China's infrastructure programs give a whole new meaning to "bailout" and "shovel ready."In 2007, the U.S. lost its seat to the European Union as the world's largest economy. The EU's economy produced $14.4 trillion in goods and services, while U.S. GDP came in at $13.86 trillion. However, the U.S. still has the largest economy of any single country. The next largest is China, at $7 trillion.
Economists tell us that China should overtake the U.S. by 2025 to be the world’s largest economy and is anticipated to grow to about 130% the size of the U.S. by 2050.
In late 2008, China started to spend hundreds of billions of dollars on infrastructure projects, fearing that widespread joblessness could lead to social unrest.
Their stimulus plan, one of the world’s largest, promises to take China a great leap forward and brings the countryside to the same level as their modern coastal cities, priming China for a new level of global competition.
That same leap took the United States decades — and a world war — to build.
China is furiously pouring concrete and laying high-speed passenger, intercity and freight rail lines. Extra spending is being planned in practically every town, city and county across the country urging local and provincial governments to proceed with their projects because they are, in current U.S. lingo, “shovel ready.”
The combined national, provincial and local spending for economic stimulus promises to change the face of China, giving the country a world-class infrastructure for moving goods and people quickly, cheaply and reliably across great distances. Aside from transportation, most of the rest of China’s national stimulus program will be spent on airports, highways and environmental projects, particularly water treatment plants.
Conversely, the American Recovery and Reinvestment Bill of 2009 is allocating less than 5% of spending for the construction of highways, rail lines and mass transit programs. This was to be the first crucial step in a concerted effort to create and save 3 to 4 million jobs, jump-start our economy, and begin the process of transforming the U.S. for the 21st century.
To truly bring about economic stimulus, we must spend our monies wisely on infrastructure projects that keep us moving forward, not straggling behind and playing catch-up.
Read the full text of the January 23rd New York Times article, “China's Route Forward.”
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3 comments:
To my friends at the Hampton Roads Partnership:
I share your belief that the nation needs to increase spending on infrastructure to remain competitive. However, two comments:
First, the stimulus package was meant to, well, stimulate the economy in the short term. It was essential to put money where it would be spent as quickly as possible - and it has been. The Congressional Budget Office estimates that 75% of the stimulus will be spent by the end of the 2010 federal fiscal year so the package pretty much does what it is supposed to do. Moreover, projects like those that have been on our region's long list of needs take too long to mobilize, even if green-lighted today, to have much of a stimulative effect in the short run.
Second, 5% of $787 billion devoted to transportation is still a very big number and is just a bit smaller than the education spending and more than direct aid to people impacted by the recession (unemployment insurance, etc). Can we really say that another road project is more important than these needs?
I too am frustrated that the region has not addressed its longstanding transportation needs. There is blame to be placed for this situation at the federal, state and local levels. But the stimulus package was never likely to save us from our regional shortsightedness. That's not the fault of the stimulus package - but rather a poor reflection on our region that we need to grasp at any chance, no matter how slim, to find the funds for our critical infrastructure needs.
Bob
I think it is a mistake to over conflate these two admittedly related points.
The stimulus package is indeed intended to provide a short term boost to the economy, but the evaluation of that should not be when the money is spent but what the multiplier of that money is. Infrastructure (not just transportation) has a known and significant short-term multiplier as well as long term benefits. Some of the other items in the package do not seem to be as beneficial to the nation.
The stimulus package was never going to replace the need for a solution to our regional challenges, but it could have slowed some of the bleeding, so to speak. The real issue is that we are now even further behind not just with the projects that have been on the list for almost 15 years but with the world who has taken advantage of the current situation to move themselves further ahead.
Andrew,
When it comes to the economic stimulus package, timing is key. The stimulus is meant, first and foremost, to help lift the economy out of recession. In my previous post I wasn't suggesting that initiatives need to be short lived, just fast acting.
The primary goal of the package was never to permanently realign the country's fundamental economic competitiveness. If some programs can improve long term competitvness and be implemented quickly, it's a nice two-fer. But speed to spend-out takes precedence.
Lastly, regarding your point on multiplier, take a look at these estimates from Mark Zandi of Economy.com. Increasing food stamps has a higher multiplier than infrastructure spending. And people spend them fast.
Spending Increases
==================
Extend Unemployment Insurance Benefits: 1.64
Temporarily Increase Food Stamps: 1.73
Issue General Aid to State Governments: 1.36
Increase Infrastructure Spending: 1.59
Source: Moody's Economy.com
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