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Special Report
The Bigger Dig
According to the Congressional Budget Office's (CBO) estimates, the "multiplier" for federal transfers to state governments for infrastructure spending is 2.5. The multiplier is the dollar increase in output (GDP) for a dollar increase in public spending -- the "bang for the buck."
Of course, Bostonians like me are all too familiar with a different, much bigger, negative multiplier: the multiplier effect that planned spending has on actual spending.
In 1985, city officials projected that the Big Dig would cost about $6 billion (adjusted for inflation), making it the biggest highway infrastructure project in history. This figure represented the costs for the entire project, including moving the Expressway underground, building a bridge to Charlestown, and improving access to the airport. When the project finally reached completion -- years overdue -- the check came in at $15 billion, plus an additional $7 billion in interest on the debt for a total of $22 billion. Divide that 22 by the original 6 and you get the insidious self-perpetuating spending multiplier: over 3.5.
It wasn't supposed to happen that way. As
Nicole Gelinas explained in a 2007 City
Journal article,
Gov. Michael Dukakis had sold the Big Dig to Massachusetts
residents on the premise that the Federal Government would fund
90 percent of the project. Massachusetts taxpayers expected to be
on the hook for only about $345 million, including interest
payments on the debt. They also anticipated only a few years of
construction marring the city. Instead, they got an $18 billion
bill and seemingly interminable construction.
Today, the Commonwealth is retracing its steps and fixing some of the shoddy work done by parasitical construction companies. Despite Gov. Mitt Romney's best efforts to right the ship before he left the state, Massachusetts residents are anticipating making interest payments until 2038 -- a burden so heavy it crowds out all kinds of other worthwhile infrastructure projects. To cap it all off, according to a Boston Globe study, the Big Dig didn't even solve the original congestion problems so much as push them further out to the suburbs.
Even before he assumed the presidency, Barack Obama asked state governors and officials to submit lists of "shovel-ready" projects to be included in the stimulus bill. Congress is likely to approve at least $50 billion for such projects. While Massachusetts submitted only relatively conservative proposals, other states have asked for funding for projects approaching the original scale of the Big Dig. For example, Miami has requested $2.5 billion for subway construction. If only Miami knew the lessons Boston has learned the hard way.
True, the whole point of the stimulus is to prop up demand to stave off a vicious circle of layoffs and reduced consumption. This aspect of the stimulus is beneficial.
But the benefits must be weighed against the costs, and our experience suggests that the costs of massive infrastructure investment are far, far higher than the CBO or Congress are considering in their models.
The gains from the stimulus are intended to accrue to consumers otherwise facing hard times ahead. Obama, however, has signed an executive order encouraging the exact kind of project-labor agreements that were the basis of contracts awarded for the Big Dig. So infrastructure projects in the stimulus are likely to reward the kinds of characters who mooched off the Big Dig for so many years.
For those of short memory, the Big Dig winners included Bechtel/Parsons Brinckerhoff, the negligent project managers who settled with the Commonwealth out of court for shoddy work, and Powers Fasteners, who were found liable for the accidental death of a woman driving through a tunnel when a roof tile fell down. We'd like to believe that no money ever found its way into the hands of mobsters like Carmen "the Cheeseman" DiNunzio, who was caught looking for a piece of Big Dig action. But we can't be sure.
The stimulus package is funded entirely by the federal government, but taxpayers are still on the hook. Where are the extra funds going to come from when the bills come back much bigger than expected? Either the state or the federal government will pick up the slack, but either way taxpayers will learn how Massachusetts residents feel when facing 30 years' worth of extra taxes.
Let's hope that the federal debt-financed stimulus successfully crushes the pessimistic expectations that threaten to send the economy into a prolonged depression. But let's also be realistic about the level of accountability and restraint we're likely to see from the bureaucrats cutting the checks. Those of us from Boston know what it's like to see a spending project go out of control -- and this time around I don't see a Mitt Romney waiting in the wings to clean up the mess.
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Melvin| 2.13.09 @ 7:16AM
Being connected in the government construction business don't expect any time soon that your pot holes or bridges will be fixed.
The amount of government and environmental regulations is staggering and costly. Even before a spade of earth is turned, it takes years and years, and years studies of just to comply with all the bureaucratic nightmares.
These governmental and environmental agencies do not operate on the same sheet of music but rather like individual fiefdoms complete with royal court and king and they fiercely defend their kingdoms when threatened and or forced to make a decision on a government construction project.
Sometimes it takes upward of 15 years of environmental impact studies, dealing with environmental and NIMBY's lawsuits to get a project off the ground.
The above is an example of before the project begins. After the project begins projects have to suffer through corruption of government bureaucrats and construction companies providing sub-standard material to cut corners.
So the next time a pot-hole throws your cars alignment out of whack, just blame it on the two legged yellow-bellied pompous peckerwood.
Don W.| 2.13.09 @ 8:43AM
Why is the federal government responsible for projects in individual states? I am thinking of the collapsed bridge in Minnesota, a state which at the time had a multi-million dollar budget surplus.
Naturally, the media and electorate wanted the feds to replace their bridge. Is there an article in our constitution that authorizes congress to replace bridges and the like?
Robert Rosencrans| 2.13.09 @ 9:54AM
A good read.
http://www.newsmax.com/politics/stimulus_promises_facts/2009/02/09/179891.html
At least Route 31 is a road to somewhere.
President Barack Obama had it both ways Monday when he promoted his stimulus plan in Indiana and later at a prime-time news conference. He bragged in Indiana about getting Congress to produce a package with no pork, yet boasted it will do good things for a Hoosier highway and a downtown overpass, just the kind of local projects lawmakers lard into big spending bills.
Obama's sales pitch on the enormous package he wants Congress to make law has sizzle as well as steak. He's projecting job creation numbers that may be impossible to verify and glossing over some ethical problems that bedeviled his team.
At his news conference, he said the plan he supports would create or save "up to 4 million jobs." In his opening statement at the news conference, at least, he avoided the claim made earlier that the plan would create or save at least 3 million jobs.
In recent years, the so-called Bridge to Nowhere in Alaska came to symbolize the worst excesses of congressional earmarks, a device that allows a member of Congress to add money for local projects in legislation, practically under the radar.
Nothing so bold, or specific, as that now-discarded bridge project is contained in the stimulus package. That's not to say the package steers clear of waste or parochial interests. Obama played to such interests Monday, speaking at one point as if he'd come to fill potholes.
A look at some of Obama's claims in Elkhart, Ind., and the news conference called to make his case to the largest possible audience:
OBAMA: "Not a single pet project," he told the news conference. "Not a single earmark."
He said in Elkhart: "I know that there are a lot of folks out there who've been saying, 'Oh, this is pork, and this is money that's going to be wasted,' and et cetera, et cetera. Understand, this bill does not have a single earmark in it, which is unprecedented for a bill of this size. ... There aren't individual pork projects that members of Congress are putting into this bill."
THE FACTS: There are no "earmarks," as they are usually defined, inserted by lawmakers in the bill. Still, some of the projects bear the prime characteristics of pork — tailored to benefit specific interests or to have thinly disguised links to local projects.
For example, the latest version contains $2 billion for a clean-coal power plant with specifications matching one in Mattoon, Ill., $10 million for urban canals, $2 billion for manufacturing advanced batteries for hybrid cars, and $255 million for a polar icebreaker and other "priority procurements" by the Coast Guard.
Obama told his Elkhart audience that Indiana will benefit from work on "roads like U.S. 31 here in Indiana that Hoosiers count on." He added: "And I know that a new overpass downtown would make a big difference for businesses and families right here in Elkhart."
U.S. 31 is a north-south highway serving South Bend, 15 miles from Elkhart in the northern part of the state.
___
OBAMA: "We also inherited the most profound economic emergency since the Great Depression."
THE FACTS. This could turn out to be the case. But as bad as the economic numbers are, the unemployment figures have not reached the levels of the early 1980s, let alone the 1930s — yet. A total of 598,000 payroll jobs vanished in January — the most in nearly 35 years — and the unemployment rate jumped to 7.6 from 7.2 percent the month before. The most recent high was 7.8 percent in June 1992.
And the jobless rate was 10.8 percent in November and December 1982. Unemployment in the Great Depression ranged for several year from 25 percent to close to 30 percent.
___
OBAMA: "I've appointed hundreds of people, all of whom are outstanding Americans who are doing a great job. There are a couple who had problems before they came into my administration, in terms of their taxes. ... I made a mistake ... I don't want to send the signal that there are two sets of rules."
He added: "Everybody will acknowledge that we have set up the highest standard ever for lobbyists not working in the administration."
THE FACTS: Two of his appointees, former Senate Democratic leader Tom Daschle for secretary of health and human services and Nancy Killefer as his chief compliance officer, dropped out after reports they had not paid a portion of their taxes.
Obama previously acknowledged he "screwed up" in making it seem to Americans that there is one set of tax compliance rules for VIPs and another set for everyone else. Yet his choice for treasury secretary, Timothy Geithner, hung in and achieved the post despite having belatedly paid $34,000 to the IRS, an agency Geithner now oversees.
That could leave the perception that there is one set of rules for Geithner and another set for everyone else.
On lobbyists, Obama has in fact established tough new rules barring them from working for his administration. But the ban is not absolute.
William J. Lynn III, tapped to be the No. 2 official at the Defense Department, recently lobbied for military contractor Raytheon. William Corr, chosen as deputy secretary at Health and Human Services, has lobbied as an anti-tobacco advocate. And Geithner's choice for chief of staff, Mark Patterson, is an ex-lobbyist from Goldman Sachs.
___
OBAMA: "The plan that we've put forward will save or create 3 million to 4 million jobs over the next two years."
THE FACTS: Job creation projections are uncertain even in stable times, and some of the economists relied on by Obama in making his forecast acknowledge a great deal of uncertainty in their numbers.
Beyond that, it's unlikely the nation will ever know how many jobs are saved as a result of the stimulus. While it's clear when jobs are abolished, there's no economic gauge that tracks job preservation.
Obama reworded his claim at the news conference, dropping the assertion that at least 3 million jobs would be saved or created.
© 2009 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.
Dustoff| 2.13.09 @ 10:02AM
In Wa state, we too are thinking of a BIG DIG... Well the dem's are. (Seattle) most everyone else is dead set against it. Everytime they try to build something here the cost always goes clean out of sight, even though they said it wouldn't!
Dustoff| 2.13.09 @ 10:03AM
I also see some website are reporting that the junk they took out of this Pig Plan are back in it.
Our grandchildern are so %^##%*&&@
Chuck Hancock| 2.13.09 @ 11:21AM
Thanks, Dustoff for expressing how the rest of Washington state feels about the Big Gig planned for Seattle.
"Oh, this will be different!" they say. The most likely difference will be that it will be even worse than promised.
Dustoff| 2.13.09 @ 11:40AM
Thanks Chuck.
Were so screwed. Building a tunnel in a earthquake/flood prone area. yeah that makes sense.
The best part. If Al Gore is right.. LOL
That area they want to build this tunnel will flood. 0-:
Richard Rude| 2.13.09 @ 12:00PM
The Stimulus Plan is a plan for corruption. How could it be otherwise when the federal government is expending, with only minimal accountability, large sums of money to local politicians and their sycophants, many of whom are already corrupt? Combined with the now corrupt Old Media, the corrupt democrat congress, and his crooked Chicago history, Obama is the most corrupt president ever!
Nick| 2.13.09 @ 12:30PM
How appropriate that B.O.'s porkulus spending bill will be voted on Friday the 13th.
Thanks for saddling the next two generations with all this debt, stinking liberals. Why do you guys love stealing your future grandchildren's money, bleeding hearts?
Marc Jeric| 2.13.09 @ 2:33PM
Umion labor, not the Big Dig management, caused shoddy work, wide-spread thefts of construction materials, politicians-directed contracts, mafia bosses of construction unions, union work rules, and finally, some unexpected obstacles in underground work.
All of these "unexpected" difficulties will be seen in this porkulus stimulus bill.
Alan Brooks| 2.13.09 @ 5:01PM
i heard (from NR) the smallest impact statement costs 1.1 percent of total.
ConstructionandLabor| 2.13.09 @ 6:08PM
Thanks for writing about PLAs and Obama's Executive Order 13502. The Obama order is setting the table for waste and discrimination in federal and federally funded construction around the country. This is going to be a massive giveaway to organized labor and will discriminate against 84 percent of the U.S. private construction workforce who do not belong to a union and would be eligible to be work on these projects as long as they agree to the "union-friendly" terms and conditions of a project labor agreement.
While it is true that non-union contractors and their non-union employees can bid/work on PLA projects, the reality is that very few do. You should read one of these PLA contracts. No non-union contractor in their right mind would bid on them. The lack of competition and inefficient work rules as a result of stipulations within PLAs leads to increased costs.
To learn more about union-only PLAs, please visit www.abc.org/pla
TJ| 2.13.09 @ 7:51PM
"For example, Miami has requested $2.5 billion for subway construction. If only Miami knew the lessons Boston has learned the hard way."
If Miami only knew why few Florida homes have basements!
Alan Brooks| 2.13.09 @ 11:07PM
having written all the half-drivel i've written, the reason for it is i really doubt progress altogether.
we cant do without progress because then the other nations will... we'll you know what they will do.
but my doubts are more spiritually than environmentally derived.
Alan Brooks| 2.13.09 @ 11:22PM
...construction and progress to WHAT?
dan| 2.14.09 @ 5:52PM
As a resident and driver in the Boston area, we were burdened with 20 years od detours for this project. It has cost increased tolls on bridges. tunnels and turnpikes with price increases on Mass transit trains and buses. The citizens are left with shoddy work ,major inconvenience and the politicians go right on with no accountability. And for those like myself who drive overnight, the tunnel and the highway is often closed down or has restricted lanes. The politicians will tell you that this is progress and they are right, my grandchildren will be paying for this.
Karcarius| 2.15.09 @ 9:39AM
This reminds me of the light-rail project in Charlotte NC that was proposed to cost $1 billion and ended up costing(last time I heard)over $9 billion.
Howard| 2.15.09 @ 2:52PM
I also live in Massachusetts. Once factor to consider in this state is what I call the sieve factor. That represent the amount of stimulus money that actually goes into bricks and mortar. because in the very "Blue State", the graft that politicians, unions, and lobbyists take will diminish the actual amount spent by a large factor. And of course to criticize any of that here, means that you are against the "working man". So, I assume in this state, the billion or so to be received will result in about 50 potholes fixed, hundreds of new toll takers employed, and many new Cadillac's purchased by various parasites. It may be good for Detroit however.
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mrEthiopian| 4.27.09 @ 4:11PM
Bush spend 8 years driving this country into the ground and you want to blame it all on our current president, this is why republican are no longer in control and never will be again, you people are delusional.
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