Tyler Cowen echoes the point I’ve been making about infrastructure projects in general and the ARRA in particular:
One major problem with ARRA was not the crowding out of financial capital but rather the crowding out of labor. In the first paper there is also a discussion of how the stimulus job numbers were generated, how unreliable they are, and how stimulus recipients sometimes had an incentive to claim job creation where none was present. Many of the created jobs involved hiring people back from retirement. You can tell a story about how hiring the already employed opened up other jobs for the unemployed, but it’s just that — a story. I don’t think it is what happened in most cases, rather firms ended up getting by with fewer workers.
There’s also evidence of government funds chasing after the same set of skilled and already busy firms. For at least a third of the surveyed firms receiving stimulus funds, their experience failed to fit important aspects of the Keynesian model.
The emphasis is mine. Unless something changes in a new infrastructure spending bill it will have little greater impact than the first. Nothing is likely to change.
An advanced, developed country with a lot of specialization in labor does not have the same tools as countries 75 years ago. For my family in highway construction, the infrastructure spending created overtime and less time to spend the additional money.
Yep. That’s what I’ve been saying in a nutshell.
I was personally involved in two ARRA projects. Both fit within the definitions required for ARRA funding and both were nice projects to have completed in that they extended infrastructure to places that did not have the particular services that would now be offered. The problem was that neither would have been done on their own merits. While they extended infrastructure to underserved areas, neither one was a high priority project. In order for those projects to be completed, time and resources had to be diverted from projects that would be much more heavily utilized but that did not fit within the definitions required because they were not new. Before building new infrastructure, we should focus on maintenance of what we already have. Moreover, it is not clear that either of those projects will ever pay for itself when considering the economic activity that is likely to be generated over the projects’ lives. When government spends money, the first consideration should be whether the project stands or falls on its own merits. A project completed solely for the purpose of “jobs” does not meet this test.
Ben: I’ve never argued that none of the projects were worthwhile, but the criteria did not make that a relevant consideration. Its quite possible that such criteria could not have been timely executed.
The odd project that I am looking at right now from my office is a fake brick crosswalk. Workers etched a brick design into the existing asphalt overlay and then colored the asphalt brick red. Since this is a truck route, I wonder how long until the whole street needs repaired.
PD Shaw: I am not arguing that the projects are worthless. Rather, I am arguing that in my admittedly limited experience they are less worthwhile than other projects which did not meet the criteria for funding. In other words, I was stating somewhat in-artfully that ARRA probably was a bad idea, since it caused money to be spent for things that would not otherwise have been funded. That money would have been better left in the hands of taxpayers, to be spent either as they see fit or to be taxed by local government, which has a better handle on which projects ought to be funded.
Ben, I was agreeing with you; it just sounded otherwise.