AP Discovers Infrastructure Spending Does Not Stimulate Economy
On January 11th, Matt Apuzzo and Brett Blackledge reported on an Associated Press analysis of federal government infrastructure stimulus spending writing:
Spend a lot or spend nothing at all, it didn’t matter, the AP analysis showed: Local unemployment rates rose and fell regardless of how much stimulus money Washington poured out for transportation, raising questions about Obama’s argument that more road money would address an “urgent need to accelerate job growth.”
AP’s analysis, which was reviewed by independent economists at five universities, showed that strategy hasn’t affected unemployment rates so far. And there’s concern it won’t work the second time. For its analysis, the AP examined the effects of road and bridge spending in communities on local unemployment; it did not try to measure results of the broader aid that also was in the first stimulus like tax cuts, unemployment benefits or money for states.
The AP should be commended for undertaking this study and publishing the results. However, the fact that government spending on transportation infrastructure does not create any net new jobs is old news. The Heritage Foundation’s Ronald Utt has documented reports from the Congressional Budget Office, Department of Transportation, Congressional Research Service, and Government Accountability Office have all concluded that the net job impact of federal transportation spending is negligible and possibly negative. For example CRS wrote in 1993:
To the extent that financing new highways by reducing expenditures on other programs or by deficit finance and its impact on private consumption and investment, the net impact on the economy of highway construction in terms of both output and employment could be nullified or even negative.