Can Obama's Infrastructure Program Work?

The new, more heavily Democratic Congress is expected to quickly approve some version of the economic stimulus package that Obama outlined in a radio address to the nation on Dec. 6, when he pledged to "create millions of jobs by making the single largest new investment in our national infrastructure since the creation of the federal highway system in the 1950s." He said that basic infrastructure work is at the core of his drive to create some three million new jobs (revised upward from the original figure of 2.5 million) that his economic team believes will be needed to pull through the worst downturn since the Great Depression. He warned state officials that his program's motto will be "use it, or lose it" -- that to receive the money, projects will need to be ready to begin hiring workers right away.

The initial cost of the plan -- based upon discussions between the Obama transition team and congressional leaders -- is reportedly in the range of $675 billion to $775 billion, but some have estimated the overall cost will grow if the recession deepens, to $850 billion or more. Not all of the proposed dollars are for basic infrastructure such as roads and bridges. Several economists have been urging a plan as large as $1 trillion -- an idea that has been seconded by cash-strapped state governors as well as the struggling American steel industry.

Some of the additional spending, according to news accounts, would include a major push for improved energy efficiency -- such as funding to spur the creation of a national power grid that could better harness wind and solar power, money for the weatherization of government buildings and critical facilities, and other so-called "green jobs" in renewable energy. Other spending proposals would target education -- including construction of new schools as well as teacher training and lowering college tuition costs -- or health care, where the incoming Obama administration has proposed a kind of technology infrastructure program that would help health care facilities better computerize their records.

Drunken Sailors

Then there are aspects of the Obama plan, as it takes shape, that would steer very little toward long-term bricks-and-mortar-type projects -- such as helping recession-battered state and local governments close the growing gaps on their accounting sheets (which must be balanced, unlike the federal budget), extending unemployment benefits and providing as much as $150 billion in tax relief for low- and middle-income families. With so many bold programs likely to be pushed through in such a short timeframe -- especially by government standards -- it is easy to see why some are so worried about oversight.

"We're spending money like drunken sailors," warns Wharton management professor Lawrence G. Hrebiniak, author of The Mismanagement of America, Inc. "Look at the TARP [the Troubled Assets Relief Program]," he adds, referring to an Associated Press report that banks receiving the federal bailout dollars approved in October are declining to account for how the money is being spent. Traditionally, infrastructure programs are even more prone to political abuse, he notes, and he expresses concern that the new Democratic White House will promise pork projects for Republican districts in return for supporting liberal goals such as higher taxes on the top income bracket.

"We need sound management," Hrebiniak says. "If we're going to provide stimulus of close to $1 trillion, we need to know how that money is being used -- and how [administrators] plan to make up for the shortfall in revenue.... There needs to be transparency."