Monday, January 11, 2010

Stimulus Spending On Infrastructure Does Nothing To Alleviate Unemployment

Remember when the stimulus package was pitched as a way to bring unemployment rates down and to create jobs for Americans at a time when the economy was sorely in need and that the best way to do so was to spend billions on infrastructure improvements?

Well, all the money spent on road rehabilitation and construction has not created jobs at all. No matter how much stimulus money was spent on road construction, unemployment rates didn't change.
Spend a lot or spend nothing at all, it didn't matter, the AP analysis showed: Local unemployment rates rose and fell regardless of how much stimulus money Washington poured out for transportation, raising questions about Obama's argument that more road money would address an "urgent need to accelerate job growth."

Obama wants a second stimulus bill from Congress that relies in part on more road and bridge spending, projects the president said are "at the heart of our effort to accelerate job growth."

Construction spending would be a key part of the Jobs for Main Street Act, a $75 billion second stimulus to revive the nation's lethargic unemployment rate and improve the dismal job market for construction workers. The House approved the bill 217-212 last month after House Speaker Nancy Pelosi, D-Calif., worked the floor for an hour; the Senate is expected to consider it later in January.

AP's analysis, which was reviewed by independent economists at five universities, showed that strategy hasn't affected unemployment rates so far. And there's concern it won't work the second time. For its analysis, the AP examined the effects of road and bridge spending in communities on local unemployment; it did not try to measure results of the broader aid that also was in the first stimulus like tax cuts, unemployment benefits or money for states.

"My bottom line is, I'd be skeptical about putting too much more money into a second stimulus until we've seen broader effects from the first stimulus," said Aaron Jackson, a Bentley University economist who reviewed AP's analysis.
Road construction projects are important to improve infrastructure and to bring roads and bridges into compliance with modern standards as well as to rebuild and replace obsolete and deficient bridge structures, but those projects aren't creating new jobs; they're simply providing more work for those workers who already have jobs in the construction industry.

It's a problem I pointed out from the outset and the fact is that the stimulus package has done nothing to alleviate the skyrocketing unemployment rates, which now hover above 10% and are realistically far higher than that since the official rate subtracts hundreds of thousands of workers who are no longer getting unemployment benefits or are no longer seeking employment, shrinking the total number of workers employed.

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