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.