The Real Take Away from the Stimulus Plan

Via Orphan Road, I read this post from Matthew Yglesias about having realistic expectations for what a stimulus package do. My response below the fold.

Obama's economic stimulus at union station #inaug09

Obama memorablia in Union Station, from flickr users baratunde.

Mr Yglesias:

It’s important to recall that infrastructure spending in the stimulus package is limited—and appropriately so—by the quantity of genuinely useful projects that it’s possible to move forward with. You don’t want to build misguided projects, or just promise things that can’t actually be delivered. Dave Alpert notes that the volume of transportation funding appears to fall short of some categories of identified backlogs. But even here there’s a need to exercise caution. Many items of backlog lists would, in fact, need to go through years worth of environmental review and so forth before you could actually build them. And the incentive structure that exists when compiling these lists militates in the direction of governors and others overestimated the volume of projects in need of funding.

This argument falls flat when you compare the $2.1 billion in the draft bill for the stimulus package and the amount of money in projects already approved for new starts by the FTA. Just last week, U-Link got final approval from the FTA for $813 million, and there are another $14 billion in approved projects that the FTA is on the hook for funding. These projects already passed the FTA’s approval process, so they are certainly “genuinely useful” by the FTA’s existing definitions.

You might say, well if they are already getting money, then what’s the point in awarding it in the stimulus? Currently the FTA gives the money in installments, and awarded about $1.14 billion last year in capital project funds. While it’s true that not all of them will have their start dates or finish dates moved forward by getting the FTA grants upfront but many of these projects could be started in the next two years, and the point of the stimulus is to get people back to work right in the next two yearsby giving this FTA money up front. I know San Francisco’s Central Subway is waiting for money to begin, and if Sound Transit got that $813 million tomorrow rather than in installments over the next eight years, it could start and finish University Link more quickly. I can’t guarantee it, but I bet one of the reasons Rapid Ride doesn’t open until 2010 or 2011 is that King County doesn’t have the money to start construction right now. So the “there’s not enough good projects read right now” argument has no truth to it.

The second argument Mr Yglesias makes is that you can’t expect the stimulus program to change the way we make transportation investments overnight:

Last but by no means least, it’s important not to let stimulus-mania crowd out all other considerations. It was true that America’s infrastructure policy needed a serious overhaul before this economic crisis hit. And it will continue to be true that the way infrastructure spending works in the United States is screwed up and in need of reform. Barack Obama had proposals for addressing these issues before the interest in a stimulus bill came around. As it happens, I think he had some pretty good ideas. And ultimately this is where the real action is going to be—not in terms of what is and isn’t in the stimulus package, but what kinds of enduring reforms does his administration bring about. For example, the stimulus proposal currently offers $30 billion for roads and $10 billion for rail and transit. That’s not the ratio of my dreams, but it’s a much better ratio than is reflected in current spending priorities.

…In the short-run—i.e., in the stimulus time frame—there’s only so much change of priorities that it’s feasible to do. But in the longer run, priorities can be shifted much more dramatically. This is a very big deal and in some ways where the real action will be in terms of whether or not we see a national shift in priorities.

There are a lot of problems with the FTA, and the ratio is sort of a smaller one. I understand the FTA isn’t going to go from an 4:1 highway:transit ratio – which is what we have now - to something like a 1:1 or a 1:5 ratio, really, ever. Partly this is because roads projects cost so much more, and partly this is because much of where our nation’s population doesn’t live in the sort of places where transit is useful or cost effective. The ratio isn’t as important as the absolute number. If the feds would go from spending $1.14 billion a year on capital projects to even $3 billion, I’d be happy with 4:1, and ecstatic with 3:1. FTA also needs to simplify it’s review process, but that’s a topic for a different post.

Fine, fine, we can’t get more money for transportation transit construction out of a stimulus package than $2.1 billion, whatever. But do we really think that the president that puts $275~$300 billion in tax cuts for his stimulus program to be or appear bipartisan and puts someone with no obvious transportation interest and a dodgy record into the head FTA position, again, to be or seem bipartisan is going to fight to change the way the feds do transportation investments? I don’t think so, not unless he can do it in a bipartisan way. Only time will tell, and I would love to be wrong, but I get the feeling that Mr Obama doesn’t see transportation – transit or highways – as a priority.

Well, I’m still optimistic at Barack Obama on many other issues, and beyond excited that Bush’s last day is tomorrow. Anyone doing anything fun for the inauguration tomorrow?




Comments

  1. The FTA can’t simplify the process until there is a lot more money in the program. The reason for the tough standards is because there isn’t enough money for all the projects that want to go, so we’re stuck with a cost effectiveness index that all of the opposition groups use against every project that doesn’t work, which is unreasonably high because of the process. Only the strongest survive, which should be projects that are funded above and beyond the FTA process because they are so good. If roads went through this process, many if not most of them would certainly fail. Especially when economic development is eventually inputted into the process.

    When I saw Matt’s post, I thought the same thing. The reason being there are so many projects out there and the time frames are so off because of this administration. An extra $2 billion is chump change. There are $250 billion in projects out there. Less than 1% is a joke.

    • Andrew Smith says:

      Right. The process is there because they can’t give every project money. In order to really make a change, they would have to give more projects more money.

  2. Where are the free-marketers now? This stimulus money is NOT from highway fuel tax. NONE of it should go to a profit-making auto and oil company subsidy, which is what new road building would be. In the U.S. public transit is NOT “subsidized” It does not favor a specific private sector. Public Transit is a public investment that benefits ALL, just as does public education.

    • What is meant exactly by the statement that “public transit is NOT ‘subsidized’”? If that were true, then we would not need local taxes to pay the capital investment cost and operating cost of the transit providers. It is strange that in biggest capitalist country in the world where free market is supposed to rule that the most transit systems are directly run and subsidized by local governments.

      • John Jensen says:

        He explained in his comment that he doesn’t believe it’s a subsidization because it doesn’t favor a particular private sector. Just as many people wouldn’t call public education “subsidized.” I don’t know if I agree with that conclusion, but there you go.

        In terms of transit systems being run and funded by local governments, you’d be very hard pressed to find any sort of transportation system in the world — air, roads, or transit — that is free of government funding. Specifically, in terms of cars, there are large social costs to the dependence on fossil fuels: Pollution, trade deficits, dealing with unscrupulous governments, etc. Even without those fuels, the size of cars can/do have a significant impact on the culture of a city and the health of individuals. The economic benefits of transit are very impressive, just as with highways. The reason neither has been able to be funded by the private sector is that those economic benefits are distributed and indirect. In other words, one would have to own the city of Seattle itself to directly benefit economically from building a transit network or a highway through it. And that means the private sector, unable to completely own an entire city, cannot justify the capital and operating costs of a transportation project.

        The public, of course, does “own” the city of Seattle which is why public investments in transit and transportation in general make economic sense. We tax ourselves to build transportation that will bring future economic prosperity to our region.

  3. The majority of our population DOES live in urban areas, where transit is certainly cost effective.

    • Transit is actually cost effective even in small metro areas. In fact, it can actually be more productive in a rider/dollar spent sense because small areas are also physically small, meaning that origins and destinations are, by definition closer together. I went to college in Bellingham (80,000 city, 150,000 metro) and we had several bus routes that were very productive.

      Grade separated fixed guideway transit may not be cost effective in these areas, but bus service certainly can be, as can BRT. Imagine what would have happened if we had built light rail in Seattle BEFORE we became a metro area of 3 million. Imagine if we had built a subway back when we were 500,000 (total metro area). The transit could have shaped land use patterns. We would have grown in a much more compact manner, more like New York and less like LA, which would have made the transit that much more effective and much, much cheaper overall.

      The point is, don’t discount the small areas. Transit works in a lot more places than one might think and it is critical to invest in small, but growing areas before the sprawl takes over rather than try to backfill afterward like we are in Seattle.

      • majority of our population DOES live in urban areas
        The majority live in urban areas, but not in urban areas that are have sufficient density to support cost-effective transit (in the format it is currently offered).

        Imagine what would have happened if we had built light rail in Seattle BEFORE we became a metro …
        They did, and then they ripped it out or let it be abandoned when a newer, snazzier way of travel was presented.

        Building infrastructure for public transit without regulations and encouragement on the land-use side of the equation will never work in the long run. Build the infrastructure, zone the land, provide some reason for developers to build stuff that will support the public transit option and encourage people to move there.

      • Chris Stefan says:

        They did, and then they ripped it out or let it be abandoned when a newer, snazzier way of travel was presented.

        Indeed. In fact much of the settlement pattern of the area was influenced by cable cars, streetcars, interurbans, railroads, and passenger ferries. Even if today those modes are long gone.

        But then this is true of most American cities with the exception of the few that went from small towns to major cities in the auto age.

      • John Thacker says:

        Building infrastructure for public transit without regulations and encouragement on the land-use side of the equation will never work in the long run. Build the infrastructure, zone the land, provide some reason for developers to build stuff that will support the public transit option and encourage people to move there.

        Perhaps, but in most places the regulation and zoning do everything possible to discourage density and increase sprawl. Take Roosevelt, as I know some people who live there. The community is very happy to have the upcoming North Link station, but the community association has still been fighting tooth and nail against all condo projects designed to take advantage of the station by increasing density. They consider any more five or more story buildings (like Dwell) to be changing the character of the neighborhood– and the zoning agrees with them.

        In most places in this country, regulation and zoning increase sprawl, because most residents tend to like their neighborhood the way it was when they moved there. Zoning gives them the power to stop changes, including extra density. I’ve seen plenty of people fight density, and even do it while appropriating the names “smart growth” or “managed growth.” To them, preventing too much density is “managing” it. The end result is that the easiest place to build is out in rural areas, increasing sprawl. (That’s certainly the case in the DC area as well.)

      • Chris Stefan says:

        In any place you are going to have some people who either can’t drive or can’t afford to. Unless an area is so depopulated and spread out that even a minimal DART service doesn’t make sense most places should have at least some sort of transit service.

        The flip side of course is unless there is traffic congestion, parking issues, or a large metro area commuter market that can be served; ridership will remain primarily the elderly, the young, the disabled, and in some areas tourists.

      • I want to support Tony’s comment. There was a time when the majority of people didn’t own cars – anywhere. Most of them didn’t own horses, either. How did they get around in rural areas? By train, by informal ridesharing, by bus/stagecoach/horsecar/wagon, and by walking. Millions of people still do just fine in rural areas around the world by these means.

        Rural transit can be useful, cost-effective and even profitable as long as it doesn’t have to compete with heavily subsidized private cars.

      • Andrew Smith says:

        That’s probably true, but the gov’t does love to subsidize them.

      • John Thacker says:

        That’s probably true, but the gov’t does love to subsidize them.

        Not as much as transit, rail, and air travel. Please find what part of the historical government statistics you disagree with. The idea that roads and cars are heavily subsidized, particularly on a per passenger basis, is unsupported by any study I’ve read, and I’ve read a lot.

        Please provide a link to an academic study that comes to a different conclusion.

        Now, transit may have enough social benefits to justify its subsidy; that’s a different matter.

      • Andrew Smith says:

        There are a number of problems interpretting that link (which isn’t a study, btw)
        1) That’s highway spending by the feds. Not roadway spending by all government. You must surely understand that. The local street in front of your house was obviously not paid for by federal dollars.
        2) Those numbers begin in 1990, long after the last huge federal highway programs ended.
        3) The feds don’t pay for upkeep for roads, just new construction.

        You have a study shows what the FTA does with gas tax money. It takes some of it and spends it on transit, and spends the rest on roads. Thus it looks like the FTA subsidizes transit and the roads are paid for by user fees. Except you are looking at a very small amount of roads expenditures, as the states pay far more than feds do.

    • Andrew Smith says:

      The majority of our population DOES live in urban areas, where transit is certainly cost effective.

      That’s sort of true, by that definition Sammamish and Auburn are urban areas. Certain transit is cost effective even there, but not the sort of transit projects funded by New Starts.

      A subway in auburn or sammamish is certainly not cost effective.

  4. Given the size of the stimulus package that is being proposed, it is ridiculous that the portion being directed to public transit is so small. It’s really nothing more than an afterthought. When you consider 1) the stimulus effect of one dollar spent on infrastructure projects compared to a dollar of tax cuts, 2) the huge backlog of projects that exist, 3) how these projects will benefit their users for decades after they are completed, and 4) that nearly all of the transit projects will also help address climate change, you have to conclude that transit projects need to be a significant part of the stimulus package.

    The tax cuts, in particular, seem like a very bad idea. What happens when it is time for the tax cuts to expire? There will be tremendous pressure for the cuts to be extended and/or made permanent. The Republicans will accuse Obama of raising taxes.

    But Obama is more interested in bipartisanship than good legislation (actually it’s probably more accurate to say that for him bipartisan legislation is by definition good legislation). He’s not interested in bipartisanship as a way to acheive his legislative goals — he’s interested in bipartisanship as a goal in itself. So we should get used to four years of giving Republicans what they want before negotiations even begin.

    I’m adjusting my expectations accordingly.

    How does one even do transportation investments (assuming you mean something other than highways) in a bipartisan way? I think we’re seeing how that will work — $1 for transit, $200 in business tax cuts…

    • Andrew Smith says:

      It’s not actually a tax cut but instead a “tax credit” which is a one-time payout whether or not you paid the tax or not.

      Yeah I think you may be right about the way the payoff would work.

  5. Mike Skehan says:

    The sad thing about the stimulus funding process to date, is that pro environment and energy policy criteria have been pretty much cast aside in favor of business as ussual.
    Each city and county have submitted their shopping list of ‘unfunded’ projects to the state, which in turn added their favorites, and sent it all off to the state delegation for inclusion in the ‘list’. Each state gets a percentage of the big pie, and the pie is further cut up at the state level.
    This whole process is starting to smell pretty crummy.
    What happened to “Change” I voted for?

  6. There are big risks with the stimulus – I’m not expecting much from round 1, round 2 needs to be a whole lot better.

    The toughest thing to do now is to establish a development path for IVS, probably on a two lane HOT lane type of approach – though first round roll out might well be in the bus tunnel downtown – between buses and rail.

    The advantages of HOV and BRT types of improvements is not only political – these approaches give you more freedom down the road, as it were. You are NOT locked into a single source technology as recent history has shown us leads to cost problems.

    • Matt the Engineer says:

      (sorry to beat on a long dead horse)
      “You are NOT locked into a single source technology” Aren’t you locked into buses? How is this better than being locked into trains?

    • Chris Stefan says:

      Rail is no more “single source” than buses.

      The cost of rail lines seldom has much to do with the rails or vehicles and more to do with the general desire when rail is planned to provide an exclusive or semi-exclusive alignment. These same constraints apply to BRT for similar amounts of grade separation. The amount of grade separation in a rail or BRT project is generally driven by the desired travel times and headways.

  7. I continue to be disappointed in Obama’s transportation policy and the stimulus package in particular. My hope is that Congressional Democrats will be able to add more for mass transit. This is a case where we’ll have to lead and Obama will have to follow, because it’s clear that transit is not a priority for him.

    • Andrew Smith says:

      The senate may, in fact, do just that. They nearly always have a different attitude toward transportation and spending from the house.

      • Chris Stefan says:

        The bill hasn’t passed the House yet so there may be changes there, especially considering both Rep. Oberstar and Rep. DeFazio are unhappy about the amount of infrastructure spending.

        I’d strongly suggest writing your Representative and both Sen. Murray and Sen. Cantwell about the amount of transit spending in the bill as it stands. You may want to mention some of the local projects that are “shovel ready” and could benefit from stimulus money.

  8. UMTA2.

    Someone needs to do it.

    • Matt the Engineer says:

      The second convention of the Utah Music Teachers Association? How will that help?

      (seriously. WUAaBTFH: we use acronyms a bit too freely here)

    • Andrew Smith says:

      I think he meant ITMFA, right?

      Oh well, we may never get great federal support for transit, but at least we’ll get:
      1) a closed gitmo
      2) a chance at health care reform
      3) an end to the Iraq war
      4) a foreign policy that makes some sense.
      5) a president that is able to make a nuanced position that most americans can agree with

      Even the transportation stuff is an improvement over GWB, so we should overall be pretty happy.

      • We will NEVER have a foreign policy that makes sense until we end consumer demand for goods that are only produced in other countries eg) electric cars and mass transit.

  9. I have written to Maria Cantwell, who is on the committee that will hold LaHood’s confirmation hearing on Wednesday. Anyone who has similar concerns, please also write her:

    “Dear Senator Cantwell,

    I am concerned that President Obama’s appointment of Ray LaHood as Secretary of Transportation demonstrates a lack of commitment on the President’s part to addressing the urgent need to reduce our carbon emissions; transportation accounts for–by far–the greatest carbon dioxide emissions of any U.S. sector (nearly as much as residential and commercial emissions combined). http://www.eia.doe.gov/oiaf/1605/ggrpt/carbon.html

    Failure to reduce our transportation-related carbon emissions dramatically is likely to paralyze any attempt to forestall climate change.

    We need to know Representative LaHood’s position on the human contribution to climate change, and his position on vigorously supporting initiatives that will help significantly and quickly reduce carbon emissions in the transportation sector.

    As Secretary of Transportation, he would be in charge of the Federal Transit Administration. How committed is he to supporting and expanding public transportation systems?

    The Passenger Rail Investment and Improvement Act of 2008, Public Law 110-432 (October 16, 2008), requires the Secretary of Transportation to “issue a request for proposals for projects for the financing, design, construction, operation, and maintenance of a high-speed intercity passenger rail system operating within either the Northeast Corridor or a Federally designated high-speed rail (HSR) corridor.” How committed is Mr. LaHood to supporting high-speed intercity passenger rail systems?

    The DOT Center for Climate Change and Environmental Forecasting, “creates comprehensive and multi-modal approaches to reduce transportation-related greenhouse gases”. How committed is Mr. LaHood to these approaches?

    Please use your opportunity to elicit this information from Mr. LaHood in his confirmation hearing.”

    • Mike Skehan says:

      The Pacific Northwest “Cascade” corridor is one of only 6 (I think) High Speed corridors designated by Dept. of Transportation. I Hope Senator Cantwell is aware of that, and presses the issue. If the time for investment in HSR is not now, then when?

      • John Thacker says:

        The Pacific Northwest “Cascade” corridor is one of only 6 (I think) High Speed corridors designated by Dept. of Transportation.

        Nope. It used to be 6, and Cascade was one of the first 6. There’s now 11, though. That’s because everyone wants a slice of the transportation funds, and so everybody’s going to fight to get their own areas designated a corridor. Politics– the same reason that Amtrak has difficulty dropping empty, inefficient routes (like Minneapolis to Seattle) and concentrate on upgrading the really promising ones (like Cascades).

        Upgrading 100 to 500 mile intercity rail would be considerably cheaper than putting in most mass transit projects. The Cascades corridor could be upgrades to high speed operation (technically– not talking about 200 mph, but at least 110 mph throughout and eliminating bottlenecks which really kill you) for less than the cost of the light rail, that’s for sure. But transit has somewhat better funding than intercity rail.

      • John Thacker says:

        See for example that in the stimulus bill (link to HTML searchable text), there’s $300,000,000 for capital projects for intercity rail and $800,000,000 for capital and debt service to Amtrak, for a total of $1.1 billion to the FRA, but the total to the FTA for transit is $9 billion.

        If you look at the Long Range Plan for Amtrak Cascades, you’ll see that the total cost over twenty years of capital improvements is around $6 billion. But that money hasn’t been forthcoming the way that the Link Light Rail money has been, despite the projected farebox recovery numbers (of up to 99% with full Cascades improvements.)

  10. Actually, I will not be satisfied until there is no money for roads in the federal budget. We have built enough roads. In fact, the chances are pretty good that we have built way too many roads, if experience is any guide.

    At one peak of the railroad experience, during WW I, we discovered that America had absent-mindedly built about 60,000 miles of excess trackage. With screams of “Don’t throw me in that brier patch” the railroads breathed great sighs of relief as the trackage was pruned.

    Maybe there were good reasons for the federal involvement in building the interstates. Those highways have been built and what we’re talking about now is building and repairing highways to deal with the problems caused by the original highway construction.

    Using inflation-adjusted figures, gasoline was at its absolute cheapest in about 1953. IOW, we’re talking about a transportation system planned in a time that will never happen again.

    Anyone who drives the roads can see the system is abused. For example, I-5 south to Portland is almost bumper-to-bumper semi-rigs paralleling a railroad. That’s just nuts.

    The only real excuse for federal involvement is to introduce order and intelligence, and solve large problems or those that cross state lines. If the feds should do anything about the interstates, it should be to muscle the truck and commuter traffic off the roads.

    How we get from here to there I can’t say exactly, but I think the future holds some very strong incentives for us to do so.

    • John Thacker says:

      If the feds should do anything about the interstates, it should be to muscle the truck and commuter traffic off the roads.

      Those are hard things to do simultaneously. It’s difficult to optimize rails for both freight and commuter traffic simultaneously. That’s a large part of why the New York City area has the smallest percentage of goods hauled by freight rail instead of trucks in the country. (Only 2% east of the Hudson, compared to numbers ranging from 7-14% elsewhere in the country.) That’s also part of why a far greater percentage of goods are carried by trucks instead of freight rail in Europe.

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