The federal stimulus package will send billions of dollars to cities and states in the form of tax cuts, Medicare funds, education spending and construction dollars. But while local governments have a general idea of how much money they will receive, there are still details to be worked out.
A significant portion of President Obama’s 787 billion dollar plan to rebuild the economy involves literally rebuilding the country’s infrastructure. Those are the so-called “shovel-ready” projects such as road repairs and school improvements that mayors and governors outlined for the president last year.
“Any time that you’re investing in your infrastructure, you’re investing in your economy and the society,” says Joe Wise, the business manager for the Greater Louisville Building and Construction Trades Council.
Wise says construction is tied to the health of the economy, and since last year, both have been in decline. He says rebuilding the infrastructure will help reduce jobless numbers.
“Right now if you were to aggregate it across all the trades, I’d say we’re right at 9 or 10 percent unemployment,” says Wise. “A lot of these projects that we’re going to be doing are projects that we probably should have done years ago and we’ve just been waiting to get the money to do and were never able to get around get that money.”
The idea behind the construction spending is that it will stimulate the economy on several levels. People will return to work, paying local, state and federal taxes and buying goods and services from local businesses. Then those businesses can hire more employees, and so on. The increase in consumer spending would ideally create more of a demand for materials and manufactured goods, and for more workers.
“It really doesn’t matter whether it’s for a temporary job or a medium-term job; if we can just somehow get spending started up again, then that should help the economy get back on its feet again,” says Economist John Vahaly.
Vahaly is the chair of the University of Louisville’s Department of Economics. He says the basic idea of stimulating through spending should work…if the money is spent right.
“It’s up to sort of each state and each local government to make the best case it can to the federal authorities on ‘These are the needs that we have that sort of fit the goals of the program,” he says.
“I feel like I’ve been given a thousand piece picture puzzle and they only sent 250 pieces. I didn’t get the box cover so I’m not sure what the end result is going to be,” says Rick Johnstone.
Former Louisville Deputy Mayor Johnstone is now the director of Louisville at Work. The organization is made up of city department heads and elected officials who will oversee stimulus spending in Louisville. Kentucky stands to receive about $3.7 billion from the package, but Johnstone says he’s not sure yet exactly how much of that will come to Louisville.
“It looks like in the formula side – money we’re pretty sure we’re going to get – that there’s going to be something in the $200 million range,” he says. “It could be more.”
And it will likely be more. There are also tens of millions of dollars available through competitive grants that can be used for construction and other projects.
The stimulus funds will only be available for two years. By that point, it’s hoped that the economy will have recovered. There’s talk of yet another stimulus proposal if the current one doesn’t yield the expected results. But economics professor John Vahaly says that shouldn’t be necessary if other steps are taken.
“I personally think it’s probably in the right number, assuming they do something about the ongoing problem of all the bad debt that’s still in the financial system. If they don’t fix that debt problem, more money’s going to have to be spent,” he says.
The Treasury Department is putting together its plan to fix the banking system. Vahaly says without functioning banks, there won’t be construction and home loans, which means there won’t be anything to sustain the jobs created by the current stimulus when the funds run out in two years.