willing to do, or else they will run out of money. No doubt a cultural change will take place, just as it did in the 30′s when unemployed WS types were selling apples on the street (at least a picture of one such was posted recently).

    Some WS types will be able to fill engineering jobs. Some quants and traders are trained as engineers and scientists. It’s time for those people to do engineering and science, not finance.

    Others will have to do something less lofty than what they did before, or not eat. There aren’t many jobs for mortgage brokers. (I don’t think that is such a bad thing.) Many of them can do manual labor though. Maybe some have health conditions, but for many this will help improve their health and reduce their weight. For those who cannot do physical work, I can’t solve everyone’s problem, am interested in ideas.

    We should certainly have work-eligibility checks for these jobs and prefer actual citizens. This is a US program not a Central American one. The over-qualified should be welcome. A mortgage broker is not overqualified, in the same sense that an experienced horse and buggy driver is not overqualified. Those are not economic skills any more.

    Retraining should be seen as a part of this massive effort. The retraining and teaching is part of the work, and people can be paid to be there for brief retraining.

    Some projects will be labor intensive like repairing roads. Some are probably close to ready-to-go in a design sense like replacing the Tappan Zee bridge north of NYC. Engineers say it cannot be repaired much longer and needs total replacement. By announcing this stuff now, Obama probably stimulates engineering and design companies to ramp up, at least a little, to make bids for this work.

    It is indeed trickle-up economics. Money trickles, up down or sideways. Trickle-down has become a sick joke. Shall we try something different for a change?

  47. Anonymous

    This is no time to raise taxes including the gasoline tax. The idea of this stimulus is to get more money into the economy. That means that interventions should not be sterilized! Spending should not be offset by taxation, but should be funded by printing new money.

    Yes it’s inflationary and generally a bad practice. But this time is different.

  48. john

    Homebody at heart makes a good point. Three years ago in Chicago Obama, Durbin, and Mayor Daley stood together at the corner of Randolph and Wacker announcing that lower Wacker would be rebuilt south from that point to match the work done North/East of it. Presumably a ton of planning has already gone into this and the money never got allocated. I’ve got a sneaking suspicion it’ll be found on January 21. There have got to be hundreds/thousands of these in the pipeline — Democrat’s bridges to nowhere and the like.

    2.5 million jobs in two years is big number to toss around, though. One of those promises people will not forget. Hopefully the Obama administration doesn’t just redefine “unemployed” like Clinton did w/ CPI.

  49. Anonymous

    Yves,

    ‘What exactly does ready to go mean?’

    I can speak to part of this. In past stimulus packages, funds passed through FHWA had some type of time limit for eligibility. Say 90-120 days before they are on the street. In other words, either ‘normal’ projects that are already designed and on the shelf or in final design already, or very simple projects.

    A note on bridges. There was no 2005 ‘study’ per se that came up with the 25% statistic for structurally deficient and functionally obselete bridges you cite. All states report on these numbers annually to feds. Our infrastructure does need investment, but these two phrases are loaded terms that often confuse more than help. The devil is the details. For example, functionally obselete may include a bridge which cannot carry modern loads and one which is a bit narrower than modern standards. Not equivalent problems.

  50. transit guy

    I have some idea what “ready to go” means, based on conversations with my state’s highest transportation officials.

    As of a month ago, a transit project that will have blueprints ready around inauguration day (but is not currently funded for construction until 2012) did not qualify, because it would take 9-12 months to let a contract under the state’s bidding rules. The ready to go projects were expansions of parking lots at train stations, overdue new roofs on existing buildings, and such. The newspapers are now reporting that anything that can be built in 2 years will qualify, but that expansion has not yet filtered down to the states.

    I suspect that the reason there are $136 billion in road projects ready to go and only $8 billion in transit is a legacy of Bush administration policies. A convoluted approval process has been created for transit, with the purpose of impeding investment. The process for roads is much simpler. In the short term, we’re stuck; blueprints for complex projects don’t spring out of the ground.

    My understanding from the media of what Obama has in mind is a two step plan. “Ready to go” is just the beginning. I think the big transit investments will come in the second step.

    As I see it, the importance of transit to economic recovery goes far beyond the direct monetary trickle-up effects. There is a vast unfulfilled demand for people who want to live in walkable transit-served neighborhoods. The housing construction business is likely to recover long before the excess inventory from the bubble is worked off. People will build apartment buildings near train stations while exurban McMansions decay into slums or are abandoned altogether. But we need to get more rail lines into the pipeline so that there are places to build that housing. (The housing construction will start while the rail lines are still under construction.)

  51. Anonymous

    It may be my imagination, but the populace at large does seem more chipper when they are in pleasant settings

    when an adult student at a large private NY university 2001-2005 I noticed over a period of years that IT workers in the computer lab who were union members were more reliable, more responsive to clients (students), more pleasant and personable than all other workers at the university.

  52. Anonymous

    correction: more pleasant and personable in my experience than other workers at the university.

  53. SB

    Four points:

    1. Corruption and bureaucracy with money from Fed -> State -> Municipal. It will be a nightmare.

    2. A great deal of manual labor is performed by workers who do not have the necessary citizenship papers/work permits. I see no evidence that will change.

    3. In Saturday's radio address Obama's very first point was about changing the government over to energy efficient light bulbs.

    "Today, I am announcing a few key parts of my plan. First, we will launch a massive effort to make public buildings more energy-efficient. Our government now pays the highest energy bill in the world. We need to change that. We need to upgrade our federal buildings by replacing old heating systems and installing efficient light bulbs. That won’t just save you, the American taxpayer, billions of dollars each year. It will put people back to work." link

    4. Obama has changed the terms of his creation of 2.5 million to create and save 2.5 million jobs. Read George Will’s recent column in the Washington Post.

    Obama’s Jobs Lowball

  54. artichoke

    This may sound un-American but hear me out. The jobs of mortgage bankers, realtors, many WS categories, etc. are not coming back. We have decided as a society that over-leverage is not the way to go.

    What we still consider useful work may not be accessible to all. We seem to have a shortage of engineers and scientists — but most categories are not in shortage. There are some low skill fields that can absorb some people, like elder care for those able to do it.

    But I am wondering if there are not just more people than possible jobs. That is after all a possible outcome of capital accumulation and efficiency increase: we don’t need everyone to work any more.

    But we don’t want people to starve either.

    So is it time to declare victory and go to a national welfare system? This system should pay the welfare to every single person including those working, so that the incentives to work are not unreasonably reduced. By working you get more stuff than by not working. But subsistence is provided to all.

    The problem is that this implies that means of wealth production must be publicly owned, to generate the subsistence. Currently the government does not own it. If we had played our cards right with the banking bailouts we might have been on our way, but instead we gave the money too easily, almost for free. (Shouldn’t do that again.)

    I dunno. But we cannot continue to pay all those people for brokering mortgages. What will we pay them to do?

  55. transit guy

    SB, the prevailing wage law means that the transportation construction jobs will go to union members, who are mostly citizens. If we had prevailing wage laws for all construction as in Europe, not just for publicly financed projects, the lowering of wages accomplished via employment of undocumented immigrants would not have happened.

    Why is it that this solution is never suggested by right-wingers who complain about employment of illegal immigrants?

  56. artichoke

    I would not be surprised to see a resurgence of unionization of workers. For years now it has been political poison, but now that many people stop seeing themselves as rentiers, as budding millionaires, and focus on reality, the bargaining advantages of unionization will come into their consciousness.

    The more things change the more they stay the same.

  57. David

    You make a good point: “However, in our modern society, labor is far less fungible in the 1930s.”

    There is, however, essential infrastructure that could effectively employ many of the office and other service workers of our workforce. Decaying infrastructure includes the people and systems that comprise our social, educational, health and other kinds of public service systems. This kind of infrastructure depends primarily on human capital of the kinds found in many areas of our service economy, from clerks to social workers to IT profesionals. (http://calibansmarket.blogspot.com/2008/12/stimulus-should-include-essential.html)

    The people most in need during the economic downturn are poor, elderly, or otherwise disadvantaged. The stimulus infrastructure should include the social, health, and other service systems that can meet their increasing needs. (http://calibansmarket.blogspot.com/2008/11/policy-for-financial-crisis-should.html)

    It isn’t just a matter of bricks and bridges. This is supposed to be a service economy, and it isn’t going to be stimulated if service jobs aren’t included in the infrastructure stimulus package.

  58. artichoke

    I have to differ with David, in principle. “This is supposed to be a service economy”? It used to be one, when we could all expect a lot of service and just keep piling on debt to pay for it. Now we are poorer and back to basics. We cannot have an economy where we all sell each other cheeseburgers and mortgages. Stuff has to be produced, and it will be produced by us because others will not be sending us as much stuff as before.

    I remember the Japanese used to say they were a “world power” in the consumption of tuna sushi. They really talked that way! I think that power will stop being measured in terms of what you need or can get away with consuming, and more in terms of what you can produce.

  59. Keenan

    Andrew Bissell, Blissex – RE: Hydrogen Economy

    Transport and storage of hydrogen presents considerable technological problems, especially in its cryogenic state. While hydrogen fuel cells are useful for their light weight in spacecraft power systems, without breakthroughs in seals for piping, joints, valves or some type of efficient storage media to avoid cryo temps, I do not see hydrogen fuel cells as the replacement power for automobiles.

  60. Anonymous

    If we create a hi-tech jobs program, offer retraining, and then it turns out that a bunch of former white-collar workers are so out of shape that they can’t even install fiber-optics cable without endangering their dignity and their health… this is Obama’s fault?

  61. Don Swanbeck

    We could delay implementation of the gas tax until 1/1/2010 or even further if the economy is still too fragile. It is much easier to put this tax off than to enact it.

    When OPEC makes their big cut on 12/17, and if they stick to it, what will our response be? More of the same. More vulnerability.

    Right now is the most propitious time for this tax given price movement of gasoline in the last six months. If the stimulus is about infrastructure, a gas tax will make sense. When do we ever pay off the trillions in stimulus?
    What kind of tax increase is going to be necessary in 3 years to pay this off. A gas tax could be a down payment; it would show some awareness of the situation down the road

  62. Anonymous

    a gas tax in the US can’t compare to Europe where public transportation is ubiquitous and efficient.

    A gas tax in the US is a pile on to the mortgage, car and gas requirements of suburban living in the US.

    Should they pay additional gasoline taxes to drive to the food line for the soup kitchen when thngs worsen or will food be delivered?

  63. Anonymous

    Hi, Yves. Love your work, but I have to disagree with you on this one.

    The states currently are facing large deficits and cutting back on infrastructure and education spending. Those cuts will further worsen the economy in the short-term and do damage to our productivity long-term.

    Some of the short-term impact of the stimulus bill can be just from preventing the needs for those cuts.

    The remainder and perhaps the majority can target the long list of “structurally deficient” roads and bridges. The U.S. Department of Transportation currently estimates that there is a $461 billion backlog of needed road, highway, and bridge repair and improvements. Rail, dams, sewer, and public school buildings also have hundreds of billions in backlogs.

    Finding projects does not require lengthy efforts to solicit and review new proposals. At least in the short-term, we can simply use the list of infrastructure problems we have caused by our many years of neglect.

  64. Bob_in_MA

    This is a huge disappointment.

    If I wanted to make sure the money was spent as inefficiently as possible, I would say things like, “If a state doesn’t act quickly… they’ll lose the money.” That sounds like the flip nonsense GWB spews.

    Was does it need to be spent so quickly? If this is a real crisis, we are talking several years. If it isn’t, we don’t need massive spending.

    And spending more on hospitals? What’s the plan, to get health care to the point where it consumes 50% of GDP?

    Those people who lost their factory and retail jobs (and health insurance) will feel a lot better that some engineering firm is making a mint bringing fiber to the hospital they can’t afford.

    And before the engineering firm gets their fat cut, you’ll have a layer or two of consultants. I’ll bet 15% of the money spent directly by the Feds doesn’t make it past the beltway. And the states are even worse.

    Here’s an example of a big, state-supervised infrastructure program that WASN’T pushed through quickly: The Big Dig.

    We can be sure, the piggies are already racing to the trough. Welcome to the mother-of-all pork fests!

    And I’m not against public investment, by any stretch. I am a life-long Democrat. If I lived in Sweden, I would be middle-of-the-road.

  65. Andrew Bissell

    “Today, I am announcing a few key parts of my plan. First, we will launch a massive effort to make public buildings more energy-efficient. Our government now pays the highest energy bill in the world. We need to change that. We need to upgrade our federal buildings by replacing old heating systems and installing efficient light bulbs. That won’t just save you, the American taxpayer, billions of dollars each year. It will put people back to work.”

    Translation: the first task of the stimulus program will be to wean the bankrupt GE off the Fed’s commercial paper facility by buying warehouses full of their light bulbs at greatly inflated prices.

  66. Andrew Bissell

    “Why does it need to be spent so quickly? If this is a real crisis, we are talking several years. If it isn’t, we don’t need massive spending.”

    Bob, shhhhhhhh. You’re harshing our collective buzz that we need to DO SOMETHING!!!

  67. luther

    nice discussion here everyone — thanks.

    (1) anon @ 12:52: do u have any expertise in bioreactors aka extracting energy from waste?

    http://www.bioreactor.org/

    this (or similar methods) seems to be a way to answer some of the energy conundrums here. the question is: are the new projects going to tap into these 'new' methods or just be doing things the same 'old' way for speed sake?

    (2) nuclear power — obviously this is a controversial issue. my personal big problem with nuclear is the hidden costs due to uranium mining.

    http://www.climateark.org/shared/reader/welcome.aspx?linkid=112342

    however, the japanese have been experimenting with a method to extract uranium from seawater.

    http://www.jaea.go.jp/jaeri/english/ff/ff43/topics.html

    (3) natural gas is not even close to a clean fuel. just google horizontal fraccing and learn about this process (patented by guess who haliburton) and what it does to the water supply.

    (4) compact fluorescent bulbs are not even close to being environmentally friendly due to the high content of mercury:

    http://www.npr.org/templates/story/story.php?storyId=7431198

    of course, all of those bulbs are currently made guess where?

    china

    but i guess since CO2 is the *only* cause of 'global warming', none of this should really matter should it?

    i agree, this seems to be another instance of crisis capitalism — this time colored green.

    since gov't spending is by numerous examples *inefficient*, shouldn't this spending be directed towards helping to make some of these technologies that truly factor in environmental costs (like the bioreactor & seawater uranium examples above) more efficient and cost effective?

  68. Main Street Observer

    Instead of this massive govt spending of money the govt doesn't have, what about this idea floated by Congressman Louie Gohmert(R) to keep the money & power in the hands of Americans by instituting a months-long tax holiday? Because the holiday would include FICA, which all wage-earners pay, it can't be argued that the cut would only go to high-income earners who wouldn't spend it. Not a perfect idea, but it seems some valid points are floated. Link: http://mainstreetobserver.blogspot.com/2008/12/proposal-stop-income-tax-for-two-years.html

  69. Views By a

    “A gas tax in the US is a pile on to the mortgage, car and gas requirements of suburban living in the US.”

    Ah, maybe suburban living is the problem ?

  70. masaccio

    I understand the concern that a huge number of the people needed to work on most infrastructure projects will need to do physical labor. However, those are the people losing their jobs in the construction downturn, and the downturn in light manufacturing, and they are the people who need money the most. If they are working and consuming, they will help restart the rest of the service economy.

    Besides, helping them is the right thing to do.

  71. Anonymous

    Most construction companies are owned privately by filty-rich tycoons. Most workers in construction are hard-working illegal. Trickle up???

  72. Anonymous

    There would be a great irony here if some of the new jobs require IT workers. There are many unemployed and underemployed in that field due to 1. jobs sent offshore, 2. people brought in with H1-B (and other) visas at exceedingly low pay. And the irony would be that the new job openings are filled by offshore workers, and by workers with special visas just to keep costs down.

    So companies like IBM and HP getting those contracts would be more trickle down economics since they would most likely engage in those practices, as they are doing today. No safeguards in this regard means that the stimulus will not do much to create domestic demand.

  73. Lord

    Construction can be done quickly if there is the will and the incentive. Consider the reconstruction of a bridge in Oakland after a fire in 29 days. This is an exceptional case and much less capable of broad application, but it is possible.

  74. Anonymous

    Stop H1B visas. We need the work here. Theoretically companies could only hire an H1B when no qualified American was available, but we all know companies cheat like hell on that. Obama knows it too, it should stop.

    The new lightbulbs should be LED, as someone suggested earlier. No compact fluorescent, it is an old inferior technology. This is the chance to develop our design and manufacturing technology in the USA for LED lighting.

  75. Anonymous

    Lots of people were building homes.

    They are out of work.

    This will get them back to work.

    Then add everything else it means, along with being an investment in freeing up resources for other projects later on instead of coming to the rescue of a crumbling country-wide infrastructure during an economic boom.

    Next: Buy the auto industry, and run it properly

  76. gloomboom.com

    Obama doesn’t have a clue. What has he ever done or managed in his life? He is just repeating what his ‘advisors’ have told him will work. It’s a crap shoot which usually just results in displaced crap.

  77. Andrew Bissell

    “Next: Buy the auto industry, and run it properly”

    Maybe we could have the Staples button run GM? “That was easy!”

  78. Anonymous

    This is an exceptional case and much less capable of broad application, but it is possible.

    But if we do things that fast with a focus on physical results, then how on earth will the hordes of high cost Ivy League lawyers and consultants ever wet their beaks?

    That’s what the 10 year administrative application period followed by 5 years of litigation is all about.

    Ivy Leaguers: AN UTTERLY FAILED LEADERSHIP CLASS WITHOUT ANY REDEEMING SOCIAL VALUE.

    It’s no surprise GM is in the condition it’s in. Look at all the Harvard and Yale alumni infesting GM’s executive offices and board of directors. Including Waggoner. Almost as many as on Wall Street.

    Honda and Toyota in North America lack three things GM and Ford have. The first is the UAW, the second is an Ivy League executive suite and the third are Wall Street created capital structures.

    The true solution is fairly obvious.

  79. Ken Stremsky

    The least that should be done to grow the economy and create jobs is the indexing for inflation of capital gains, interest from savings accounts, and dividends. If the capital gains tax is not indexed for inflation, people may pay the capital gains tax when they have actually lost money because of inflation.

    If the federal government is serious about growing the economy and creating jobs, it will stop taxing capital gains, interest from savings accounts, and dividends. Businesses will have an easier time obtaining loans and investments for hiring workers, training workers, research and development, and plant and equipment. People will have an easier time saving for downpayments on homes and fixed rate mortgages, college tuitions, and retirements.

    The federal government should sell a lot of the land it owns to raise capital, reduce the national debt, help fund Social Security and Medicare, help fund passenger rail, help fund buses within cities, help fund buses between cities, energy transmission, and energy development. Some of the money the federal government obtains from the sale of the lands should go to State governments. If you type federal government owned land on a search engine, you might be surprised at how much land the federal government owns.

    If the federal government spends more money on buses within cities and buses between cities, people may have an easier time getting to jobs and from jobs which may help reduce the need for food stamps and Medicaid. People may have less need for 2nd cars and 3rd cars which would allow them to have more money for non transportation expenses. Our country may be able to use less foreign oil.

    I ran for United States Senate from New Hampshire in 2002. My website is http://www.myspace.com/kennethstremsky

  80. Guttersnipe

    Apparently Obama has yet to realize that Roosevelt’s “make work” projects did not get us out of The Depression…World War II did.

  81. Anonymous

    Hi Yves:
    Love the site. I think the America that FDR unleashed his new deal on is far different than the place we now inhabit. I share the concern of many posters regardings revitalizing our highway infrastructure. This investment, since Eisenhower, has led us into the cul-de-sac we now face. The subsidy of the private car culture has proved to be ruinous as will become clear in the very near future I fear. Mass transit that works is sorely needed. If I could live with out my car, it would be the first item I’d dump. An argument can be made for consuming the present to metamorphize into a better future but to consume the present and perhaps the future to just be where’ we’re already at is a disaster.

    Also, my American provincialism may be showing, but the only Yves I’ve ever known is my brother-in-law from Belgium. I just assumed you were a guy but after watching a video clip interview of you I have decided that you are far more beautiful than my brother-in-law…keep up the great work . your site makes a difference in my life.

    Rob from Pittsburgh.

  82. tom a taxpayer

    Among the items Governor Rendell requested from Obama last week at the NGA meeting in Philadelphia was for Obama to speed up federal red tape on road and bridge projects. One of the biggest sources of project-delaying red tape is the National Environmental Policy Act of 1969 (NEPA). One man’s red tape is another man’s careful analysis of potential environmental effects and consideration of Alternatives. NEPA is a rich source of administrative delays, appeals, and lawsuits by Obama’s friends in the environmental community and by NIMBY’s.

    The NEPA process can take years to complete, going from a Notice of Intent (NOI), to a Draft Environmental Impact Statement (DEIS), (possibly to a Supplemental Environmental Impact Statement (SEIS)), and then a Final Environmental Impact Statement (FEIS). Then, after taking years to complete an FEIS, it can takes months and years more for appeals and lawsuits over the adequacy of the FEIS or the legality of road or bridge project. Here is a link to the Federal Highway Administration (FWHA) website listing the active and inactive FWHA EIS projects.

    http://www.environment.fhwa.dot.gov/projdev/active_eis.asp

    Some States also have their own “environmental reviews”, but these State reviews pale in comparison to the grandeur of the federal NEPA process.

    For those road and bridges projects that have completed NEPA, it will be good news. But what will Obama do about NEPA “red tape” for projects that have not completed the NEPA process?

    Since Obama has appointed former Senator Daschle to his Cabinet, perhaps Obama will follow Daschle’s lead in trashing NEPA red tape. In 2002 Senator Daschle found that the NEPA process was preventing the Forest Service from promptly addressing risk of fire and insect infestation in his home State of South Dakota. Senator Daschle added a rider to a Defense Appropriations Bill. The rider exempted the federal actions from NEPA and judicial review.

  83. Don

    I may be wrong but wasn’t World War II a giant acceleration of the New Deal? You can look at the economic charts of GDP, employment, etc and see the move down from 1929-1932, then the move up to 1937 until FDR and Congress got cold feet on the deficit, reversed course and an echo recession occurred. Then a gradual move up and an acceleration after 1940 culminated in a huge deficit by 1945, much larger than today in terms of deficit relative to GDP.

    Gearing up for World war II produced a lot of economic activity and jobs, financed by government deficits, much, much greater than anyone envisioned in 1932 in order to emerge from the Depression.

    Is this off base?

  84. Tortoise

    One of challenges is how to stimulate the economy quickly. There are several ways.

    One is to stimulate the scientific enterprise. In the last quarter century, budgets for research at the USGS, NOAA, etc. as well as work done in universities have not kept up with the cost of getting the work done. The public and our solons tend to underestimate the cost of first educating a biochemist (or a biophysicist or a materials engineer or an aeronautical engineer or …) and then giving her the opportunity to do first class work. In the past, we looked at science as a source of innovation and economic advancement. Now, we are a nation of financial engineers with a public that distrusts evolution…

    The budget of the National Science Foundation is about 6 billion a year or less than 20 dollars per capita or 0.2% of the unified budget. This kind of spending is perfectly fine for a broke developing country, which is what we obviously plan to become.

    The Obama administration can double the NSF budget immediately (we would still be far behind the EU, Japan, or Singapore). The money will be spent almost immediately (because there is tremendous pent-up demand) in equipment, salaries to support personnel, student-assistant stipends, and travel expenses.

  85. Bob_in_MA

    Don,

    That is the standard thinking, ie., it took WWII to finally get us out of the depression. At the end of WWII, I believe the Federal Deficit was 100% of GDP, from about 16% in 1929, or six fold.

    This time, say taking Fall 2007 as a baseline, it was about 60% of GDP. Six fold would bring us to 360% of GDP.

    Japan’s debt is over 180% of GDP, that hasn’t done too much to help.

    It may be that WWII, per se, isn’t what brought us out of the depression, just that it tool 20 years to restructure the economy.

    I think it’s rather obvious, there is no play book here.

    No one has any idea what will happen next week, next year, or over 10 years.

  86. Don

    How valid a comparison is Japan?

    They save a whole lot more than we do. They were very slow on bank reform after 1990. I’m not meaning to imply anything negative, but do they have the risk-taking, dynamic economy we do? Obviously they have pioneered some impressive technology.

    Bob-what do mean by “restructuring the economy”?

    I have studies the panics of the 19th Century and then the Great Depression and it seems like we always tried to restore confidence in the economy/government by resorting to the gold standard or raising interest rates to prop up the currency or cutting spending and those did not work in the short run. Obviously everything eventually improved (and that may relate to your comments on World War II), but it seemed awfully painful for a lot of people for a long time.

  87. Don

    I also forgot to say that the economies of the 19th Century were much more dependent on agriculture.

    Maybe that made coping with recessions/panics/depressions easier? The security of land and all that.

  88. Anonymous

    In recessions, which usually are not industry specific, the first jobs to go are the unskilled jobs and of those, the first jobs to go are the younger labor force. While the white collar gets hit, the hit is tame compared to the blue collar hit. Construction projects is definitely what I would recommend to decrease the unemployment rates. However, it does not address the office support staff unskilled labor. They can be hired by the state and local governments for pushing paper related to construction and allied industry jobs (hmmm, nothing new there).

    I would have liked to see massive investments in intercity rail transportation. Private industry is best able to handle the less money-hungry transit needs.

  89. lineup32

    Yves: yes the service sector will need help trying to maintain employment levels but Obama’s plan does little to feed into growth channels that fueled the service sector growth namely the expansion of the urban landscape with its endless housing developments,malls,schools and related infastructure development and of course surplus credit looking for anyone who could make a possible payment.

    Richard: As usually a thoughtful commentary on Obama’s latest attempt at change.

    datadave;
    Excellent description for what we can expect from the many dollars that will be spent on heavy construction workers and the valuable overtime hours that await them. Thanks for the education.

  90. johnboy

    I’m just a dumb Aussie, so what would I know…. but I see:

    * A financial sector increasingly owned by the state
    * A workforce increasingly employed by the state
    * Official data officially manipulated and ‘hedonistically adjusted’ by the state
    * An electoral system that is barely democratic

    This does not look good.

    On top of that, a public debt shooting for 100% of GDP…

    And where are the funds for this massive state-run infrastructure project going to come from??? The current get-out-of-jail-free pass on the Treasury market is not perpetual.

  91. Anonymous

    Lets hurry up and throw more money down the rat hole without changing the rules of the game. We have given the financial industry trillions now to continue the course they are on and are about to continue supporting existing transportation strategies that are part of the problem, not part of the solution.

    The US is bankrupt financially and intellectually….something about repeating the same mistakes and expecting different results.

  92. strobe

    With respect to infrastructure, one shouldn’t focus too strongly on the highly visible projects such as bridges, roads, rail transit, and the like. In large part, these are simply good housekeeping – things that should have been budgeted for if not for recent cutbacks.

    If this Obama proposal is meant to forward a bigger idea, a vision of energy efficiency for our society, we should be talking about an entirely different package of work.

    I happen to have a front row seat since I’m an engineer with a large-ish city government, and I do supply-side and demand-side energy management.

    I’m currently in queue for funding of 2009 projects, for which I currently have zero from my city’s budget. I expect this funding no earlier than April, which gives me 8 months to put it to work. I’m looking at retrofitting older buildings with better metering, better HVAC, building envelope improvements, lighting (very small art of our work), and new building design to meet LEED standards.

    Taking Mr Obama at his word, you’d want to be able to measure improvement, so for buildings, an energy audit would be useful. This gives you a baseline. And this is basically our bottleneck – data collection and analysis could occupy months/years of full-time work in order to identify the best candidates for upgrades. Unless you use the shotgun approach and spend randomly (less effective but entirely possible).

    But we certainly don’t have stacks of projects with designs, contractors, suppliers lined up at this point. Remember, we’ve been in belt-tightening mode since the R-word started popping up this summer. And unfortunately, in this case, the stereotypes are true: The pace of approvals/decisions at the municipal level is rather glacial. Mind-numbing iterations of reports to councils, committees, inter-council committees, etc before anything gets the green-light…

  93. strobe


    The really interesting projects are the ones with potential to re-shape our energy usage patterns. Sourcing wind power or financing new wind farms. Solar (most practically solar heating, or concentrated solar in the sunbelt). District energy heating and cooling has big potential for our cities. These are highly specialized projects from start to finish, so only a small group of engineering companies, designers, and contractors would see the work. But these are examples of forward-thinking in infrastructure spending.

    The problem is, it’s such a hard sell with energy prices back down again. The rise and fall of oil did not create lasting change to personal energy consumption patterns – it was simply too brief a period. This is where the long-term vision is essential: understand that the backside of this recession will bring wicked volatility to energy prices.

    Bottom line – allocating infrastructure funds to old-school projects is fine for dumping money into local economies, but it’s missing the opportunity unless we target true progress in energy efficiency. So far I haven’t seen much of a strategy in this respect, but I’m waiting with optimism.

  94. Anonymous

    An working example of trickle up would be how an American Consumer Spends Money at a Big Box Store. The Money Flows Up. As the old saying goes ” You are only as strong as the weakest link”. Right Now, the Bush policies have proven a FAILURE.

    * I am surprised Stock Holders haven’t Tarred and Feathered Board Members and Upper Management!

    WPB, FL

  95. Matt C

    Yves,

    (1) Bush’s Iraq war plan and his FEMA plan was ready to go so STFU.

    (2) Look, its obvious that infrastructure means hiring Mexican labor to move north, where they will help to prop up SS and Medicare. Its working well for Europe!

    (3) Diabetic, out of shape white people will continue to live off the ponzi scheme for another 10 years at least, when “technology” will save them. Duh!

    -Matt C

  96. lottopol

    All that is needed to avert/end the recession/depression is for Obama to fulfill his promise of a middle-class tax cut. If $150 billion was the right amount in Sept then $300 billion is called for now. Just make it retroactive for the year 2008. That will put $300 billion into consumers hand in 1Q 2009 (via tax refunds) and another $300 bill for full year 2009. End of recession.

  97. William

    What sectors of jobs have been getting hit the hardest?

    Finance Sector <== (Probably not building so many roads.)
    Construction <== (Hey, these guys can build roads!)
    Manufacturing <== (Hey, these guys could probably build roads too!)

    From New York, the problem may look very different than from the rest of the country. I think there are a lot of construction workers that need money bad.

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