Obama's New Deal is on a smaller scale

Minutes after President Obama signed the $787 billion stimulus package on Feb. 17, grizzled hard hats started banging on a new bridge over the Osage River outside Tuscumbia, Mo., an $8.5 million project that will employ 45 workers for two years.

In Clinton, Mont., Kathryn Dougherty calls the $600,000 her town will receive to fix broken water pipes a “miracle.”

Mr. Obama’s recovery act has been hailed as a new New Deal to transform America. But there will be no Grand Coulee Dam or Golden Gate Bridge. Instead, there are thousands of small shovel-ready projects designed to bring transformation quickly – not through projects on an awesome scale, but rather in the mundane rumble of jackhammers in countless communities.

To critics, this is money wasted: The outlay of billions of dollars without deeper strategic planning about how the projects could be knitted together into some greater rebuilding of America. To others, however, the pressing need to save jobs now makes such delay impossible.

“What you need to do is get the money in people’s hands quickly, and that really precludes taking the visionary approach and looking at big projects,” says Jim Berard, communications director for the House Committee on Transportation and Infrastructure. “We found it’s better and quicker to do the small projects that are just as necessary ... that aren’t sexy or postcard material but are just as needed.”

Construction gets $135 billion

In all, some $135 billion of the stimulus package is labeled for construction projects, though some of that total is included in other parts of the bill, such as education. The actual figure devoted solely to infrastructure is $86 billion, and states have to assign at least 50 percent of their share to shovel-ready projects – those that are ready to go within 120 days. Otherwise, they risk losing their funds.

About 5,000 highway projects are being planned, the equivalent of 1-1/2 for each county in the United States. Tens of thousands of smaller projects are also in the works, including “weatherization” incentives to improve energy efficiency in low-income families’ houses and new roofs for urban schools.

The federal spigot opened last Tuesday, when Obama proclaimed “shovels are already in the ground” as he released $27 billion for paving jobs and bridge makeovers.

The concern is that the stimulus amounts to “a grab bag of pet projects” unlikely to spur either an economic or physical transformation, says Bob Poole of the Reason Foundation in San Francisco.

Moreover, the focus on shovel-ready projects could limit the impact on the nation’s jobless rate. In order to be shovel-ready, most projects have already been approved and hiring is already done. As a result, the stimulus package is likely to save jobs more than create new ones.

To some economists, the lesson from the New Deal is that public-funding packages aren’t enough – private investment is the key to turn around a recession. “Basically they’re going to shove too much money – more bad money – down a hole,” says Addison Wiggin, publisher of the Daily Reckoning website, which covers Wall Street.

Stimulating hope

Yet a glimpse at a handful of shovel-ready projects around the country shows that, at least in the Rocky Mountain towns and “blues belt” burgs where dirt moving and road milling has begun, federal money is renewing a sense of hope.

Built by New Deal money in 1933, the Route 17 bridge in Tuscumbia is literally crumbling, its concrete sloughing and iron spans rusting. The state had scheduled its replacement for 2012, but the federal infusion enabled the Department of Transportation to move it up by three years. The new bridge will span 970 feet and stretch 24 feet wide – hardly a modern-day Golden Gate Bridge.

The project may not be transformative, but 5,000 such highway projects around the country – all to be marked with newly created federal signage – can change both local and national dynamics, argues Tom Wright, a local county commissioner.

“Forty jobs is a huge percentage for this area,” says Mr. Wright. “Just driving by this project and seeing a guy you know driving a bulldozer is going to make you feel better.”

“You’re not going to have tourists standing in front of a mile of new blacktop taking each other’s picture,” says Mr. Berard of the House Committee on Transportation and Infrastructure. “But there’s a certain egalitarianism to having smaller projects being done in every state instead of only creating jobs in one or two places.”

After layoffs, one rehire

Tuscumbia surveyor Rocky Miller had to lay off nearly half of his 19-employee staff during the past year. Now, he’s been able to hire one back and hopes to rebuild his company at least in part based on the Osage River bridge project.

“I don’t necessarily agree with President Obama’s politics, but I do agree the stimulus money is important when it comes to infrastructure and putting people to work,” says Mr. Miller.

Questions remain about who, exactly, this money will put to work. “One assumption of the president’s employment estimates is that labor is homogenous, that if you have unemployed people they can do anything,” says William Beach of the Heritage Foundation, a think tank in Washington. “But we know that’s not true. Labor is heterogenous. I have a hard time understanding how the labor market is going to be elastic enough to respond.”

The sheer philosophical and geographical expanse of the shovel-ready package will be key to its effectiveness, others say.

“The point is that the recession is so broad-based geographically and across industries, there’s slack out there in the economy,” says Gus Faucher, director of macroeconomics at Moody’s Economy.com. “Scattershot may be too pejorative, but the plan is to try a bunch of different things with the expectation that some will work better than others.”

Tears of joy for a water system
For the 100-or-so low-income residents of the Lewis & Clark trailer park just east of Missoula, Mont., the economic benefits equal $24 a month. That’s the money each household won’t have to pay to upgrade a 40-year-old water system that leaks so much that the county sends 3 million gallons a month out to a community that only uses 300,000.

Struggling for years with low pressure, sediment in the lines, and frequent shutoffs, some residents had even shed tears as they pleaded with the county commission for help to repair the system.

In a month or so, work will begin on a $600,000 project to replace the old system. “This is going to change our lives,” says Ms. Dougherty. “I am even more energized by the fact that some of this money is going to actually trickle down to small projects like this that need so badly to be completed.”

A few states are planning some New Deal-size projects. New Jersey wants to build a multibillion-dollar Hudson River tunnel to New York, and Virginia intends to extend a commuter-rail line from Washington to Dulles Airport.

Yet, the stimulus money may make a more immediate economic and physical impact in a place like Mound Bayou, Miss., the self-styled “Jewel of the Delta.” Mayor Kennedy Johnson promises to personally pick up the unemployed on the street corners to bring them to work on a $9.8 million repaving of the entire town.

The roads in this town of 2,000 people look like a moonscape. Jobs to repave every inch of the town won’t be unionized, nor will they go to outside contractors, says Mr. Johnson. Currently unemployed townspeople are likely to do much of the work, directly enriching a town where the median household income is now $17,000.

Johnson also hopes that sprucing up the town’s bedraggled appearance will help entice new businesses.

“Small communities like us, we don’t have a tax base to do this on our own,” says Johnson. “So this stimulus package, if it reaches down to this small community, will be a godsend.”