Infrastructure Spending: Stimulant Or Depressant?

Remember the fuss about infrastructure spending? In 1991, Congress passed a surface-transportation bill designed to boost federal outlays by $85 billion over five years. And last year, President-to-be Clinton promised to stimulate the economy by raising investment in highways, bridges, airports, and other public works.

In 1993, however, infrastructure spending has actually declined. Economist David Hale of Kemper Financial Services Inc. points out that, so far this year, real outlays for public construction are running 6% below the same period last year. State and local governments' budgetary woes have forced them to cul spending on infrastructure, he explains. And public concern about the deficit and coming tax hikes are leading the Administration and Congress to try to curtail most forms of discretionary spending, including highways.

Because of Capitol Hill's austerity mood, says Hale, infrastructure spending is now in danger of becoming a force that intensifies economic sluggishness rather than fosters faster growth.

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