Forget About Hoover Dam and Other Job-Growth Lessons: Ron KlainRon Klain
June 14 (Bloomberg) -- When I worked in the Obama White House, one of my most important assignments was to help oversee implementation of the American Recovery and Reinvestment Act, commonly known as the stimulus. The measure met its major objectives, hitting spending targets on time, keeping down waste and fraud, and surpassing the goal of saving or creating 3 million jobs. Yet it never won favor with the public.
In defending it, the most common question I heard from friends and foes was something like: “Why didn’t you guys just do what FDR did, and build another Hoover Dam?”
Even my administration colleagues sometimes expressed Hoover Dam nostalgia as they grew disappointed that the act’s signature initiatives such as solar and wind power, high-speed rail, a smarter power grid and electric car battery plants failed to rally the public. No one cares about the small projects, I was often told. So why wasn’t the answer to start another mega-project like the Hoover Dam? And why isn’t it the right policy now, with the unemployment rate so stubbornly high?
First, it’s important to understand how small a role giant construction projects played in ending the Great Depression. Millions of Americans were employed by the Works Progress Administration and the Civilian Conservation Corps on scores of discrete projects, including reclaiming land, constructing federal buildings, planting windbreak trees, erecting park lodges and paving park roads. The spectacular mega-endeavors that we now associate with the New Deal were actually a small part of the overall program.
The Hoover Dam, the granddaddy of them all, provided jobs for only 5,200 people at its peak employment level. The Tennessee Valley Authority’s signature Wheeler and Norris dams employed even fewer people, about 4,000 each.
That may sound like a lot, but given that the U.S. lost 1.5 million jobs in the two months before President Barack Obama took office, any such project would barely have made a dent. To employ just the people who lost jobs in those two months -- and not the millions more who lost them before or after -- we would have had to build 300 Hoover Dam-sized projects.
Which brings us to the next point: Who wants that? Yes, the U.S. has a dramatic need to update its infrastructure, with some estimates putting the cost at $2 trillion.
Yet the vast majority of these needs are repairs and improvements to existing roads, bridges, dams and rails -- the kind of projects that we did finance with Recovery Act funds -- each of which creates a relatively small number of jobs, and none of which are head-turning landmark enterprises.
As for dams specifically, though some people may miss the old days, there are many who believe that building more would be harmful to the environment. Indeed, these days, there are probably as many proposals to tear down dams as there are to build new ones.
As a developed country with a mature infrastructure network and a desire to preserve our remaining green space, there are only so many major new dam, road and bridge projects (as opposed to repairing existing ones) that we need. What’s more, major infrastructure projects take years from conception to construction, making them an ill-fitting short-term answer for our employment woes.
There is another reason Hoover Dam nostalgia is misguided: Improvements in technology, equipment and management mean that projects we undertake today create far fewer jobs than projects did in the New Deal era. Endeavors that took hundreds of people in the 1930s are now completed by a few dozen workers using state-of-the-art equipment and techniques.
The most compelling comparison comes from the recently completed Hoover Dam Bypass bridge. For decades, the top of the Hoover Dam was a major roadway, but after the Sept. 11 attacks, planners began an effort to close the dam to traffic, and build a parallel bridge about 1,500 feet to the south.
The 2,000-foot bypass took 10 years and cost $250 million, about half as much (in constant dollars) as the original dam. But the new span employed no more than 1,000 workers at any time, one-fifth the Hoover Dam’s peak level. Great earth-moving machines, sophisticated cranes and precision construction equipment allowed far fewer workers to do the same tasks that were done by scores of laborers with picks and shovels in an earlier era. Modern managers with computer-coordinated schedules moved workers on and off the job on a just-in-time basis that kept staffing levels tight.
This was true of countless Recovery Act programs throughout the country. Taxpayers should be pleased to know that the stimulus program delivered more infrastructure projects, more quickly, at a lower cost, than early projections suggested. But this efficiency meant that these projects often created fewer jobs than one might have imagined.
The very first Recovery Act undertaking was a bridge spanning the Osage River in Missouri, to replace a New Deal era structure from 1933. Desperately needed, the project was a success: finished under budget, ahead of schedule and meeting a serious need. Laudable in every respect, it directly employed 18 workers at its peak.
Our infrastructure needs are real, and improvements in this area are critical to long-term economic growth: good airports, roads, bridges and rails increase our national competitiveness, lower costs of transporting goods and encourage investment.
Yes, infrastructure projects create jobs. But even by the administration’s own estimate, the number of jobs created or saved by $25 billion in Recovery Act spending on roads was a mere 150,000 over a two-year period. That isn’t a trivial number, but it’s hardly a game changer for an economy that needs to create 5 million jobs each year just to keep the unemployment rate constant.
In the short run, more jobs can be created with initiatives like the payroll tax cut the administration is reportedly considering. In January, the administration extended a 2 percentage-point reduction in worker contributions to the tax during 2011. The new proposal would cut employers’ contributions, too, making it easier and cheaper for them to add workers, with an incremental contribution from federal revenue (as opposed to full federal funding for an infrastructure project). In the long run, federal kick-start investments in industries that need time to take off, such as clean cars, wind and solar power, advanced manufacturing, and high speed rail, are more likely to create permanent jobs.
The U.S. needs jobs, and better bridges, roads and dams. But it’s time to let go of the idea that a handful of marquee construction projects, even majestic and lasting ones, can solve our employment problem. Such endeavors alone didn’t bring us out of the Depression in the 1930s, and they won’t end our current predicament.
(Ron Klain is a Bloomberg View columnist. The opinions expressed are his own.)
To contact the writer of this column: Rklain@Bloomberg.net
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