Infrastructure: Do We Need A New New Deal?
President Barack Obama hasn't given up on it. Having seen Congressional Republicans dash his hopes of passing his American Jobs bill as a whole, Obama is now seeking to get his plan through in what he calls "bite-sized pieces."
Senate Majority Leader Harry Reid (D-Nev.) says he will try and introduce a weekly vote on each component of the bill, starting with the plan to spend $35 billion to save the jobs of public school teachers, police and firefighters. (The Senate squashed that one too, during a procedural vote on Oct. 21.) And this week, parts of the $447 billion plan dedicated for infrastructure including $60 billion for transportation projects will be voted upon as well. The total money the Obama administration had originally set aside for infrastructure-related projects was $105 billion. The White House has declined to specify the exact number of jobs it expects to be created through spending on highway, schools and other infrastructure projects.
The legislation has reignited a decades-old debate about jobs creation through infrastructure plans. And the issue inevitably casts the spotlight on the New Deal legislation initiated by Franklin Delano Roosevelt in his first term -- when the national unemployment rate stood at 24.9 percent.
The jobs that Obama envisions creating through his plan include those of construction workers and engineers to help in "modernizing our roads, rail, airports and waterways," according to a White House fact sheet. And it was exactly those kinds of skilled workers who labored on a sizable portion of New Deal projects, such as ones run through the Works Progress Administration (WPA), the largest New Deal agency.
Run by top Roosevelt adviser Harry Hopkins, the WPA oversaw the spending of roughly $13 billion on the construction of highways like the Merritt Parkway in the Northeast, and buildings like the Griffith Observatory in Los Angeles. In total, some 8 million jobs were created by the WPA during its eight years of existence from 1935 to 1943, according to the WPA's archives. That figure represented slightly less than half the total amount of people who were on federal relief at the inception of the WPA.
"It's almost a surefire thing," says H.W. Brands, a history professor at the University of Texas, Austin, in an interview with AOL Jobs. "Adding workers on government projects [during the New Deal] surely helped bring down the unemployment rate.
"These are not jobs that will persist indefinitely," says Brands, who is currently at work on a book about Roosevelt. "This is contract work we are talking about. Permanent jobs is not the idea."
As soon as Roosevelt took office in 1933 he began immediately pushing through his programs during the first 100 days of his administration. National unemployment went from 24.9 percent that year to 20.1 percent the year the WPA was founded in 1935, then to 14.6 percent in 1940, the year before the country entered World War II.
And while many have long chalked up the improvement in the national unemployment rate at the end of the 1930s to the ramp up in spending before World War II, there are also those who contest whether federal infrastructure projects provided any help at all.
"If FDR had done virtually nothing, it appears that the economy would have continued to expand on its own," says Jim Powell, a senior fellow at the libertarian Cato Institute and author of "FDR's Folly: How Roosevelt and His New Deal Prolonged the Great Depression," via email to AOL Jobs.
Powell represents a class of analysts who credit the role of the private sector for the recovery from the Great Depression.
"The economy was recovering before the New Deal Program was entirely drafted," he also says. "Two of the most important New Deal programs (the National Industrial Recovery Act and the Agricultural Adjustment Act, both signed in June 1933) were anti-expansion. They restricted production, and in the case of the AAA actually destroyed large quantities of food in an effort to boost farm prices, which surely didn't help American consumers."
Powell notes that the GDP had already begun improving shortly before Roosevelt took office. And during FDR's first year in office, it climbed 17 percent, well before any New Deal policies could begin to take full effect. New Deal skeptics like Powell instead credit the recovery of the GDP and employment to the natural consequences of market flow. The numbers turn around once wages and prices hit bottom, and the economy is characterized by bargains. That in turn leads to a natural recovery of spending and increased employment, the argument goes.
"There had been many panics and crashes before in American history; there weren't any New Deals before, and the economy recovered every time," says Powell.
For Obama, the option to champion a laissez faire response in the face of the country's economic issues would introduce at least a pair of problems. For starters, it would fail to present the commander-in-chief as engaged with the country's employment problems heading into an election year. But such an approach would also be at odds with both his own governing philosophy and that of the people who got him elected.
Indeed, many of Obama's supporters have consistently embraced an activist response to jump start the private sector. They point to the 2009 stimulus as a model, and embrace its successes as a reason to do more of the same.
"There's no question this approach [the American Jobs Bill] is basically the same as the ARRA [American Recovery and Reinvestment Act of 2009]," says Donna Cooper, a senior fellow with the Economic Policy team at the left-leaning Center for American Progress, who served as secretary of policy and planning for the Commonwealth of Pennsylvania under Governor Ed Rendell. "But even where you have government spending for infrastructure, the Feds will only be raising money. It leads to direct private employment in construction, but also in industries like asphalt and steel."
And as a counter to commentators who champion tax cuts as a means to grow the economy, Cooper points to the stat, provided by economist Mark Zandi, of a net gain of $1.44 for every dollar spent on government spending. As a point of comparison, every dollar set aside for a tax rebate adds $1.22 to the economy.
Cooper's home state of Pennsylvania provides a case study in effective jobs growth from federal stimulus help. Among its most noteworthy projects from the stimulus was a major overhaul of the battered Vare Avenue Bridge. The six-lane, mile-and-a-half span on I-76 had long been an eyesore in the Keystone State. After receiving $60 million in stimulus money, the bridge was redone in 12 months, from contract to last steel beam. It, along with other in-state bridge upgrades, supported nearly 4,000 jobs in Pennsylvania as of July, according to the state's transportation department. And the employment takes place on a two-tier track, both through the direct construction and engineering jobs, as well as a result of private aggregate spending on related products, such as asphalt and steel.
"The problem with the Jobs bill," Cooper says, "is that it may not be enough."