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Not Your Grandfather’s Recovery Plan

For the past several months, the million-dollar question in Washington on the American economy was whether it was in recession. That question has been answered in the affirmative, and was echoed loudly by the December jobs report. That echo will also likely reverberate when the January job numbers are released. Now, the million-dollar question — or, as it appears, the trillion-dollar question — is what to do about it. [IMGCAP(1)]

There seems to be an assumption that the answer to this question must include spending of taxpayer dollars on infrastructure. Some of the chatter might make one believe that it is as simple as replicating President Franklin D. Roosevelt’s New Deal, a program from an era seven decades ago, that even then, according to some intellectual leaders, produced debatable results. But in the 21st century, do we really think people who lost their jobs as refrigerator repairmen or hedge-fund managers will suddenly become steelworkers, asphalt layers or concrete setters overnight and take construction jobs created by a second New Deal? Even if they did, how many jobs would this infrastructure construction spending spree create?

It’s clear America needs a great deal of improvements to its infrastructure, but before we begin pumping a trillion dollars into roads, sewers and broadband lines, let’s be sure that we understand 1. what exactly our overarching goal is, i.e., how many jobs and what types of jobs we want to create, and, 2. just how much we need to spend to create that number and those types of jobs.

Our overarching goal should be to invest wisely to build an environment in which innovation and entrepreneurship can thrive throughout this century and beyond. It should not be to create jobs in the short term by way of a federal spending free-for-all. Not only will this be exorbitantly expensive to the taxpayer, but it also will not help our economy. During my tenure at the U.S. Department of Commerce’s Economic Development Administration, I saw firsthand how some federal community and economic development programs across the government — there are up to 180 programs, depending on how you classify them — provide funding for infrastructure to communities as practically an entitlement for years and years with often little to no impact on creating jobs and spurring economic growth. It is clear that pumping dollars into infrastructure does not automatically equal job creation and economic growth.

However, I also saw that infrastructure spending can create jobs over the longer term if funds are spent wisely. Moreover, wise investments can create not just temporary construction jobs, but higher skill, higher wage jobs that make both our workers and our economy more competitive in the 21st-century worldwide economy. This should be the goal of any stimulus package.

What do I mean by spending wisely? At the EDA, we learned that in order for investments in infrastructure to be effective in creating jobs, they must be part of a comprehensive, well-researched, market-based economic development strategy — not just a panicked spree to create immediate, short-term jobs of an uncertain quality. In order to receive EDA funding, communities are required to collaborate with other communities in their economic region in doing their homework in terms of evaluating what their economic assets are (natural resources, institutions of higher education, etc.) and building strategies to capitalize on those assets.

Looking at what a goal should be for the number and type of jobs created by a stimulus plan, consider this: By funding infrastructure projects that are an integral part of a well-conceived comprehensive economic development strategy, the EDA investments helped create more than 350,000 higher skill, higher wage jobs across the nation since 2004 at a cost to the taxpayer of $2,500 per job. One well-known governor supports the notion that a rule of thumb for government spending on infrastructure is that about 40,000 jobs are created for every $1 billion spent. That translates to about $25,000 per job created. Compared to the EDA’s return on investment, something is not right here. Perhaps the infrastructure spending part of the much-debated stimulus package is not that well thought out. Perhaps some of us are seeing dollar signs instead of carefully thinking through how best to spend hard-earned taxpayer dollars.

We must not forget what we have learned about the 21st-century economy — we are living in a new worldwide marketplace in which old strategies for economic growth no longer apply. Economic growth today is about more than just government spending. It’s about creating an environment in which higher skill, higher wage jobs can be created. Infrastructure is a critically important part of this environment, and there is a role for the federal government in building it. But we must not act in haste in spending taxpayer dollars. Any stimulus plan should not take a shotgun approach of funding “one-off” earmark infrastructure projects, but instead should invest in projects that can be demonstrated as part of an integral strategy for long-term, high-quality job growth.

Matthew E. Crow was the deputy assistant secretary of Commerce for external affairs and communication at the Economic Development Administration under President George W. Bush.

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