Fixing Highways Helps - Probably
But the hard evidence for boosting federal infrastructure spending to create jobs is elusive
SLIPPERY ROCK, PA. — ZIPPING along Interstate 79 in rural Butler County, Pa., Rick Hogg's state-owned Chevrolet rumbles over an invisible seam.
"Feel the vaulting?" he asks as the car hits several more seams. Ka-thump. Ka-thump.
Concrete sections of this 30-year-old Interstate have settled unevenly, explains Mr. Hogg, who is an assistant district engineer with the state transportation department. He quickly spots other deficiencies: deep cavities that pockmark the road, the wearing away of the anti-skid micro-grooving, safety features that are out of date. Thanks to President Clinton's plan to boost highway spending, Hogg hopes to repave nearly 30 miles of this section of interstate highway.
"That's an exceptionally good buy," he says, "if we can get to it."
Infrastructure spending is all the rage these days. President Clinton touts it as jobs today and opportunity tomorrow. When the nation's governors formulated a stimulus package for the new administration, about the only thing they could agree to was a boost in infrastructure spending.
But hard evidence of benefits from rebuilding infrastructure is lacking. While advocates point to the impact of building something new - say a highway or airport runway - they haven't yet pinned down the effects of maintaining existing systems. No one knows yet how bad a road has to get before its repair provides a significant productivity boost.
"No one has a hard answer to that question," says Francis Francois, executive director of the American Association of State Highway and Transportation Officials.
The productivity impact is probably minuscule, says Charles Hulten, an economics professor at the University of Maryland. "It's hard to imagine really dramatic improvements in productivity for minor improvements in the system."
Measuring the impact on jobs is almost as hard.
On Feb. 17, Clinton announced his stimulus package, which included an extra $4.2 billion in highway and other transportation spending. If approved by Congress, it would mark the first time that the highway portion of the 1991 Intermodal Surface Transportation Efficiency Act would be fully funded.
In a statement the same day, Transportation Secretary Federico Pena called the transportation proposal "a balanced approach between getting the economy going right away and taking long-term steps to keep the economy strong for years to come." He said it would support 70,000 jobs in fiscal 1993 and 1994.
This estimate is much more conservative than the Road Information Program, an association backed by several industries interested in highway development. That group estimates that the extra $3 billion in highway spending would generate twice as many jobs.
How significant these jobs are is a subject of some debate. "I think there is an impact and I think it spreads to other areas," says Paul Banner, visiting scholar at Northwestern University's Transportation Center.
But a September 1991 report sponsored by the respected Transportation Research Board reached a different conclusion. "The weight of available evidence indicates that transportation policies and investments make very little difference to total employment and income in a region."
New projects shift employment from one area to another, but do not create new jobs - except in areas with long-term structural unemployment, the report said. "Even then, the gains are typically small."
The significant gains from new building come from increased productivity, the report said. For example: A 1989 study found that building a four-lane highway from St. Louis to St. Paul, Minn., would provide a 120 percent return in productivity gains on a $359 million investment. The employment impact was less than 6 percent of the original investment.
If such examples are representative, it suggests that policymakers should stop touting infrastructure spending as a jobs package and focus more attention on the long-term benefits.
Some kinds of maintenance work clearly boosts productivity. If a railroad bridge has deteriorated to the point that trains have to carry lighter loads, then refurbishing it can have a big productivity impact. So can the rebuilding of a highway, if potholes slow down truckers or cause motorists to fix their cars more often.
But that case is harder to make in less extreme cases, such as the stretch of I-79 here in Butler County. It's not potholes holding back the traffic. It's the state's 55 mile-per-hour speed limit. Eager to take advantage of any new federal money, the Pennsylvania Department of Transportation prepared several projects that could be bid rapidly. This one, estimated to cost $36 million to $40 million, was one of them.
The proposal makes sense from a maintenance point of view, argues Hogg. A reconstruction of the highway would cost twice as much per mile. But he declines to guess how long it would take before such a reconstruction would be necessary. And neither he nor state transportation secretary Howard Yerusalim can point to any evidence about the likely impact on productivity.
Some just say it doesn't matter. "We can't wait for those studies to be done before making any investment," says Aaron Gellman, director of Northwestern's Transportation Center. "We have got to make substantial investment in our infrastructure, particularly highways."
But don't be surprised if a new round of infrastructure spending fails to send the nation's productivity growth back up to the levels of the 1950s and '60s, warns Professor Hulten.
"Fixing it up at the margin is not going to produce any eye-popping numbers."