White House Tells States to Create Jobs from Earmark Money

White House gives earmark money to state transportation projects, but the job gains are unclear.

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The White House announced Friday that it is making more than $470 million available to states for use on surface transportation projects. The administration has announced the initiative as part of a series of programs presented under the slogan of "We can't wait," in a nod to a Congress that the White House believes is not moving quickly enough in making policies to boost the economy.

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"We're not going to let politics stand between construction workers and good jobs repairing our roads and bridges," President Barack Obama said in a release announcing the initiative.

The new money consists of unspent earmark funds and is intended to be used for projects of individual states' choosing. The spending will certainly boost employment and state economies, though to an uncertain extent: in a conference call with reporters on Friday, Transportation Secretary Ray LaHood said the administration would have a clearer picture of job gains this fall. However, within the context of broader transportation spending, the new investment is small.

It is true that infrastructure is generally a profitable investment, especially when compared to other expenditures that state governments can fund with extra money.

The effects of new spending or tax cuts can be estimated using a "fiscal multiplier"—a figure that measures how much new economic output is created for every dollar of government spending or lost revenue. According to Daniel White, economist at Moody's Analytics, infrastructure spending on a state level can have a significant economic impact.

The boost, he says, "is a little more than general state spending because of all the construction, the extra purchasing that goes into some of the infrastructure stuff. It adds more than taking out."

He estimates that the multiplier for infrastructure is around 1.5, meaning that roughly $1.50 in GDP is created for every $1 spent.

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That's a good return, but the ultimate size of that return still depends on inputs. And $470 million isn't a huge input in the context of the states' needs for new transit projects, says one advocate.

"I would describe it as throwing one piece of meat into a pit full of alligators," says Bob Burleson, president of the Florida Transportation Builders Association. He paints a picture of states that are desperate for transportation funding.

"We're delighted to get whatever money we get from the government to help build infrastructure, but it's really just a small drop in the bucket," says Burleson, pointing to the massive size of overall highway spending.

For example, the transportation bill that President Obama recently signed was a $120 billion measure for 27 months, or an average of $53 billion per year. Compared to that, less than half a billion dollars can look downright puny.

"We say typically that a billion dollars worth of construction will create about 27,000 jobs. So you're creating maybe 13,000 jobs out of this, all across the country," he says. "It's not a giant bump."

Put into context, the economy added 163,000 jobs last month, adding nearly 13,000 jobs in manufacturing motor vehicles and parts, in July.

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White also points out that infrastructure spending often creates temporary jobs. While any job is a boost for someone out of work, a job building a bridge or a port might last only as long as the project takes.

Asked about the potentially small impact of the earmark money, a White House spokesman says, "We've always been clear that these 'We Can't Wait' actions are no substitute for Congressional action." He adds that "as long as [lawmakers] refuse to act, we will take every step in our power to create jobs and grow the economy."

Still, even if the effect of these extra dollars is small, the Obama Administration stresses that it is good use for money that otherwise would have been "sitting around," as LaHood put it on Friday. In a sluggish recovery, the simple truth may be that every little bit of help counts.