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How to Create 7 Million New Jobs

Job Losses
Job Losses

Another hit in the gut today for those Americans without a job.

The Labor Department released its latest figures and the numbers are bad-really bad.

Employers slashed 263,000jobs in September - that's way deeper than expected - pushing the nation's unemployment rate to 9.8 percent.

That's the highest it's been since June 1983. All this bad news only fuels those fears that the weak labor market might undermine any economic recovery.

Today, a guest blog from Pat Choate author of "Saving Capitalism: Keeping America Strong" on how to get Americans back to work.

How to Create 7 Million New Jobs by Pat Choate

Guest Author Blog
Guest Author Blog

The toughest economic problem that the Obama administration faces is figuring out how to create enough new jobs for America’s 27 million unemployed workers.

A jump-start to solving this problem would be to make a massive national investment in the repair, rehabilitation and expansion of America’s public infrastructure – the facilities that provide safety, fire protection, communications, transportation, water and sewage treatment and other basic services in all American communities.

Saving_Capitalism.jpg
Saving Capitalism

Because the U.S. has significantly under-invested in such domestic civil works for 30 years, most of the facilities are wearing out faster than they are being repaired or replaced. The American Society of Civil Engineers estimates the U.S. now has a backlog of more than $2.2 trillion in infrastructure investment that it needs to make between 2009 and 2013 just to maintain present levels of service, let alone provide for the future requirements of a growing nation.

Investing money in rebuilding and improving the deteriorated public infrastructure offers proven ways to get the American economy moving again. It will create millions of new jobs, revitalize manufacturing and help put federal budgeting on a sound foundation. To capture these opportunities, two major actions are required in Washington.

First, the federal government needs to create a “national capital budget” that publicly sets long- and short-term investment priorities, provides budget projections for major federal capital investment programs, shows the relationship of these needs to policy objectives, assists state and local governments plan for their major capital investments and improves legislative oversight over federal public works expenditures. This public transparency is the enemy of “earmarked” projects and wasteful boondoggles, such as Alaska’s infamous bridge to nowhere. All state governments and major corporations have such long-term capital budgets that distinguish between expenditures for annual operations and expenditures for long-term physical investments. The federal government does not. This is an elementary accounting method the federal government has yet to accept in its budgeting.

Second, the federal government will need to create a National Infrastructure Bank that can arrange the massive financing required for such an effort. This bank would work closely with federal, state and local governments to arrange sound financing. Also, it would help put into place controls to guarantee that provisions are made for the future service, repair and rehabilitation of the infrastructure facilities to assure their long-term life for many generations of use. For example, the Brooklyn Bridge, a beneficiary of full-life servicing which keeps it in good repair, is now more than 126 years old and carrying more loads than ever. In contrast, the U.S. Department of Transportation reports that another 151,000 bridges are so poorly maintained, too weak or out-of-date to function properly. Most require major rehabilitation or replacement.

As to the jobs potential, Moody’s Economy estimates that the fiscal stimulus of a massive infrastructure program would produce $1.59 of benefit for every dollar invested, a substantial return by any measure.

Dave Swenson, a research scientist at Iowa State University’s Department of Economics, has maintained an input-output model of the Iowa economy since the early 1990s. In March 2009 Swenson, reporting on the jobs federal stimulus investments in infrastructure would create in Iowa, concluded that for every 100 new jobs that were created building roads, bridges and other infrastructure, another 62 related positions would be generated in other industries such as cement, steel, controls, transport and business services. Swenson also calculated that every 100 new jobs in infrastructure maintenance and repair-related activities would create another 56 jobs in supporting fields.

Translated into dollar-related terms, these models reveal substantial potential for job creation through infrastructure investment. Assuming the U.S. in general has numbers roughly similar to Iowa’s, each $1 billion of investment in new infrastructure construction will create 15,000 jobs and each $1 billion investment in infrastructure repair and maintenance will create 17,400.

We currently have no details on how state and local governments are dividing the federal infrastructure funds they received from the federal stimulus package (The American Recovery and Reinvestment Act of 2009). A reasonable assumption is they are dividing it evenly between new construction and repairs/maintenance, thereby creating approximately 16,000 new jobs for every $1 billion expended on infrastructure.

These monies ripple through the economy. About one-third of the funds go for wages and salaries of workers and executives. About 7 percent go to lumber products, while another 7 percent are for stone, clay and glass. Heating, plumbing and structural metal industries receive more than 8 percent and business services such as transport, insurance, accounting and legal services will share another 6 percent. The steel, concrete, equipment and other materials industries will get more than 21 percent.

Thinking in grand terms, as is appropriate, America should mount a 5-year effort to eliminate the entire $2.2 trillion infrastructure backlog. In 2009 dollars this would require an investment of $440 billion for each of the next 5 years, which would create 7 million new jobs for the period. Of these, 4.6 million would be construction-related and 2.4 million would be in manufacturing and support industries. Once completed, the nation will have the benefits of the new and rehabilitated facilities for decades.

A massive rebuilding program of such audacity would be comparable to construction of the Interstate Highway System, the largest infrastructure project in world history. That project created millions of new jobs throughout the nation and underpinned decades of economic growth. So too can this one.

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Pat Choate
Pat Choate
Pat Choate

Pat Choate is author of SAVING CAPITALISM: Keeping America Strong

Pat Choate - a political economist, think tank strategist, policy analyst, and author - studies U.S. competitiveness and public policy. He directs a Washington-based policy institute, the Manufacturing Policy Project, and teaches Advanced Issues Management at George Washington University's Graduate School of Political Management. Pat Choate also co-hosts the nationally syndicated weekly radio program "The Week Ahead." Dr. Choate has held several positions in the U.S. Department of Commerce, the Office of Management and Budget, and in the governments of Tennessee and Oklahoma. In 1996 he was the Reform Party Vice President candidate, the running-mate of H. Ross Perot.