Sunday, October 2, 2011

The Fallacy of Obama's Infrastructure Plan

Under Mr. Obama's so-called jobs plan, $140 billion would be spent on infrastructure programs such as road and bridge building and repair, rapid transit systems, and air traffic control upgrades. Now, to many, $140 billion sounds like a lot of money and it also sound as if a lot of jobs would be created to help lower the unemployment rate. But, nothing could be farther from the truth.

First off, there is no way that any jobs would be created any time soon. At the earliest, the Obama plan might get some hiring started in 2013. That's because heavy construction transportation projects aren't off-the-shelf kinds projects. They require considerable engineering and design work to simply develop the specs for bidding the project out. Traffic engineers have to provide a plan as to how traffic flows will be handled during the entire construction process. Approvals must be obtained from the EPA to insure the the construction plan is compliant with both current and pending environmental rules. Actually, it could take up to 2 years or more before any work, and hiring, ever gets started.

Secondly, in the world of heavy construction, $140 billion is not a lot of money. For example, the lowest cost for building or replacing a single lane of road over the span of a mile in any urban road construction is about $5 million. In other words, you could easily eat up a billion dollars by simply replacing 50 miles of a four-lane road or highway.

Third, compared to other business activities, the labor component of a heavy construction project is fairly small in contrast to the cost of the equipment and material. Typically, the labor cost component is about 35%. Then, too, these kinds of projects usually span over a period of several months to years to complete. Additionally, in the snow-belt areas of America, construction is often curtailed, due to weather, from mid-Fall; through the Winter; and, into mid-Spring. This is significant because much the dilapidated infrastructure is in the colder and more densely populated areas of our country.

My guess is that, even at the very best, about 40% of the $140 billion might be spent in 2013. With the labor component of that being about 35% and assuming that the average union, heavy construction worker makes between $50,000 and $80,000 a year, Obama's plan might employ, at the very maximum, about 215,000 workers in the first year; with that overall work force declining by about a third in each successive year. So, computationally, that means that Obama's infrastructure plan would spend nearly two-thirds of a billion dollars to create a single job. Further, 215,000 jobs represents just one percent of all the people who are out of work in this country; assuming (unrealistically) that all of those 215,000 workers will be newly hired for any given project.

To me, infrastructure improvement is a good thing for America, but, in no way will it create the number of jobs needed to get the U.S. back on its feet. The cost is just too high and the employment impact only helps the 7% the workforce who are unionized. Most of this country's workforce is employed in small business activities; which this plan by Obama doesn't address. We need to cut spending so the U.S. dollar will be re-strengthened and, in doing so, reverse the inflation that the consumer has been seeing for food, clothing, and energy expenses. This way, the consumer will have more money to spend and, subsequently, small businesses will see the demand for their products and services increase; with jobs to follow. Big government and big spending by this President are only hurting the economy and the facts on the ground clearly prove that.

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