$1 of Highway Spending Creates $2 of Economic Activity

Economists at the Federal Reserve Bank of San Francisco studied the effects of unexpected grants to states for Federal-Aid Highways affected gross state product (GSP, or the gross domestic product (GDP) of a state).  They found that an unexpected $1 increase in federal highway grants to a state resulted in a $2 increase in GSP.  The economic effect was double the amount of the grant.  In the short term, effects on GSP were even greater.

You can read the unpublished paper here→ or read a summary here→.  Additional posts and articles related to the impact of infrastructure investment include:

American Infrastructure: An Expense We Need to Pay (Infrastructure Watch, Nov. 1, 2012)

Invest in Water Infrastructure (Infrastructure Watch, Sept. 13, 2012)

STUDY: Every $1 Of Infrastructure Spending Boosts The Economy By $2 (Kawa, L., Business Insider, Nov. 3, 2012)

In Congress

Balancing Act

The Balancing Act (H.R. 505) has been referred to several committees of the House of Representatives. The bill is intended to delay sequestrations, improve efficiency, reduce tax loopholes, and extend some programs. Some of the infrastructure related highlights of the bill include

-elimination of several tax breaks related to fossil fuels,

-immediate appropriations for air and surface transportation,

-create an infrastructure bank called the American Infrastructure Financing Authority,

-extending certain tax exemptions on bonds.

If Congress would like to put this blogger to work, it should end this ongoing threat of sequestration and agree on a budget.

Congressional Budget Office Releases 4Q2012 Recover Act Report

The Congressional Budget Office (CBO) released a report on the economic impact of the American Reinvestment and Recovery Act (ARRA) for the last quarter of 2012. During that period, ARRA funded 113,000 full-time-equivalent jobs (FTEs), though this figure does not necessarily correlate to increased jobs in the economy. CBO estimates the economic impacts for the reporting quarter to be

-0.1 to 0.6 percent increase in gross domestic product (GDP),

-0.1 to 0.4 percentage point decrease in unemployment, and

-increased the number of people employed by between 0.1 million and 0.8 million.

Fix It First

President Barack Obama’s Fix-It-First proposal has received some fairly gentile criticism from House Transportation and Infrastructure Chairman Bill Shuster (PA). The plan would provide an additional appropriation of $50 million to transportation projects ($40 million to transportation programs and $10 million to capitalize an infrastructure bank). Rep. Shuster says the proposal fails to address the long-term issue of transportation funding. Current transportation funding sources bring in $35 billion annually, but Congress has approved spending of more than $50 billion annually. You can read more about this issue at The Hill.