Obama's Billions Game

If the new president is right, America will soon have more employed than unemployed workers. There is ample evidence that infrastructure spending can help, but it can even backfire, if pork-barrel spending and pet projects aren’t meticulously monitored.

During the Great Depression, Roosevelt’s New Deal put 7 million people back to work between 1933 and 1937, building highways, dams and bridges. The US President Obama is proposing at least $150bn to be committed to the infrastructure in the country.

Top of the spending list is physical infrastructure. According to the US Department of Transportation, an estimated 56% of the nation’s roads are in need of serious updates. 26.7% of the country’s bridges are structurally deficient and 13.6% are functionally obsolete. Meanwhile, the US railroad is requiring nearly $200billion in investment over the next 20 years. Likewise, with the US public transit system, which needs even more money and mass transit investments would need to increase by $3.2billion a year just to keep pace with existing needs. In 11 short years, 80% of the locks on the nation’s waterways will be functionally obsolete as well, according to the Army Corps of Engineers. Clearly, the $90billion that has been earmarked for this infrastructure category is just a drop in the bucket compared to what’s needed.

Also, call it ‘the invisible infrastructure’ if you will. The digital highways of today are critical to the economy – so critical that President Obama will appoint the nation’s first-ever ‘chief technology officer’. Between 1995 and 2002, IT was responsible for two-thirds of the growth in the US labour productivity – a huge boost to the country’s GDP. However, it still lags well behind countries like Japan, Singapore, South Korea and 3G cellular networks, even behind China and digital traffic in the US is expected to increase 500% by the year 2020 as demand for multimedia applications increases. The budgeted amount of at least $6billion is just a start.

Obama’s commitment to energy sector is equally large. Not one single refinery or nuclear reactor has been built in the US since 1970s. The electricity demand has increased by about 25% since 1990, construction of transmission facilities has fallen by about 30%. Right now, the 20th century electrical grid is already struggling to keep pace with demand – many US regions see generation shortages on the 10-year horizon. Obama’s proposed $54billion in spending for this category, including for alternative energy, can really be a challenge, if that to be the case to transform the US economy, but nevertheless, it is still a vision for all to move forward.