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Tuesday, September 7, 2010

Another Stimulus?

“The welfare of the people in particular has always been the alibi of tyrants, and it provides the further advantage of giving the servants of tyranny a good conscience.” —Albert Camus

Appealing to a union crowd on Labor Day, President Obama on Monday is calling for a $50 billion investment in long-term infrastructure projects that the administration claims will stimulate the flailing economy, create jobs and refill the exhausted highway trust fund.

Though the infrastructure package is aimed at the next six years, the investment of $50 billion is intended to be a "front-loaded" expansion of the $814 billion stimulus package that emphasized shovel-ready projects.

"The plan builds upon the infrastructure investments the president has already made through the Recovery Act, includes principles the president put forth during the campaign and emphasizes American competitiveness and innovation," reads a statement from the White House.

The goals of the infrastructure plan include: rebuilding 150,000 miles of roads; constructing and maintaining 4,000 miles of railways, enough to go coast-to-coast; and rehabilitating or reconstructing 150 miles of airport runways, while also installing a new air navigation system designed to reduce travel times and delays.

Obama will also call for the creation of a permanent "infrastructure bank" that uses competitive measures to determine which projects receive funding rather than earmarks and grants.

In an interview on CBS' "Early Show," Labor Secretary Hilda Solis said the plan Obama was to unveil Monday would "put construction workers, welders, electricians back to work ... folks that have been unemployed for a long time."

According to President Barack Obama used the terms “invest,” “investing” or “investment” seven times in his Labor Day speech to describe federal spending and special-interest tax breaks.

Two examples of Obama’s speech are; “Now, let me tell you, another thing we’ve done is to make long-overdue investments in upgrading our outdated, our inefficient national infrastructure.  We’re talking roads. We’re talking bridges.  We’re talking dams, levees.  But we’re also talking a smart electric grid that can bring clean energy to new areas. We’re talking about broadband Internet so that everybody is plugged in.  We’re talking about high-speed rail lines required to compete in a 21st century economy.  I want to get down from Milwaukee down to Chicago quick. Avoid a traffic jam.  We’re talking investments in tomorrow that are creating hundreds of thousands of private sector jobs right now. Because of these investments, and the tens of thousands of projects they spurred all across the country, the battered construction sector actually grew last month for the first time in a very long time.”

"And, we want to set up an infrastructure bank to leverage federal dollars and focus on the smartest investments.  We’re going to continue our strategy to build a national high-speed rail network that reduces congestion and travel times and reduces harmful emissions.”

These remarks must have had the boys at Caltrans headquarters at 1120 N Street in Sacramento drooling in their soup. With the funds from a second stimulus they will now be able to pay the full salaries of those furloughed engineers and bureaucrats. Just think 150,000 miles of road construction. Wow, this will be great—perhaps we can hire even more people.

Most experts agree that most of the money from the last stimulus went to cover the state deficits and retain their overblown bureaucracies. Now with this new proposed federal package their departments of transportation will be bolstered.

As for Obama’s dream of a national high speed rail network I can only say one word — poppycock. A few days ago I posted a blog debunking the HSR myth. Click here to read the post.

Obama was flanked by selected union members at the setting for his Wisconsin Labor Day speech. You could see the drool running down the chins of these handpicked union members. One absence was very evident, however, where was Russ Feingold, the States 'incumbent Democrat senator? Nowhere to be seen on the podium Feingold somehow made himself invisible for this big Labor Day event. As he is in a very competitive race with his Republican challenger, Millionaire Ron Johnson, Feingold claims he had other “pressing” engagements —yea.

If those union members think they are going to get a job from this proposed infrastructure stimulus in the near future, or ever, they are very mistaken. First let’s look at highway construction and maintenance. If you have ever driven past a construction site you probably have wondered where all the workers are. Many times you see less than a dozen people working on the project. Why is this? Well, it’s because they use machines. Unlike the roads built during the depression years where there were thousands of unskilled laborers leaning shovels, today’s road building is carried out by very skilled people using very sophisticated machines. Even a resurfacing project is dependent on paving machines and trucks. There are not many laborers working the project. Too make matters worse many of these unskilled positions are filled by illegal immigrants. So, hundreds of thousands of jobs — very unlikely.

There is also another issue to consider in Obama’s fantasy. New highway projects can take anywhere from ten to twenty years to complete. In many cases the environmental approval process can take five or six years. As I have said before, infrastructure projects are not for job creation, but for the benefit the project brings to the end user.

As for HSR all I can say is “what a farce”. Let’s look at the jobs that will be created by the building of HSR. The first batch of jobs will go the politicians and bureaucrats; they will be the administrators and keepers of the purse strings. They will write the contracts for the consultants and hire the program managers. That next group of jobs will go the A&E firms that will prepare the environmental impact reports, preliminary route designs, aerial mapping, surveying and final engineering drawings. None of these jobs are performed by union workers, they performed by both private and public sector professionals.

Once the engineering plans are completed the project will go to a construction management firm. These are large AE&C firms with unique experience in managing  many large and small construction contractors that will actually build the HSR. They are staffed by specialists that have worked on similar projects all over the world. They do not employ union workers.

Finally we will get the construction itself. The construction manager will issue contracts for various aspects of the construction. These contracts will go to large and small contractors. The large contractors may use sub contractors for aspects of their work. Sub contractors may or may not be union as these contracts are given out based upon qualifications and price.

What will they build? The contractors will grade the HSR line, lay the ballast and rails, construct the electrical systems and build the stations. Because it is HSR there will not be many stations so there will not be too much work for site builders. The rails will come from Belgium, Luxembourg or Japan so there will be no work for the U.S. steel industry. The electrical system will come for ABB or Siemens as they have the most experience in HSR and they are European companies. So that leaves us with common labor, workers using those machines to grade the line, place the ballast, lay the rails and erect the fences. Finally, the locomotives and train cars will come from Europe or Japan — that’s where they are made.

So what’s left — the train operators, the maintenance crews, the security guards and the bureaucrats who will administer the system? Even the automated ticket machines are made in Europe or Japan.

Where will these hundreds of thousands of jobs come from? Who knows? Perhaps Obama knows?  As Obama states; “he wants to ride from Milwaukee to Chicago without any traffic.” What great idea. Unless they are going to build the HSR line within existing RR right of way I doubt if such a trip will take place in the next ten to twelve years. It will take another thirty to forty years for such an “investment” to pay for itself, if ever.

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