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The Economic Lessons Biden Learned from Obama and Roosevelt

America doesn’t hear about ‘shovel-ready’ or ‘New Deal’ work projects anymore because the Biden administration knows infrastructure spending doesn’t generate jobs in the short term. But it does create long-term economic development.

Aerial view of the Hoover Dam.
The Hoover Dam was one of the New Deal's signature infrastructure projects, but it took years to complete.
(Photo courtesy of Travel Nevada)
Joe Biden’s rhetorical strategy is simple. Everything is about jobs, America, and more jobs.

“Some of you at home wonder whether these jobs are for you. You feel left behind and forgotten in an economy that’s rapidly changing,” said Biden in his first address to a joint session of Congress. “The Americans Jobs Plan [his $2 trillion infrastructure initiative] is a blue-collar blueprint to build America.”

The pitch is deceptively simple. Unemployment reached apocalyptic heights last year. Infrastructure spending is popularly associated with jobs and, especially, with well-paid work that doesn’t require a college education. But historically, public works projects have a complicated history when it comes to quickly getting a lot of people back to work.

Biden knows this. The last Democratic administration faced a historic economic meltdown too. His assignment as vice president, in the early days of Barack Obama’s presidency, was to work with state and local officials to ensure that the $830 billion American Recovery and Reinvestment Act didn’t go awry.

Here are some key lessons from that federal response to the Great Recession and how vice president Biden’s work with state and local policymakers frames his presidential agenda.

“The only thing that went wrong with the infrastructure part of the stimulus in 2009 is that the president had an unrealistic expectation of how fast the money could be spent,” says Ed Rendell, the former Democratic governor of Pennsylvania. “He thought the federal government gives us the money on Monday and on Tuesday we break ground. Joe Biden learned from this experience that you can’t expect immediate results.”

Infrastructure Spending Is Bad Stimulus Spending

After Barack Obama won the 2008 election, it quickly became clear that the magnitude of the economic crisis was far greater than anyone had realized. As the year drew to a close, the incoming president’s team began crafting an economic rescue package that seemed to increase in size by the day.

Time was of the essence and priority was given to policies that would stimulate the economy immediately. Tax cuts were included to court Republican votes and because they inject money into the economy quickly. Aid to state and local governments had a similar effect, as did boosts to unemployment insurance, food stamps, and other social safety net programs.

But Obama avidly promoted public works spending as well. Comparisons with the New Deal and Franklin Roosevelt abounded, with many Democrats and progressives vaguely recalling the Works Progress Administration and the Tennessee Valley Authority. In a Dec. 6, 2008, radio address to the nation, Obama promised to enact “the single largest new investment in our infrastructure since the creation of the interstate highway system.”

But despite the popular imagination of public works providing rapid relief, historically it hasn’t quite worked that way.

In 1983, at the end of what was then the worst economic downturn since the Great Depression, Congressional Democrats and Ronald Reagan put together a stimulus package that included infrastructure spending. But unlike other aspects of the law, that money took years to get out the door. Some of the infrastructure funds hadn’t even been spent by the early 1990s, when policymakers who’d been working for Congressional Democrats in the 1980s entered the federal bureaucracy under Bill Clinton’s administration, according to Michael Grunwald’s book The New New Deal, about the 2009 stimulus package.

But building bridges and roads is more popular than tax cuts (which the left often disapproves of) or social spending (which the right often attacks), and it appeals to a gauzy vision of the unemployed being handed hard hats and being transformed into construction workers. As Rahm Emanuel told Grunwald, “the one thing that brings Democrats and Republicans together [is] concrete.” That vision was particularly appealing during the Great Recession, when actual construction workers were suffering mass unemployment after the housing market collapsed.

Infrastructure spending was included in Obama’s stimulus package, but the realities of how such projects work clashed with the administration’s imperative to quickly shoot money through the economy. Federal agencies, state governments, and municipal politicians don’t have big drawers of pre-planned projects ready to break ground at any moment. Building anything takes time. Design, permitting, and environmental reviews don’t come already prepared, no matter how pressing the emergency.

“Infrastructure projects are full of lags at many different levels,” says Amanda Page-Hoongrajok, assistant professor of economics at Saint Peters University. “One of the biggest takeaways from trying to incorporate state and local government capital spending into stimulus policy during the Great Recession was that capital projects are just different from direct stimulus.”
Then-President Barack Obama included a call for long-term investments in the nation’s roads, railways and airports as part of the $50 billion stimulus plan in Septemeber 2010. (Source: AP)

No Such Thing as “Shovel Ready”

In early December of 2008, however, president-elect Obama hadn’t yet realized that. He had a catchy term for the initiatives he’d been assured would be ready as soon as federal dollars started flowing.

“I think we can get a lot of work done fast,” Obama said in a December 2008 interview on “Meet The Press.” “When I met with the governors, all of them have projects that are shovel ready, that are going to require us to get the money out the door, but they’ve already lined up the projects and they can make them work.”

A Google Trends search for the term “shovel ready” finds almost no use until a massive spike started forming in December 2008 and ended in February 2009 when the stimulus passed. Smaller spikes occurred in 2010 and 2011 as the media narrative soured and it became clear how long many of the projects were taking to get going.

Page-Hoongrajok interviewed dozens of state and local policymakers about how they approached capital spending in the wake of the Great Recession. The overwhelming majority saw their public works efforts, even if funded by federal dollars, as distinct from the Keynesian countercyclical stimulus Obama’s administration was attempting.

“In 2008, Obama literally said I have all these ‘shovel ready’ projects ready to go,” says Page-Hoongrajok. “But actually, if those projects were truly shovel ready, they would have already had funding. If you have a big design ready for a huge bridge, or a public library, you most likely had the funding online.”

Page-Hoongrajok’s research found that the only actors that had projects ready to launch immediately were transit agencies. A policymaker in Philadelphia told her that in other areas of local governance it took at least one year to set up a project and another two to three years to actually spend the money. Representatives from almost all the responding states said that it took them four or more years to spend stimulus funds for capital projects. Within the first year of receipt, half of responding states reported spending less than 25 percent of their federal capital dollars.

Even during the New Deal, which placed infrastructure spending at the heart of its recovery efforts, public works projects faced similar challenges. By the end of 1933, the Public Works Administration was being attacked for not employing people fast enough. “Who’s Holding Back Public Works” asked an article in a September edition of The New Republic. Secretary of the Interior Harold L. Ickes responded by blaming states and localities for being sluggish in suggesting projects.

Infrastructure as Economic Development, Not a Jobs Program

Joe Biden seems to have learned from his time helming the last attempt to pull the economy out of a historic hole. The American Rescue Act was passed at roughly the same point in his presidency as the stimulus passed under Obama. It also dwarfed its predecessor, punching in at over twice the size.

But the Rescue Act also focused on direct aid to American citizens and businesses, boosting unemployment insurance, covering COBRA payments, and sending $1,400 checks directly to individuals. Public works were not in the picture. Instead, they have their own bill so that Biden’s recovery plans decouple infrastructure spending from stimulus.

“There’s no talk about shovel ready projects [this time]; they’re talking about an eight-year plan,” says Bill Dupor, assistant vice president of the Federal Reserve Bank of St. Louis, in reference to Biden’s American Jobs Act. “For [Biden’s] first two [bills], one is about recovery and one is about reinvestment. They’ve split things up.”

The Biden administration’s rhetoric around the American Jobs Act is, obviously, about job creation. But the $2 trillion plan is not about juicing the economy in 2021, or even in the crucial midterm election year of 2022. Instead, it is meant to unfold over the course of a decade. It is about long-term economic development.

Contemporary scholarship about the New Deal has emphasized that if the great public works projects of the time did not defeat the specter of unemployment, that doesn’t mean they failed as conservative critics have suggested. (It’s also worth noting that recent research found that “an additional dollar of New Deal public works and relief spending in a county during the 1930s raised 1939 income by nearly a dollar.”)

“New Deal public works programs are better understood not as unsuccessful state-employment measures, but rather as a strikingly effective method of state-sponsored economic development,” writes Jason Scott Smith, assistant professor of history at the University of New Mexico.

In this way, at least, the Roosevelt comparisons are much more apt for Joe Biden than they were for Barack Obama. Promising more jobs is probably a better way to make sure he justifies that comparison, even if today’s unemployment crisis is a distant memory by the time the money actually gets spent.

“[The Obama administration] did a poor job of setting out expectations [for the stimulus act’s infrastructure spending] and a poor job of promoting their good work afterwards,” says Rendell. “Biden learned from those mistakes.”
Jake Blumgart is a senior writer for Governing and covers transportation and infrastructure. He lives in Philadelphia. Follow him on Twitter at @jblumgart.
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