Infrastructure package: Avoid the mistakes of Obama ‘stimulus’

Congress and President Trump would be wise to heed the sage advice of philosopher George Santayana — “Those who do not learn from history are doomed to repeat it” — as they tackle the next big opportunity to further boost the economy and create jobs: delivering the president’s $1 trillion infrastructure investment package.

Lessons learned from the 2009 Obama-era American Recovery & Reinvestment Act (a.k.a. “the stimulus”) should guide its development and implementation.

{mosads}An analysis of government and market data shows that the $830 billion “stimulus package,” which obligated $48 billion over just two years for transportation infrastructure, is revealing. At peak spending in 2010, the transportation component kept about 320,000 Americans working who otherwise might have lost their jobs, including 108,000 on construction sites and in state and local transportation departments. But it did not create many new jobs, or, for the most part, fund investments that would provide long-term economic returns.   

The reason it didn’t create many jobs is that it didn’t result in significant construction market growth. U.S. Census Bureau data show the total value of road and bridge construction work put in place in pre-Recovery Act 2008 was $81.4 billion. In 2009, it grew by only $800 million to $82.2 billion. It totaled $82.5 billion in 2010.

Why? Because many states, reeling from recession-caused tax revenue losses, yet still facing a constitutional mandate to balance their budget, simply substituted federal “stimulus” dollars for their own. Contract data show 20 states actually put less money out for road and bridge work in either 2009 or 2010 than they had in 2008 — despite the “stimulus” funds.

Lesson 1: Congress should ensure any federal resources provided in the 2018 infrastructure package are supplemental to the current level of funding being dedicated to transportation or other infrastructure capital improvement projects by the receiving state. Although the 2009 “stimulus” included a “maintenance of effort” requirement to prevent such substitutions, it lacked the teeth to make it enforceable.

Lesson 2: Forget “shovel-ready.” Play the long game, not small ball.

By far, the most critical infrastructure investment issue facing the nation is ensuring the long-term viability of the federal Highway Trust Fund.  The HTF provides, on average nationally, over 50 percent of the annual capital investments in highway and bridge improvements made by the state transportation departments. Without new revenue for the fund, starting in 2021, the states will face a growing cut from their current level of HTF program funding that would average about $19 billion annually. Providing an expanded and sustainable revenue solution to support future HTF investments should be Job No. 1.

Job No. 2 should be ensuring expanded federal HTF resources are invested in projects that will truly facilitate long-term regional and national economic growth.

The president and Congress should double current investment in the 68,000-mile “National Highway Freight Network.” This is “America’s economic expressway” — the interstate system and 18,000 miles of urban and rural roads that connect it to the nation’s major ports, inland waterways, rail hubs, airports and pipelines.

The value of freight shipments is expected to double by 2045 and the U.S. population projected to increase 20 percent over the same period. As a nation, our transportation network is not prepared to meet this demand.

The pavement on much of the interstate system may be top-notch, but the performance of the system and its links to modal hubs is rapidly deteriorating. Ever-increasing congestion is causing a huge drag on our economy. It negatively impacts the cost of every good we make, buy and export. Like the just-enacted tax bill, done right, modernizing “America’s economic expressway” could reduce costs and make U.S. businesses more productive and competitive.

Those who would financially benefit from new efficiencies to our core highway network should be asked to help provide the expanded HTF funding needed to provide the improved throughput.

Following tax reform with a wisely-targeted and robust infrastructure package this year will deliver a powerful “one-two” punch that can drive U.S. economic growth for decades. Let’s get it right.

Peter Ruane is president and CEO of the Washington, D.C.-based American Road & Transportation Builders Association.