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Expert: Stimulus Job Creation Hits Wall of Red Tape

By    |   Friday, 06 March 2009 04:05 PM

An expert reports that after racing the stimulus package through Congress, the administration has allowed key programs to run into a brick wall of bureaucracy and business as usual – dangerously delaying the job creation touted to be at the heart of the recovery.

Congress was bullied to speed through the passage of the immense American Recovery and Reinvestment Act as if every minute of delay drained the economy’s life’s blood, now things have crawled to a snail’s pace, laments Dr. Ronald D. Utt, senior research fellow in the Thomas A. Roe Institute for Economic Policy Studies at the Heritage Foundation.

At the heart of the dramatic bait-and-switch, says Utt, are all the administration’s claims of immediate economic activity through infrastructure spending.

While frantically stumping for his stimulus plan, President Barack Obama told an audience in Elkhart, Indiana: “Economists from across the spectrum have warned that if we don’t act immediately, millions of more jobs will be lost… [W]e can’t afford to wait…”

That was then – now the great relief engine’s timetable has apparently changed from high-speed express to local commuter.

Utt points directly at the “leisurely pace the act allows for all of the infrastructure spending authorized in the legislation. As the language of the act reveals, some of the unemployed may have to wait until 2012, or even later, for their piece of this pie.”

In his analysis, Utt targets the largest infrastructure spending component of the bill – the $27.5 billion for highways, most of which will be distributed by the usual means to the states, territories, and Indian tribes.

“The delay begins with the provision that states have up to one year to obligate the money, meaning only that they have to identify a project and set aside money for it,” notes Utt. “Still to be done might be the design and engineering work, request for bids, and the selection of the winning contractor.”

Then, explains the expert, there is the new program created to provide another $1.5 billion for surface transportation programs that will be allocated as competitive grants.

“Since the program does not now exist,” Utt instructs, “the U.S. Department of Transportation (USDOT) will need to draw up the rules and guidelines (90 days are allowed), time must be allowed for states to submit proposals (180 days), and USDOT must be given time to pick winners (up to one year after act’s enactment).”

Thus, explains Utt, the approval process alone can take up to a year for projects that are expected – but not required – to be completed within three years.

Slow and Slower

Utt bullet-points other choke points in the bureaucratic pipeline:

  • The $1.1 billion for Grants-in-Aid for Airports allows the USDOT secretary up to one year to make grants “with priority given to those projects that demonstrate to his satisfaction their ability to be completed within two years.” Unfortunately, the expert notes, this is not a requirement, just a suggestion.

  • Transit programs (buses, commuter rail, trolley cars, etc.) receive $6.9 billion in capital assistance, and states and urban areas have up to one year to obligate the money, but that could be extended if certain problems are encountered. Reflecting the long lead time involved in many transit projects and the difficulties getting them approved, the new law includes no time limit on their completion.

    Then there is the $8 billion the plan commits to high-speed rail (HSR) corridors.

    “The definition of HSR, as applied to those in European and Asian countries, is passenger rail service that averages more than 150 miles per hour, which can only be achieved on very expensive, dedicated lines that serve only HSR,” says Utt. “Since no such lines exist in the U.S., any HSR would have to first acquire a right of way, buy the land in it, lay the very costly track, and buy the new equipment.”

    Another glaring upshot: the $8 billion is way short of what is needed to complete a single system.

    “[T]he President and Congress know it, which is why the $8 billion should be viewed as little more than an amuse-bouche to keep the nation’s influential rail hobbyists happy and content,” charges the expert.

    “Indeed,” highlights Utt, “the law recognizes the folly of the aspiration by allowing the money also to be spent on intercity passenger rail service (Amtrak) and ‘congestion’ grants. And the act includes no time limits on when these projects are to be completed; it states only that the money will remain available for three and one-half years.”

    Several of the other infrastructure components of the act (public housing, for example) are also permitted a lengthy period of time to get underway and be completed.

    “As a consequence, these costly components of the bill will do nothing to alleviate the immediate downward slide in economic activity – and little or nothing to support jobs during the current year,” Utt concludes.

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    Friday, 06 March 2009 04:05 PM
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