Thursday, June 30, 2016

Don't Expect Hillary's Infrastructure Plan to Boost the Economy

Hillary Clinton claims that she has 5 ideas that will fix the economy.  Of course, implying that it needs fixing may be a shock to President Obama who is proud of his managing of it. At the top of her list is to "create jobs with a big government investment in infrastructure."  Thus, she is proposing that, in her first 100 days as President, she would enact a $275 billion infrastructure spending bill.  Apparently on her own; as if Congress would have nothing to say about it.

While $275 billion sounds like a lot of money, it won't create a lot of jobs because most of the money spent on infrastructure goes to materials and land acquisitions, not labor.

According to the Bureau of Labor Statistics, only 316,780 workers are employed in the Highway, Street, and Bridge industry with an annual average wage of $52,750.  But, understand, that wage number is high because it includes executives, managers, and engineers who are paid more than double that amount.  Highway maintenance personnel are only paid, on average, $38,440 a year. Even so, if you do the simple math of multiplying the number of workers by the higher average wage, you will find that, at best, a total of $17 billion goes to wages.

On the other hand, according to the Congressional Budget Office, $416 billion was spent on infrastructure in 2014.  Therefore, the cost of labor represents just 4% of all infrastructure spending.  

The reality is that we do have an infrastructure problem in this country that sorely needs to be dealt with.  Estimates are that between $3 and $4 trillion will be needed to repair our crumbling streets and bridges. However, lets not mislead people into thinking that the repairs will create some type of big jobs program because it won't.  Also understand, that infrastructure projects provide, by design, short term employment that won't sustain the economy.  We have a $17-1/2 trillion economy.  Spending $275 billion over 2 or 3 years is "sofa change" when compared to the big picture.

This is just another example of how Hillary has no idea how to grow the economy.  Another one of her "5 ways" is the increases taxes for the rich.  As if that will result in some kind of an economic boost.  I really have to scratch my head on that one!

References:

Hillary Clinton's 5 ideas to fix the U.S. economy: http://money.cnn.com/2016/06/22/news/economy/hillary-clinton-economy-5-ideas/

Highway, Street, and Bridge industry: http://www.bls.gov/oes/current/naics4_237300.htm

Highway Maintenance Industry: http://www.bls.gov/oes/current/oes474051.htm

Trends in Federal Infrastructure Spending: https://www.americanactionforum.org/research/trends-in-federal-infrastructure-spending/

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