Government Spending

Get Ready for the Great Infrastructure Grift of 2011!

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Over at National Review's Corner blog, Reason economics columnist and Mercatus Center researcher Veronique de Rugy lays out the case against President Obama's impending speechifying about creating prosperity via massive infrastructure spending.

Moody's analyst Mark Zandi, who missed his real calling when he stopped writing press releases for the record number of aglets produced this year by Oceania, will tell you that every government dollar spent building a road or bike path or rail line will yield precisely $1.44 in economic activity. But that's just his opinion, notes de Rugy, who cites a recent IMF study on the effect of infrastructure spending:

The reality is that economists are far from having reached a consensus on what the actual return on infrastructure spending is. As economists Eric Leeper, Todd Walker, and Shu-Chum Yang put it in a recent paper for the IMF: "Economists have offered an embarrassingly wide range of estimated multipliers." Among respected economists, some find larger multipliers and some find negative ones. 

As important, says de Rugy, infrastructure spending should not be confused with stimulus spending, especially of the Keynesian variety:

According to Keynesian economists, for spending to be stimulative, it has to be timely, targeted, and temporary. Infrastructure spending isn't any of that. That's because infrastructure projects involve planning, bidding, contracting, construction, and evaluation. Only $28 billion of the $45 billion in DOT money included in the stimulus has been spent so far.

And there's this to consider as well:

Infrastructure spending tends to suffer from massive cost overruns, waste, fraud, and abuse. A comprehensive study examining 20 nations on five continents ("Underestimating Costs in Public Works Projects: Error or Lie?" by Bent Flyvbjerg, Mette K. Skamris Holm, and Søren L. Buhl) found that nine out of ten public-works projects come in over budget. Cost overruns routinely range from 50 to 100 percent of the original estimate. For rail, the average cost is 44.7 percent greater than the estimated cost at the time the decision was made. For bridges and tunnels, the equivalent figure is 33.8 percent, for roads 20.4 percent. 

In following the example set by Dean Wormer in Animal House—he tells the slob Kent Dorfman that fat, drunk, and stupid is no way to go through life—I'll stop with three reasons to be wary of the Great Infrastructure Grift of 2011.

But I'll let de Rugy add a fourth:

I should also add that I think it's a mistake to assume that it is the role of the federal government to pay for roads and highway expansions. With very few exceptions, most roads, bridges, and even highways are local projects (state projects at most) by nature. The federal governmentshouldn't have anything to do with them.

Read her piece here.

Yesterday I explored some other reasons why much of what goes under the name of Keynesian stimuli is neither stimulative nor Keynesian. Check it out here. What does the world need now (beyond love, sweet love)? A government that stops acting so frenetically that it can't create any sort of sense of a stable future by which businessess and individuals can start planning.

In August, Reason.tv showed how private capital could help many urban areas build their way out of economy-killing congestion—at no cost to taxpayers. If you've ever sat in a traffic jam, watch this documentary:

 

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  1. Asphalt? The potholes I have to deal some are on the Concrete 101 running down the San Francisco Penninsula. Some of them are large enough to swallow Mini Coopers whole!

    1. I’ll avoid the Yakov set up, go straight to the Russian punchline.

    2. Concrete roads suck. Asphalt all the way!

      Even Asphalt over Concrete is better than concrete, but still almost inevitably leaves you with joints pushed up. Use Asphalt!

      1. How about brick streets. Every brick street I’ve seen seems to have held up for like a hundred years, as far as providing a satisfactory surface for driving on. You don’t get the joint problem, or cracking, but the bricks may drift a little over time.

        I would also be perfectly cool with dirt roads. Peaceful, quaint. Get better tires and suspension, road welfare slaver.

        1. Because idiots drive 5-10 mph under the speed limit on brick streets? One street I was living on got converted to brick, and I needed to get a Valium script soon after, or I would have committed homicide. I actually passed people on a couple occasions (it was a two lane road) who were doing about 12-13 mph in a 25 zone.

          1. They go slow cuz it’s hard to dial when driving on a brick road.

      2. Concrete pavements depend heavily on good base preparation and proper joint construction to hold up well. Properly done concrete is the best pavement for urban roads.

        The main problem with concrete is its initial cost. The advantage of asphalt pavement is that it is much more flexible. Pun aside (which will go over the head of anyone but another highway engineer) it’s a lot easier to go back in and repair and/or otherwise modify.

      3. I thought asphalt was a rectal disorder.

  2. WPA, TVA, CCC. Wee Wee Wee, all the way home.

  3. I loved it back home in Oklahoma that a road would be freshly redone… two weeks later, it would be riddled with potholes and cracks. Just paving the road with saw dust.

  4. Don’t forget, we’re all socialists now
    https://reason.com/blog/2009/02…..tcontainer

    btw, what happened to some of these posters? driven out by the trolls? They became socialists?

  5. OMG, is that what he’s going to propose? More public works projects? We know this?

    If this is the big idea these morons have come up with, more “infrastructure” spending, then it should ruin Obama. No one is going to go for another plate of his turds, no matter how much garnish they add.

  6. This commentary is very much worth reading, in that it helps explain why big infrastructure projects are not really job creators:

    http://www.coordinationproblem…..today.html

    Short answer, the people who can do big infrastructure work are not in the unemployment line.

    1. +100

    2. These types of projects are trying to invoke the legacy of the WPA, with Hoover Dam etc.

      Problem is, if governments actually tried to utilize the unemployed as cheap labor to get big projects done cheaply and quickly as the feds did in the ’30s, the public-employee unions would go to DefCon 5. It’ll never happen. Instead, these “infrastructure” funds inevitably just prop up existing government payrolls that are otherwise unsustainable.

      It’s also worth noting that turnaround times are so long on public works projects largely because of all the paperwork and NIMBY litigation created by the environmental laws Obama and his friends love so much. Hard to get a project to shovel-ready status when the lawyers and bureaucrats have to argue about it for a decade beforehand.

      1. They so want this to be a Great Depression, where government can do Great Things?.

        1. Wonder what the political fallout would be if 100 people died while building the 2011 version of the Hoover Dam (like the 1930s version).

          1. The 2011 version of the Hoover Dam would just be Obama’s face on Rushmore.

      2. Even the rhetoric invokes the 1930’s: “shovel-ready”. Construction projects dont involve much work with a shovel, we have this invention called a bulldozer.

      3. “” Hard to get a project to shovel-ready status when the lawyers and bureaucrats have to argue about it for a decade beforehand.””

        Bingo. That’s where the money suppose to go, lawyers and bureaucrats.

  7. “With very few exceptions, most roads, bridges, and even highways are local projects (state projects at most) by nature. The federal government shouldn’t have anything to do with them.”

    Amen to that. I just attended a meeting to discuss the construction of a ramp to connect existing HOV lanes on Interstate highway to an existing roadway. VDOT had to (1) submit an application to the FWHA to allow the project to proceed with an Environmental Assessment (EA) instead of an Environmental Impact Study. Once that was approved, VDOT has to conduct the EA, submit it to the FWHA for review and approval before it is released to the public for comment. After the public comment period, VDOT needs to revise the EA per public comments, and then submit it to FWHA for final review and approval. Assuming no hiccups, this will take about a year just for the environmental clearances on a roadway that will be constructed entirely in space already occupied by an existing roadway.

    Next time the Prez suggests infrastructure as a way to stimulate the economy, I just wish someone would stand up and explain how he doesn’t understand how the government he supposedly runs actually operates if he expects the money to be spent anytime soon.

    1. And that’s the best-case scenario. If some activist group sues under NEPA etc., the thing could drag on for years.

  8. Assuming that the governemnt is going to be in the infrastructure business no matter what I think of it, I wouldn’t have too much of a problem with the infrastructure spending (I’ve come to terms with the fact that the government is probably going to keep doing roads) if it were spent on shit that actually needs to be done instead of highly visible (or union friendly) stuff. I’m sure that there are bridges in dangerous states that need to be fixed or replaced, and roads that actually need to be repaved. But all I have seen is paving on big roads that would probably be fine for another few years and stupid commuter rail crap.

    1. Politically, the key is “high-profile.” Widening the freeway or building a new interchange is highly visible and changes the functionality. Replacing a crumbling 1930s-era bridge on a back road doesn’t get the same political bang for the buck.

      And things like sewer or waterworks repairs and upgrades? Forget about it. Local governments have hollowed out those budgets for years to pay for more visible stuff (like schools) and more corrupt crap for high officials.

      1. I meant to add that injecting federal involvement won’t change the political dynamic. If anything, the feds will be even more insistent that such funds be used for high-profile projects. Think of all those signs announcing the use of stimulus funds on road repaving projects.

        1. Well what public official would want his name on a sewer?

          1. The funny/sad thing is, sewer and water are far and away the most important services provided by local governments. If the schools close for a month, nobody dies. Sewer and water cutoffs, on the other hand…

  9. As much as I can’t stand Robert Reich, he had an idea some years back for a BRAC-like committee for federally funded infrastructure projects. I thought he was onto something. Prioritize infrastructure spending based on a consensus of needs and ROI. Give the committee members the freedom and political cover they need to make decisions based on these criteria.

  10. It seems to me that infrastructure-spending enthusiasts are stuck in the wrong century. Sure, building roads, bridges, and highways greased the wheels of commerce back in the industrial days of the 20th century. But in the electronically-oriented 21st century does a new road, bridge, or highway really promote commerce?

    1. Since the government insists on fucking up infrastructure, better they fuck up 20th century infrastructure than 21st century infrastructure.

    2. That’s right. Here in the 21st Century. We deliver items like food, clothing and medicines electronically. It’s like magic!

    3. You’re forgetting the 500,000 dollar broadband in Montana!

  11. So are you guys an item, or what?

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