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Saturday, December 6, 2008

Obama's Infrastructure Plan Is A Road To Nowhere

In his weekly radio address today, Barack Obama repeated his intention to stimulate the economy and "create" jobs through a massive public infrastructure program. As we have noted before, "[o]f all the concepts to help build the economy, Barack Obama has seized on the one type of project -- public infrastructure -- that has the worst history of cost overruns, corruption, construction incompetence, and economic harm."

This bad plan just got worse. A key part of the plan will be a "use it or lose it provision."

“If a state doesn’t act quickly to invest in roads and bridges in their communities, they’ll lose the money.”

Even with the luxury of following normal planning processes, which can take years for large projects, states are incapable of effectively implementing, monitoring and controlling infrastructure construction. The example of the Big Dig is symptomatic of what happens when money is thrown at grand projects.

My home state of Rhode Island is a good example. The Rhode Island Department of Transportation has been the poster child for incompetence, with a $102,858 typist as a result of "paying 'overhead' rates that add anywhere from 65.94 percent to 210 percent to the bills it has been paying private companies for their staff engineers, draftsmen, technicians and typists." The RI DOT failed to do routine concrete testing on a major highway relocation project, despite such testing being a requirement of the federal funding. A contractor on bridge projects has been accused of "ransacking part of the DOT’s computer system used to manage and monitor the DOT’s hundreds of millions of dollars in construction projects."

A small 338-foot bridge project in Barrington, Rhode Island, is not completed despite 10 years of construction. The project has been "plagued by erroneous designs and the subsequent negotiation of costs." The cost of this small project has more than doubled and is ending up costing $40,000 per foot. As reported in the Providence Journal:

One of its current projects is the Barrington Bridge, which has taken so long to build that the DOT has had to repave the temporary bridge next to it twice. The bridge carries traffic on Route 114, a heavily traveled secondary road running up the east side of Narragansett Bay, across the Barrington River.

That project is taking twice as long to build as it was supposed to, and it could cost more than twice as much as its $10.4 million bid price. With the project far behind schedule, the state paid Shire $5.3 million in September 2006 to settle the company’s claim that the DOT caused the delays.

Rhode Island so bungled its transportation infrastructure when times were good, that now that times are bad Rhode Island is considering re-instituting highway tolls, increased license fees, gas tax increases, and even taxing car owners based on miles driven:

[A] new fee is proposed, a vehicle miles traveled fee. This is known in the industry as a VMT tax or mileage fee. The state would impose a flat rate mileage fee on every car registered in Rhode Island. This fee could be variable based on gross vehicle weight. Logistically, drivers report odometer reading biannually when they renew their automobile registrations. Such self-reported odometer readings could be verified in a variety of ways, including as part of already-mandatory auto inspections. A mileage fee is fundamentally fair because it charges drivers according to how much they use the roads.

One notable benefit to a mileage fee would be that of reducing the aggregate number of miles traveled in Rhode Island, thereby reducing greenhouse gas emissions and the emission of other tailpipe pollutants. The fee would be borne entirely by Rhode Islanders, but the burden could be somewhat offset by a toll rate structure which favors frequent users or rebates Rhode Islanders tolls paid on their income tax. It is widely believed among transportation professionals that the gas tax will eventually
become obsolete and be replaced by a mileage fee.
Rhode Island is sinking economically, with the highest unemployment rate in the country due to high taxes, unsustainable union contracts, and an anti-business culture. The inability of the state to oversee infrastructure construction has contributed to these problems, and is set to make the Rhode Island economy even more tax heavy. In Rhode Island, infrastructure construction has been a problem which has wreaked havoc on the economy because of the inability of the state to handle projects currently on the table.

The Obama "use it or lose it" infrastructure construction plan will be a disaster. While throwing federal money at infrastructure construction may ease the burden on states, forcing states to rush into such projects at risk of losing funding will cause even more problems. You simply cannot force projects through a bureaucratic system which is having trouble handling its current workload without precipitating fraud, corruption, and incompetence on a massive scale.

Obama is trying to fit a square peg in a round hole. Infrastructure projects are not a good way to provide short-term stimulus, much less long-term job creation. Obama's infrastructure plan is a road to nowhere.


  1. So true! It will become a money pit with lots of headaches.

  2. Professor,

    It's a valuable service to identify deficiencies in a proposal, to be sure.

    Given the very serious problem our economy is facing, would you be able to recommend any replacement solutions?

    Thank you.

  3. This comment has been removed by a blog administrator.

  4. America needs to get back to work. LiUNA (Laborers’ International Union of North America http://bit.ly/9Y3oTf) estimates 1.5 million men and women in the construction industry are jobless. That's unacceptable, somethings gotta be done.