As lawmakers on Capitol Hill talk about what they want and don’t want to see in an expected economic stimulus package, President-elect Barack Obama is urging them to act as quickly as possible on his still-developing proposal. Obama cautions that if legislators delay, the crisis will only get worse.
“For every day we wait or point fingers or drag our feet, more Americans will lose their jobs,” Obama warned in a Jan. 8 speech. “And our nation will sink deeper into a crisis that, at some point, we may not be able to reverse.”
Democrats won’t meet their earlier goal of having a stimulus bill ready for Obama just after his Jan. 20 inauguration. As the clock ticks on, legislators from both parties are seeking to influence the final product. GOP leaders are talking up tax breaks. Senate Minority Leader Mitch McConnell (R-Ky.) suggested cutting the income tax rate for many individuals to 10%, from 25%. Democrats tend to favor the spending side and reportedly opposed having the package contain a tax credit for companies that hire workers.
“I just think it’s the main train leaving town early, and they want to be on it with whatever issue they have,” says Jay Hansen, National Asphalt Pavement Association vice president for government affairs. “The congressional leadership’s going to have a tough time keeping all this stuff off.”
House Speaker Nancy Pelosi (D-Calif.) said on Jan. 13 Democrats were “making great progress” in drafting a bill. She said committee votes on the measure are planned for the week of Jan. 19.
In the meantime, the recession’s grip remains firm, and construction is feeling the pain. The Bureau of Labor Statistics reported on Jan. 9 that the industry lost 101,000 jobs in December, bringing its total jobs shed to 899,000 since the peak in September 2006. Construction’s unemployment rate also keeps climbing, reaching 15.3% in December, compared with 9.4% a year earlier.
An Associated General Contractors survey, released the day of Obama’s speech, underscores the grim picture: With business dropping off, an estimated two-thirds of nonresidential contractors plan to institute layoffs, totaling about 30% of the current workforce, the survey reported.
AGC’s report also showed downturns either had taken hold or are expected in all major construction sectors, including buildings, highways and utility work. But if the stimulus plan becomes a reality and includes aid for infrastructure projects, AGC said contractors would boost their workforce by 25%.
A National Asphalt Pavement Association survey shows a similar picture, finding that 50% of capacity “is just sitting out there idle,” says Hansen, “A lot of crews are laid off. Half the plants in some states are shut down.”
If a stimulus is approved and money flows to stalled projects, crews could be rehired quickly, Hansen says. “There’s people chomping at the bit to work. So finding a workforce is not going to be a problem once these projects are funded and they can get going.”
A new report by two top Obama economic advisers shows that a stimulus would have big construction benefits. The Jan. 9 study, prepared by Christina Romer, Obama’s choice to chair the Council of Economic Advisers, and Jared Bernstein, chief economist for Vice President-elect Joe Biden, says construction would see the largest gain of any industry under the envisioned stimulus, with an estimated 678,000 jobs created or preserved by the end of 2010. It bases its calculations on a total package of slightly more than $775 billion over two years.
“It’s encouraging to see Obama’s key economic advisers endorsing a package of this size and saying that it would produce such a large number of construction jobs, says Ken Simonson, AGC’s chief economist. “And it’s consistent with what we believe would happen.”
Even so, industry officials still aren’t sure how much of the $775 billion—if that turns out to be the final number—will be allotted to infrastructure. They also don’t know which public-works sectors will be funded.
In his speech, delivered at George Mason University in Virginia, Obama fleshed out the plan more than before. He reiterated that it would include money for highways, school repairs, modernizing federal buildings and boosting alternative-energy production, as well as have tax breaks for individuals. But he did not say how much aid would go to those areas.
Obama said the proposal, which he called the American Recovery and Reinvestment Plan, would seek to double production from alternative-energy sources in three years. “We will modernize more than 75% of federal buildings and improve the energy efficiency of two million American homes, saving consumers and taxpayers billions on our energy bills,” he said, adding that “we’ll put people to work repairing crumbling roads, bridges and schools by eliminating the backlog of well-planned, worthy and needed infrastructure projects.”
In addition, he said the measure will include provisions to start building “a new smart grid that will save us money, protect our power sources from blackout or attack and deliver clean, alternative forms of energy to every corner of our nation.”
Obama again said the stimulus plan would be “free from earmarks and pet projects.” He insisted the plan would not be “just another public-works program,” but would make investments in areas such as education, energy, health care and infrastructure that would provide longer-range benefits to the country.
The President-elect continued to make clear that tax provisions also will be in the proposal, including a $1,000 tax reduction for “95% of working families.” Obama said the plan would extend unemployment insurance and health-care coverage for those who have been laid off.
Responding to entreaties from governors around the country, Obama said, “We’ll help struggling states avoid harmful budget cuts, as long as they take responsibility and use the money to maintain essential services like police, fire, education and health care.”
In looking at Obama’s speech, Stephen E. Sandherr, AGC’s CEO, says, “I think what he’s doing is, he’s obviously trying to build public support for getting something done quickly. My own personal view is that the longer this hangs out there, the tougher it’s going to be to get it done.”