Infrastructure, stimulus and import propensity

By Fester

Barack Obama has announced that he intends to pursue a public infrastructure program of a size that has not been matched since the federal Interstate program.  This program is partially aimed at hacking away at the backlog of projects that we have deferred maitenance and upgrades to for the past thirty years, but more importantly and immediately, it is to serve as a significant portion of a projected stimulus package.  This spending will be on bridges, schools, roadways, rail, broadband connections, and medical record computerization.  We should see good, positive long run impacts from all of these programs, but they are large programs which will take a while to get moving. 

Paul Krugman notes that one of the big problems with any large-scale infrastructure program is that there are very few large projects in the pipeline that are ready to go as soon as new money is released. 

Infrastructure spending will take time to get going — a new Goldman Sachs report suggests that projects that are “shovel-ready” are probably only a few tens of billions worth, and that a larger effort would take much of a year to get going.

I think from a stimulus point of view, thinking big may be a mistake when project selection is a concern.  The problem is the lag from project identification to serious money being spent.  Thinking small and wide-spread in project selection may be a much better idea for the first round of spending.  For instance, the city of Pittsburgh allocated enough money to re-pave 4.2% of the city's road-miles for the next fiscal year.  If the city was to receive a windfall grant that was tied to road repaving, the lag between reciept of that money and the writing of checks to contractors and then to workers is fairly short.  The city could go from re-paving a little more than 4% of its road inventory to 7% of the road inventory with minimal planning.  Other small projects that are locally scalable should also be available for rapid stimulus effects.

Furthermore, these small projects are most likely locally supplied projects with a fairly low proportion of their budgets used to import goods and services.  The lower the initial import bill for stimulus related projects, the more efficient the stimulus will be in upping its internal, short run multiplier effect. 

Comments

[Kat]

>> This spending will be on bridges, schools, roadways, rail, broadband connections, and medical record computerization

Rather than handing out another 'one-time' stimulus check, if some of the money were spent to better-insulate homes, everyone's discretionary income would substantially increase from now on. This would
1) create jobs in the hard-hit construction sector,
2) reduce electrical demand in summer, which would help prevent brown-outs and black-outs,
3) reduce the number of new coal-fired power plants needed,
4) reduce greenhouse gases, and
5) lower utility bills, thus increasing discretionary spending every month for decades, which would stimulate the economy and prevent further job losses.

What happened to the plan to upgrade our aging electrical grid? It's great that they're planning to make broadband faster and more widely available, but a faster internet connection won't do anyone much good during our ever-more-frequent summertime blackouts and brownouts.

Another item that's missing from the list... We have a critical shortage of nurses -- due to a critical shortage of nursing schools, which is due to a critical shortage of qualified teachers of nursing, because nurses can make far more money working as nurses than they can teaching nursing.

The government could immediately improve healthcare and address rising healthcare costs by:
1) giving money to nursing schools for higher salaries for teachers of nursing as well as for creating more teaching positions, thus dramatically increasing the number of students that our existing nursing schools would be able to accomodate
2) offering full scholarships and living expenses to all would-be students of nursing who meet nursing schools' entry qualifications; and offer the same, plus an even higher incentive, to entice some current RNs to return to school for their Masters in Nursing, so they'd be qualified to teach nursing.
3) and, after enough nurses are trained to meet current demand, they could help states (especially rural states which have a critical lack of access to healthcare) restart the discontinued county healthcare clinics, which would further lower healthcare costs (or at least slow the increase).

[Betty Knudson]

It is vital that we train persons for a Masters in Nursing. Obama's Stimulus Package must take a serious
approach to providing scholarships for those who meet the requirements. My daughter is in such a program. She has a 4 year degree from the U.W. Now she is attending Seattle Central Community College working on the RN degree. She needs a scholarship to go on to the Master in Nursing as soon as she completes the RN.