Where Obama's Jobs Bill Falls Short
President Obama’s jobs bill is better than doing nothing in the face of a national crisis, but it won’t have much impact on unemployment. Many of the measures are short-term tax breaks and benefits that are unlikely to affect demand for products and services — business’s fundamental problem — and so won’t boost hiring. Moreover, many of the measures are efforts to get consumers spending again. Given what happened after Americans maxed out their credit cards and used homes as ATMs, consumers are understandably cautious.
There is one area where government can create demand — regardless of private-sector behavior — and in a way that is productive for long-term growth: building infrastructure. The president’s plan contains some proposals for this, but we need something much more ambitious. The American Society of Civil Engineers estimates that America’s crumbling infrastructure — ranked ninth in the world a decade ago and, according to the World Economic Forum’s Global Competitiveness Report, now 24th and falling — needs $2 trillion worth of repairs, upgrades and expansions. With needs on that scale, why are proposals at one-20th that size being floated? We need a more ambitious effort — which requires grand bargain between Republicans and Democrats.
The first element of the bargain would be funding. Already, there are several good proposals for infrastructure banks, including from Obama and Sen. Kay Bailey Hutchison (R-Tex.). They adapt a model used in much of the world, particularly in Europe. Relatively small public investments can be leveraged to attract much larger sums of private capital. Projects should be awarded based on need and merit only. Compared with other nations, the United States has astonishingly little private-sector involvement in the building of infrastructure such as roads, bridges and highways. Such a bank would allow us to create smart public-private partnerships that are market-friendly and efficient. But Republicans would have to agree to make serious public investments so that the banks could take on projects on a scale that would make a dent in unemployment.
Obama said he was surprised that there are so few shovel-ready projects. But the regulations, reviews and permits required to approve infrastructure ensures that any major project takes years, often decades, to be shovel-ready. In fact, one study of a set of infrastructure projects found that, of all countries examined, the United States has the highest proportion of projects stuck at the “pre-approval stage” of announced but still three to 10 years from construction — more than 31 / 2 times the number of such projects, by value, in Europe.
The other problem is that the law requiring infrastructure projects to pay the “prevailing wage” means a relatively small number of highly skilled workers get all the jobs. What if the goal were to, say, pay people to dig up the concrete around the Detroit River and create parklands? If people were hired not at union-level wages of $26 per hour but at half that price, an army of unemployed workers in that area could be tapped. By getting unions to agree to below-prevailing wages, General Motors has been able to hire thousands of workers over the past two years.
The president should announce a national jobs emergency. Infrastructure projects listed under this rubric should be fast-tracked through the environmental review process, with approvals granted within 60 days, and the Davis-Bacon wage requirement should be suspended. In return for these exemptions, Democrats should seek $200 billion in capital for the new infrastructure banks, which could easily attract private capital of hundreds of billions within weeks. The efforts Obama and Jeffrey Immelt, his jobs czar, have made to cut the regulatory cycle time are a good start but not enough; we need something much bigger and bolder.
There is really no debate about the need to invest in America’s infrastructure. The conservative-leaning Center for Strategic and International Studies issued a report in 2006 noting that U.S. productivity and living standards were declining as a consequence of neglect. It urged federal involvement and investment, pointing out that “creating infrastructure assets with long-lived benefits should not be determined by short-term cash availability.” It also noted: “Federal deficits sap our economic growth, and must inevitably be paid. But failing to support long-term growth could prove even more vexing. . . . By whatever means, it is imperative that we make new investments.”
Of the 2012 presidential candidates, just one was a signatory to that report on “Guiding Principles for Strengthening America’s Infrastructure.” I look forward to hearing a full-throated case for infrastructure spending during the campaign from that person, Rick Perry.