Over Labor Day weekend, President Obama announced his plan for a new infrastructure reform plan. It is expected to cost around $50 billion and with the economy continuing to struggle Obama has pitched the proposal as a job creation package. However, many experts have suggested that it might have the opposite effect. The full contents of the plan have not yet been released. However, based on the information currently available, I have put together the following article so we may all become familiar with the President’s new stimulus plan.
At “Laborfest” in Milwaukee the President Obama first announced his proposal for the $50 billion infrastructure plan. He specifically called the plan a "permanent policy change" rather than a quick fix for a big problem.
“We used to have the best infrastructure in the world and we can have it again,” Obama announced. “We want to change the way Washington spends your tax dollars; we want to reform the way we fund and maintain our infrastructure to focus less on wasteful earmarks and outdated formulas, and we want competition and innovation that gives us the best bang for the buck."
Roads, Railroads and Job Creation
The main idea behind this infrastructure plan is to do what its name implies: build and repair infrastructure. Obama’s plan aims to build 150,000 miles of new road, 4,000 miles of railroad, and 150 miles of runway. It would also work on establishing a next generation air traffic control system. Director of Transportation of America, James Corless, has come out in strong support of the plan. He said the American Society of Civil Engineers regularly gives our country's infrastructure "grades that parents would punish their children for bringing home."
Although many members of Congress agree that our infrastructure needs improvement, many disagree with the President’s new proposal. John Mica, the ranking Republican on the House Transportation and Infrastructure Committee, has already spoken out against Obama’s plan. He asserts that nearly two-thirds of the money allocated for infrastructure projects in the American Recovery and Reinvestment Act of 2009 have still not yet been spent. Mica has suggested working with the White House on a plan to use this money, and also warns that members of Congress are likely to be dubious about a massive spending bill this close to the November elections.
The main selling point of Obama’s proposal is the jobs it would create. However, economists are unsure about the number of new jobs the plan would actually generate. Goldman Sachs economist Jan Hatzius has claimed the proposal "could be helpful,” but is “unlikely to have a large effect on growth." The White House itself has even admitted that the plan would do little to create any jobs until later in 2011. There are also concerns that some tax changes to fund the bill would have a negative affect on the unemployment problem in the country.
Although it will be Congresses job to decide how to fund the legislation, President Obama has suggested closing tax loopholes to pay for the proposal. Specifically, they would like to eliminate the manufacturing tax deduction, and the depletion allowance for oil and gas companies. It is unclear at this point if these proposed changes would cover the full cost of the legislation or not.
Effect on Businesses
While the plan pushes job creation, some opponents believe it could negatively affect businesses, and cause additional job losses. Economists worry that closing certain business tax loopholes could lower revenue, and force some businesses to cut back on expenses, or lay off workers. However, supporters of Obama’s plan explain that highway spending is scheduled to decrease by 5% in the next year, and the infrastructure proposal would both save, and create thousands of construction jobs.
National Infrastructure Bank