Infrastructure spending to be used sparingly

Only a small fraction of President Obama’s proposed $274 billion in infrastructure spending to boost the economy will be spent by this fall and the balance won’t be fully disbursed until 2010 or later, according to an analysis by congressional economists.

About $26 billion, just 9 percent, of Mr. Obama’s massive spending plan to create jobs by rebuilding the nation’s roads, bridges, school buildings and other crumbling infrastructure will be spent by Sept. 30, the end of fiscal 2009, according to the Congressional Budget Office, a nonpartisan agency that analyzes tax and spending proposals for Congress.

CBO’s report, which was released to some members of Congress but has not been made public, said that less than half of the $30 billion in highway construction spending sought by House Democrats would get into the nation’s spending pipeline in the next four years, the Associated Press reported Tuesday.

Only about $4 billion in highway funds would get into the economy by September 2010, and about one in seven dollars in the stimulus plan’s $18.5 billion investment in renewable energy resources and energy efficiency programs would be spent by the summer of 2010, the CBO analysis said.

The report’s conclusions were released on the day that Mr. Obama was sworn into office promising in his inaugural address that these and other infrastructure spending will “not only create new jobs,” but also “lay a new foundation for growth.”

CBO’s findings reinforced those of other economists and policy analysts, including some among Mr. Obama’s own economic advisers, who cautioned that the public works spending to stimulate the economy and create jobs takes a long time - and often is just getting started when the economy is coming out of its recession.

Infrastructure spending was one of the “less-effective options” for breathing new life into the economy, Jason Furman, one of Mr. Obama’s chief economic advisers, wrote in a paper in January 2008.

Big infrastructure spending “might provide an important boost to long-term growth,” he said, but he doubted that it “would generate significant short-term stimulus,” because all too often in the past the money was not spent “until after the economy had recovered.”

Other critics said there were many examples where public works spending was used to jump-start an economy but without success.

“During the 1930s, New Deal lawmakers doubled federal spending - and unemployment remained above 20 percent until World War II. More recently, Japan responded to a 1990 recession by passing 10 ‘stimulus’ bills over eight years … and their economy remained stagnant,” Heritage economic analyst Brian Riedl said in an analysis of Mr. Obama’s spending plans.

“Why do lawmakers believe the same failed approach will succeed for the U.S. today?” Mr. Riedl said.

Many economists are forecasting that the economy should be turning upward by the end of the year, but CBO’s analysis projects that much, if not most, of the infrastructure spending won’t be spent by that time.

Republicans, who are pushing income tax cuts for workers and businesses, also have attacked Mr. Obama’s plan as too costly. They say his overall $825 billion spending and tax cut plans to preserve or create 3 million jobs would cost taxpayers $275,000 per job.

Obama adviser David Axelrod defended Mr. Obama’s economic stimulus proposals Sunday on ABC’s “This Week.”

“I think preventing this country from sliding into as deep an economic emergency as we’ve seen since the Great Depression, preventing double-digit unemployment and laying the groundwork for the future in these areas … is a worthy thing to do,” Mr. Axelrod said.