Job Creation Driving Highway Bills in Congress

Do the highway bills really create more jobs? The answer from a lot of economists is not really.
by | March 5, 2012

The lure of roads, bridges, buses and trains isn't enough anymore to drive an expensive transportation bill through Congress. So to round up votes, congressional leaders are pitching the bills as the hottest thing around these days: job generators.

But do they really create more jobs? The answer from a lot of economists is not really. The bills would simply shift spending that was creating jobs elsewhere in the economy to transportation industries. That means different jobs, but not necessarily additional ones.

"Investments in transportation infrastructure, if well designed, should be viewed as investments in future productivity growth," said Alice Rivlin, a former director of the White House Office of Management and Budget under President Bill Clinton.

"If they speed the delivery of goods and people, they will certainly do that," she said. "They will also create jobs, but not necessarily more jobs than the same money spent in other ways."

But that hasn't diminished the jobs claims being made on Capitol Hill.

"This legislation would put 2 million middle-class Americans back to work right away," Senate Majority Leader Harry Reid, D-Nev., said Thursday, as he fumed about nearly 100 amendments that have delayed action on the Senate's version of the transportation bill.

"Although our economy has gained momentum, there are still millions of Americans out of work. So it should be obvious why we can't afford to delay efforts to rebuild our roadways, railways and bridges," he explained.

In the House, Speaker John Boehner, R-Ohio, made a transportation bill the election-year centerpiece of the GOP's jobs agenda last fall when he unveiled its broad outlines. To make sure nobody missed the point, the bill was dubbed the "American Energy and Infrastructure Jobs Act of 2012."

Support for the five-year, $260 billion House bill has since fallen apart because conservatives think it spends too much money, and because Democrats and some Republicans balk at policy changes they say would undermine mass-transit funding, weaken environmental protections and penalize union workers.

Urgency is growing because the government's spending authority for highway and transit programs expires at the end of this month and the trust fund that finances them is expected to go broke sometime next winter. Boehner is struggling to find some mix of policy and spending that can win the votes needed for passage.

President Barack Obama has pitched his own six-year, $476 billion transportation bill as a jobs plan as well, but it is obvious lawmakers are unwilling to consider such a large proposal. They've had to scour the federal budget to find money to pay for a Senate bill a quarter of that size. While paying lip service to their own bill, administration officials are also backing the more modest Senate bill, which would cost $109 billion over two years.

"A transportation bill will be the biggest jobs bill Congress could ever pass, bigger than anything else they've done in the three and a half years I've been in this job," Transportation Secretary Ray LaHood said, praising the Senate bill.

Sen. Barbara Boxer, D-Calif., the chief sponsor of the Senate bill, estimates it will preserve 1.8 million jobs that would be lost if authority to spend trust fund monies expires, and create another 1 million new jobs through a $1 billion loan-guarantee program. The loan program has been shown to generate as much $30 in private sector investment for every $1 in federal aid. To reach her job estimate, Boxer used that formula, plus Federal Highway Administration estimates that every $1 billion in highway spending creates about 35,000 jobs if it is matched by state and local aid.

Nearly 3 million jobs "are hanging in the balance" as the Senate debates the bill, Boxer said.

But that analysis "assumes that if this bill doesn't pass, all funding ceases, which really isn't a fair assumption," said Joshua Schanks, president of the Eno Transportation Foundation, a transportation think tank.

It's unlikely that Congress would allow highway and transit aid to lapse even if lawmakers can't agree on a longer-term bill, he said. Rather, he said, they are likely to pass a short-term extension of current programs, as they have done eight times since the last long-term transportation plan expired in 2009.

Also, jobs created by the loan-guarantee program may be a long time coming since the program is aimed at financing major projects, economists said.

"In many cases this is not spending that occurs very rapidly," said Alan Viard, an economist with the conservative American Enterprise Institute. "Anything that involves construction has notoriously long lead times."

The question of job creation is relatively unimportant when compared to the other significant economic benefits associated with maintaining and improving the nation's aging transportation system, like enabling people to get to work and businesses to speedily move goods, economists and transportation experts said.

Schanks pointed to the construction of the federal interstate highway system, which began in 1956 and was completed 35 years later.

"How many jobs did we create by building the interstate system? Nobody knows. And who cares? We built the interstate system, that's what matters," he said.

Copyright 2012 The Associated Press.

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