Monday, February 09, 2009

Understanding 'shovel-ready' 

Among the many things wrong with this stimulus bill, one that seems to pass attention of most is the meaning of the word "shovel-ready". The local paper discusses which projects would be funded.

Engineers in Stearns, Benton and Sherburne counties say federal cash would help them tackle overdue road resurfacing and free up future funds for other long-term projects.

�We�re trying for all the free money we can get,� Jodi Teich, assistant Stearns County engineer, told the county board last week.

Since word broke that an economic stimulus bill from Washington might include substantial funds for transportation, county engineers started looking at their road and bridge plans to see which projects might qualify.

The ones they chose are mainly road resurfacing or bridge reconstruction projects that don�t involve lengthy environmental reviews or right of way purchases.

�We tried to target jobs that were fairly straightforward and simple,� Benton County Engineer Bob Kozel said.

Listing only shovel-ready projects, regardless of whether or not those are real priorities for an area, is understandable. It is, to the counties and municipalities, free money. If the marginal cost of a project is zero, you offer to do any project at all with positive benefits to at least one group regardless of the net benefits. (One of my first lessons in the principles course: Costs are always costs to someone. I use the cost of a baseball to illustrate. It's the cost of the act of acquiring a baseball that's relevant: buy it, catch it at a game, steal it, etc.) So people write lists critical of certain spending programs like the St. Cloud skateboard park proposal, without realizing that there was no prioritization of a list.
�We were asked to submit a list of every possible project we have that could be ready to go in 90 days or less,� [St. Cloud Mayor Dave] Kleis said. �We didn�t prioritize the list. If we had, those items would have been on the bottom.�
The 90-day criterion is a stipulation in the House bill that was passed as a condition for gaining access to the $90 billion meant for infrastructure projects. An article in Popular Mechanics last week talks about the inefficiency of the 'shovel-ready' criterion that mayors and county commissioners were compelled to apply.
The programs that would meet the bill�s 90-day restriction are, for the most part, an unappealing mix of projects that were either shelved after being fully designed and engineered, and have since become outmoded or irrelevant, or projects with limited scope and ambition. No one�s building a smart electric grid or revamping a water system on 90 days notice. The best example of a shovel-ready project, and what engineers believe could become the biggest recipient of the transportation-related portion of the bill�s funding, is road resurfacing�important maintenance work, but not a meaningful way to rein in a national infrastructure crisis. �In developing countries, there are roads that are so bad, they create congestion, because drivers are constantly forced to slow down,� says David Levinson, an associate professor in the University of Minnesota�s civil engineering department. �That�s not the case here. If the road�s a little bit rougher, drivers will feel it, but that�s not going to cause you to go any slower. So the economic benefit of those projects is pretty low.�

That might be acceptable to people focused purely on fostering rapid job growth�but, ironically, such stimulus spending could fall short on that measure, as well. �In the 1930s, when you were literally building with shovels, that might have made sense. That was largely unskilled labor. Today, it�s blue collar, but it�s not unskilled,� Levinson says. �The guy brushing the asphalt back and forth is unskilled, but the guy operating the steamroller isn�t. And there�s an assumption out there that construction workers are interchangeable between residential and highway projects. But a carpenter isn�t a whole lot of help in building a road.�
The only way a stimulus bill "frees up future funds" is if the project that it finances is something that would have been done anyway, i.e., if it meets the cost-benefit criterion, and that there is another project that would meet that criterion as well but for which you face a financing constraint. The skateboard park, according to Kleis, does not and so it is not going to be funded at any rate. That is sound public policy. Making timing more important than net benefits is not.

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