Republican Governors Lobby For Stimulus Legislation

Breaking ranks with their party's Senate leadership, a chorus of Republican governors can be heard in Washington pressing for passage of President Obama's economic stimulus legislation in the Senate. Sarah Palin of Alaska [yes, that Sarah Palin] is meeting over this weekend with Minority Leader Mitch McConnell and other Senators to explain how much her state needs these appropriations. Florida's Charlie Christ has been on the telephone with that state's Congressional delegation, and Jim Douglas of Vermont, who is also Republican Vice Chairman of the National Governor's Association, will be in D.C. Monday, February 2, to deliver that organization's call for Senators to pass the bill promptly.

Three Republican governors have hinted they may not accept the federal appropriations for their states due to "strings" attached to the money. Haley Barbour of Mississippi, Mark Sanford of South Carolina and Bobby Jindal of Louisiana have opposed the legislation, but all three will be hard put to turn down the money once the bill passes and 47 other states start spending the cash and creating high paying construction trade jobs across their borders. Tim Pawlenty of Minnesota put it best, saying "If we are going to go down this path, we are entitled to ask for our share of the money."

President Obama once again used his Saturday morning radio address to press for quick passage of the stimulus bill in the Senate, reminding the nation that this measure may not be the last one required to get the American economy back on sound footing. With white collar unemployment at 4.6% and blue collar unemployment at 11.3%, the working families who elected Obama are feeling the pinch all across the country. The Congressional Budget Office conservatively estimates that as the legislation is now formulated, $525.5 billion would be injected into the economy in the next two years, including the entire $153.3 billion for construction which the law requires to be spent or returned to federal coffers for redistribution within 24 months after the bill is signed into law.

CBO predicts the federal bureaucracy will become clogged up with cash and have trouble pushing so much out into the real world in just two years. Go figure! I predict the demonstrable organizational skills of the Obama team will be brought to bear on that problem, and the profit opportunity of $7.5 billion or more for the construction industry will be absorbed significantly more quickly than the not for profit CBO can presently comprehend.

Senators Still Tinkering With Stimulus Legislation

The Senate's $900 billion version of the stimulus bill will come to the Senate floor for debate next week, and some proposed amendments will be offered there. Senate Budget Committee Chairman Kent Conrad wants top do more about the housing crisis, and is proposing extension of a $7,500.00 tax credit to all home purchasers, not just first time buyers. He may also seek to add mortgage cram down provisions to help homeowners whose houses are now worth less than the balance owed on their mortgages.

Senate Finance Committee member Maria Cantwell might ask for acceleration of the low income housing investment income tax credit from the present 10% each year to 20% per year for the first three years and 5.71 percent for the last seven years. She claims this would cost an additional $1.0 billion, but critics claim it won't produce any new jobs.

Vice President Joe Biden said after the House passed its version of the bill that the Senate could increase the infrastructure spending approved in the House version, and the Senate Committees have already approved addition of a $70 billion patch to the alternative minimum tax. Senator Ben Nelson will likely offer a proposal to cut the income tax on repatriated earnings of foreign subsidiaries from the current 35% to 5.25% .

Meanwhile, Senate Minority Whip Jon Kyle of Arizona, along with Senators Jeff Sessions and Tom Coburn, threatens to "explore" the possibility of a filibuster on the stimulus measure when it comes to the floor, unless Democrats slash spending and increase tax cuts in the bill.

House Passes Recovery And Reinvestment Act

Wednesday, January 28 the House of Representatives passed President Obama's economic stimulus legislation, entitled H.R. 1 The American Recovery And Reinvestment Act, on a roll call vote with 224 Democrats and 0 Republicans voting in favor. So much for bipartisanship. The 224 to 188 vote along party lines is probably a preview of what will happen when the Senate votes next week.

H.R. 1 includes spending of $550 billion and tax relief of $275 billion for a total economic stimulus of $825 billion. At present the Senate bills are still undergoing committee markups, with the likely outcome in the Senate including $515 billion in spending and $375 billion in tax relief, for a total package of $880 billion. The Conference Committee reconciliation version which ultimately goes to President Obama could increase to over a trillion dollars in economic stimulus.

As they now stand, both packages include over $150 billion for the construction industry.

The Senate Appropriations Committee has already reported out its portion of the Senate package, including appropriations of $365.6 billion. The Senate Finance Committee has approved its portion of the package, which has $375 billion in tax cuts, including a $70 billion patch to the alternative minimum tax which the House left out of its version, and expanded spending for unemployment benefits, Medicaid, health insurance for laid off workers, and $18 billion to switch Medicare to electronic recordkeeping.

Amendments may be offered on the Senate floor regarding the distribution of Medicaid payments, and reduction of the bottom two income tax brackets.

Fortunately, it looks like any further changes in the construction appropriations are more likely to be increases rather than decreases.

Laws and Sausages

Bologna, Italy is famous for its law school, and more famous for its sausages. And the folks in Bologna say that it's best for people never to see how either laws or sausages are made. The progress of the economic stimulus legislation through Congress proves them absolutely right.

Senate Appropriations and Finance Committees are busy marking up their versions of the economic stimulus tax and spending bills, and they don't agree on very much with the House version, which will go to the House floor Wednesday afternoon January 28 for a vote. The senate version of the spending part of the package allocates about the same total dollars as the House bill, but distributes it a little differently from the House version. The good news for the construction industry is that total spending for construction projects is about the same in both houses of Congress. And things may get even better. It would not be unheard of for the conference committee which will be formed to reconcile the two versions during the next couple weeks to increase total spending so that each agency gets whichever total is higher between House and Senate appropriations.

If that does happen, the total spending for construction projects will increase from about $153.3 billion up to as much as $168.7 billion.

Without accounting for the ongoing committee markups which will change these totals, the principal differences between House and Senate appropriations for construction look like this:

The Senate version gives $2 billion more for elementary school construction, but takes away $2.5 billion for colleges.

The Senate cuts $450 million from defense energy efficiency projects, but adds $900 million for defense family housing and child care facilities.

The Senate adds $6.3 billion for cleanup of old military bases and weapons production facilities.

The Senate adds $2.5 billion for VA hospitals and medical clinics.

The Senate cuts $3.4 billion from water navigation and flood control projects, and cuts $1.1 billion from drinking water projects.

The Senate cuts $3 billion from highway construction, adding $400 million to public transit construction and $4.5 billion for purchase of light rail and bus rolling stock.

The Senate cuts $1.7 billion from airport construction.
The Senate cuts $400 million from Section 8 housing construction, and cuts $1.6 billion from neighborhood stabilization.

The Senate adds $300 million to Superfund.

It also looks like the Senate version will roll back the Customs and Border Protection directive that lumber, steel and cement suppliers repay anti-dumping finds they received earlier this decade under the Byrd Amendment.

Senate Finance ranking member Charles Grassley wants to increase tax credits for wind energy from $13 billion to $20 billion as part of the economic stimulus package, and tax breaks for the construction industry may also include lifting of the tax on debt restructuring for two years, and eliminating the repayment requirement from homebuyer tax credit, as well as increasing the credit from $7,500 up to $20,000, and eliminating the restriction to first time buyers.

Finally, the Senate version could contain a $70 billion alternative minimum tax patch, and a 75% exclusion of capital gains tax on sale of shares in small businesses if the shares have been held over 5 years.

There will undoubtedly be more changes in the Senate markups, and the Conference Committee report in the next couple weeks. Bottom line, in all likelihood there will be a bill on President Obama's desk before Valentine's Day, and it will still include more than $150 billion for construction projects.

President Obama Personally Pushes Stimulus Legislation

President Obama met with House and Senate leadership from both parties in the Roosevelt Room of the White House Friday morning January 23 to push for quick adoption of the pending economic stimulus legislation. Acknowledging that the legislative package is a "heavy lift" for all concerned, Obama repeated his prediction the new spending and tax cuts will create between three million and four million new jobs. He said "it appears we are on target to make our Presidents' Day weekend," referring to the upcoming Congressional recess and the day he expects to sign the legislation.

The bills have been reported out of the House Ways and Means, Appropriations and Energy and Commerce Committees, and a floor vote is expected in the House Wednesday, January 28, according to Majority Leader Steny Hoyer of Maryland. Markups are expected to begin in the Senate Appropriations and Finance Committees Tuesday, January 27, even before the House passes the measure.

Complaints about the package can be heard from both sides of the legislative aisles, including Highways and Transit Subcommittee Chairman Peter DeFazio's remark that the construction portion of the spending measure is "a pathetic amount of money just to deal with deferred maintenance," and House Minority Leader Boehner's comment that the measure "spends too much and spends it too late." Nevertheless, the $153 billion appropriated for construction projects remains intact.

Meanwhile, business lobbyists are opposing the "buy American" provisions regarding steel for construction and hardware and software for medical record computerization which have been written into the legislation, on the grounds that such protectionist legislation will ultimately hurt American exports to other countries, China in particular. Executives of certain tech industry companies, though, praise the appropriation of $40 billion for IT projects, asserting that such spending will create 949,000 technology jobs, more than half in small businesses.

Next week's Senate committee markups will determine whether the package can gather bipartisan support, or whether voting is likely to fall out along strict party lines.

Construction Spending Clears House Appropriations Committee

The $550 billion spending portion of President Obama's economic stimulus legislation, including over $153 billion for the construction industry, was reported out of the House Appropriations Committee January 21, and is expected to come to a vote on the House floor next week. Republican amendments offered in the committee in efforts to move $122 billion from spending into tax cuts were all defeated. The committee vote to discharge the bill was strictly along party lines, Democrats supporting it and Republicans opposing it.

In the order they were taken up on the agenda, the following changes were made to the committee print of the bill which has been in circulation:

The committee voted 55-0 to add a requirement that all steel used in construction projects funded by the bill be produced in the United States.

The committee voted 42-16 to require all construction projects funded by the bill to pay tradesmen prevailing wages under the Davis Bacon Act.

On a voice vote the committee approved a requirement that contractors on projects funded by the bill check the immigration status of new hires, and use the federal government E-Verify system to screen out all employees who are illegal immigrants.

The House Ways and Means Committee is marking up its $275 billion tax portion of the bill January 22, and is expected to extend the new five year tax loss carry back provision a few months into 2010, to give the break to retailers whose fiscal year ends in January because of Christmas shopping revenues.

Balancing the added cost of that provision is the exclusion of any financial institution receiving TARP funds from the tax loss carry back.

The home building industry is lobbying for additional tax benefits, in the form of a two year suspension of the taxability of debt restructuring as gross income. While Ways and Means may not include this extra tax break, Senator John Ensign of Nevada expects to introduce it into the Senate version in the Finance Committee.

Majority Leader Reid expects the Senate Finance and Appropriations Committees will both mark up the bill January 27, and he agrees with Speaker Pelosi that Congress will have the final bill on President Obama's Oval Office desk before the scheduled February 13 recess.

Infrastructure Construction Draws Bipartisan Support

Spending on infrastructure construction seems to be the only aspect of the American Recovery and Reinvestment appropriations which both political parties can agree on. At Wednesday's meeting of the House Appropriations Committee to mark up the bill, Appropriations Chairman David Obey urged the committee to act quickly on the proposals to staunch increasing unemployment, which he says will reach "well into double digits" without quick passage of the stimulus legislation. At the same time ranking member Jerry Lewis put forth Republican objections to certain appropriations, including $50 million for the National Endowment for the Arts, and an additional $650 million to subsidize purchases of digital TV converter boxes.

On the other hand, Lewis complained that the $30 billion appropriation for highway construction was not enough, in light of a backlog of $64.3 billion in shovel ready road projects. Lewis says "infrastructure investments that will create sustainable jobs should be given even greater priority in this package."

The House Ways and Means Committee takes up the tax portion of the stimulus legislation Thursday, and Senate Finance Committee and Appropriations Committee markups are scheduled tentatively for next Tuesday.

House Minority Leader Boehner, Minority Whip Cantor, Ways and Means Ranking Member Camp, and other Republicans wrote to President Obama today complaining they are being squeezed out of the process, and that the rush to pass this stimulus legislation will lead to mistakes. Boehner said "We want to sit down with the president and tell him we are opposed to what the congressional Democrats want to do." Camp proposes delaying the House committee markups until "full hearings" on the stimulus package can be convened.

Meanwhile, in separate Senate action Senator Isakson of Georgia, along with co-sponsors Chambliss and Corker, has introduced S 253, proposing an extension and increase in the homebuyer tax credits through December 31, 2009, increasing the credit to as much as $22,000.00, permitting its use in conjunction with state or local bond mortgage financing, removing the restriction to first time buyers and the repayment requirement, and monetizing the credit so it can be used at closing as all or part of the down payment.

Home building industry lobbyists are pressing for this bill to be incorporated by the Senate into its version of the economic stimulus legislation. They point out that the housing market index fell to a record low of 8 this month, with the western US region falling to a disastrously low level of only 4.

If you have any interest in seeing this legislation get to President Obama's Oval Office desk in time for it to do any good, now is the time to call, write and telegraph your Senators and Congressmen.

Stimulus Legislation Gels In House

The package came in two parts: a 328 page committee print of a tax bill from House Ways and Means Chairman Charles Rangel co-sponsored by Representatives Stark and McDermott, and a 258 page committee print of an appropriations bill from House Appropriations Chairman Dave Obey, accompanied by a 76 page draft Appropriations Committee report. Altogether the spending totals $550 billion and the tax cuts total $275 billion, for a grand total proposed economic stimulus of $825 billion.

My last update detailed the $153 billion in spending designated for the construction industry, which the Appropriations Committee draft report notes is the segment of the economy most devastated by the present crisis. Committee markups in the House will begin tomorrow, when Congress reconvenes after the inaugural festivities.

Two highlights of the committee print of the tax legislation important to the construction industry are permanent repeal of the impending 3% additional withholding tax on government contractors, and provision that all construction projects funded by tax advantaged bonds created under this legislation must adhere to the prevailing wage provisions of the Davis Bacon Act. These newly created bonds include clean renewable energy bonds, energy conservation bonds, qualified zone academy bonds and school construction bonds.

One key provision of the appropriations committee print is the requirement for creation of a website at recovery.gov - it hasn't been created yet - where all projects funded by these appropriations will be listed. The legislation intends this as a public site for oversight of how the money is being used. While the appropriations committee draft report suggests that projects may be posted on this site before bids are taken, the committee print of the bill does not mandate that this be done. Hopefully that situation will be remedied in the markups, so this website will provide a centralized reference available to all prospective bidders on these projects.

Other key prohibitions of the appropriations committee print are that none of this money can go to companies owned in any part by illegal immigrants, and none may be used for construction of casinos, other gambling establishments, aquariums, zoos, golf courses or swimming pools.

The committee print requires the federal government to award formula grants within 30 days after the bill is signed, and competitive grants within 90 days after the bill is signed. The six month clawback provisions which were contained in HR 7110 passed last session have been replaced in the committee print by "use it or lose it" requirements that funds be reallocated if not spent by state and local authorities 50% within one year after passage of the legislation, and 100% within two years after passage.

The appropriations committee print includes protection for federal, state, local and contractor whistleblowers who report fraud in the expenditure of any of these funds. It also requires that construction projects funded by these appropriations be awarded as competitively bid, fixed price contracts.

For your convenience, links to the full text of both committee prints and the Appropriations Committee draft report are included in the lower right corner of the front page of my website. Just follow this link: http://james-g-mcconnell.com/

Stimulus Provisions Harden Political Party Lines

The good news: The House version of economic stimulus legislation contains over $153 billion in hard dollars for construction projects.

The bad news: Debate over this important legislation is already degenerating along the old political party lines, despite the best efforts of officials and staff of the incoming Obama administration to include something for everyone in the package.

Republicans in the Senate, led by Senate Appropriations Ranking Member Thad Cochran, sent a letter to Senate Appropriations Chairman Daniel Inouye complaining that the Senate should not even take up the bill until it has been vetted by Obama administration OMB staff and OMB can report to the committee on the effects the proposed spending will actually have on the economy. Republicans are miffed that tax reduction is such a small portion of the House package. So the age old beliefs - Democrats that spending stimulates the economy; Republicans that tax relief stimulates the economy - will apparently define the debate over this legislation.

While House Appropriations Chairman David Obey is already talking about the potential need for additional stimulus spending even after the House measure passes, House Appropriations Ranking Member Jerry Lewis pans the measure as giving "little thought to real economic results, job creation or respect for the taxpayer," and Senator Tom Coburn complains that "75% to 80% of [the House measure] won't stimulate anything."

The other principal issue to be debated will be protectionism. Representatives Dan Lipinski and Donald Manzullo are complaining there should be more "buy American" requirements in the legislation, and they are joined by Steelworkers Union President Leo Gerard and Scott Paul, executive director of the Alliance for American Manufacturing. At the same time, President Nancy McLernon of the Organization for International Investment points out that stricter requirements to use American produced materials for all this construction work would likely violate the WTO Agreement on Government Procurement, to which the United States is a signatory.

As of Friday afternoon, the details of the House version of appropriations for construction spending looked like this:

INFRASTRUCTURE CONSTRUCTION DOLLARS (Billions)

Agriculture - Construction
$0.253

Agriculture - Rural Facilities Loans
$0.200

Subtotal Agriculture
$0.453

Airport Improvements
$3.000


Defense Environmental Cleanup
$0.300

Defense Facilities
$4.500

Defense Hospitals
$3.750

Defense Reserves and National Guard Facilities
$0.400

Defense Troop Housing
$1.550

Defense VA Medical
$0.950

Subtotal Defense
$11.450



Federal Buildings - Border Protection Modernization
$0.150

Federal Buildings - Border Protection Construction
$1.000

Federal Buildings - Bureau of Indian Affairs
$0.500

Federal Buildings - Commerce Department Science Research
$0.300

Federal Buildings - Fish and Wildlife
$0.300

Federal Buildings - Forest Service Construction
$0.650

Federal Buildings - GSA Energy Conservation
$6.000

Federal Buildings - Indian Health Service
$0.550

Federal Buildings - NASA Hurricane Repairs
$0.050

Federal Buildings - National Mall
$0.200

Federal Buildings - National Parks
$1.700

Federal Buildings - NSF Construction and Equipment
$0.400

Federal Buildings - NSF University Repair Grants
$0.200

Federal Buildings - Other
$0.700

Federal Buildings - Smithsonian
$0.150

Federal Buildings - U. S. Geological Survey
$0.200

Subtotal Federal Buildings
$13.050



Health - Centers for Disease Control Modernization
$0.462

Health - Community Health Center Construction
$0.500

Health - Community Health Center Modernization
$1.000

Health - NIH Central Campus Modernization
$0.500

Health - NIH University Research Construction and Renovation
$1.500

Health - Public Health Service Headquarters Construction
$0.088

Subtotal Health
$4.050



Highway Federal Aid
$30.000



Local Transit Capital
$6.000

Local Transit Investment
$1.000

Local Transit Rail
$2.000

Subtotal Transit
$9.000



Passenger Rail
$1.100



Power - Bonneville Power Administration
$3.250

Power - Carbon Capture And Sequestration Demonstrations
$2.400

Power - Energy Efficiency and Renewable Energy Grants
$8.400

Power - Home Weatherization Assistance
$6.200

Power - Renewable Energy Loan Guarantees
$8.000

Power - Smart Grid Construction
$4.500

Power - Western Area Power Administration
$3.250

Subtotal Power
$36.000



Public Housing Capital
$5.000

Public Housing Community Block Grants
$1.000

Public Housing Lead Paint Remediation
$0.100

Public Housing Native American
$0.500

Public Housing Neighborhood Stabilization
$4.190

Public Housing Section 8 and Elderly
$2.500

Subtotal Public Housing
$13.290



School Federal Impact Aid
$0.100

School Modernization - College
$6.000

School Modernization - K-12
$14.000

Subtotal Schools
$20.100



Water and Environment - Brownfields Cleanup
$0.100

Water and Environment - Drinking Water Construction
$0.500

Water and Environment- Corps of Engineers Construction
$2.000

Water and Environment - EPA Clean Water Construction
$6.000

Water and Environment - EPA Drinking Water Construction
$2.000

Water and Environment - EPA Leaking Underground Tanks
$0.200

Water and Environment - EPA Superfund
$0.800

Water and Environment - Mexican Boundary Water Projects
$0.224

Subtotal Water and Environment
$11.824


TOTAL CONSTRUCTION
$153.317

Stimulus Details Emerging

The economic stimulus legislation has been reduced to writing, but it will be sometime next week before copies of the bill are available to the general public. By that time various Congressional committees will be in the process of marking up the legislation. Until the final bill is passed and enrolled, those of us relying on the Government Printing Office to keep us informed will remain relatively uncertain about all the details. Nevertheless, it now seems clear the appropriations of hard construction dollars will amount to at least $119 billion, and there is some chance of that total increasing as the legislation moves through Congress.

The total package is presently pegged at a value of $825 billion. Of that huge sum, $550 billion will be direct spending for state and federal procurement, and $275 billion for tax relief in various forms. Some Congressional leaders, including in particular House Transportation and Infrastructure Chairman James Oberstar of Minnesota, think the spending element is underrepresented, and will be seeking increases either through the committee markups of this bill or separate subsequent measures.

At this moment, the construction appropriations are broken down like this:

$40 billion for highway and transit construction

$32 billion for energy grid construction

$31 billion for federal government construction projects

$10 billion for science laboratory construction

$6 billion for rural internet access construction

Other spending measures include:

$87 billion for a temporary increase in Medicaid reimbursement to states

$79 billion to states to prevent reduction in key education programs

$43 billion for extended unemployment insurance benefits

$39 billion for COBRA health insurance assistance to people losing jobs

$20 billion for a 13% increase in food stamp benefits

$ 20 billion for computerizing medical records

Stimulus Details Still In Flux

The House Appropriations Committee, House Ways and Means Committee and Senate Finance Committee all expect to begin marking up the economic stimulus legislation in meetings January 22. Speaker Pelosi says she will bring the bill to the House floor sometime the week of January 26. It may take a few days after the legislation is introduced for the bill to be printed and available to the general public and all the members of Congress, and some Senators and Representatives are already chafing under the absence of detail for their consideration while negotiations about the size and contents of the bill continue to be debated.

The package is now estimated to have a total cost in the range of $800 billion to $850 billion. There could be as much as a total of $320 to $340 billion for the construction industry overall, with $110 billion of that devoted to roads, bridges and airport runways. The Defense Department and House Defense Appropriations Subcommittee Chairman John Murtha want $11 billion for non-weapons defense construction, with some of that to be spent on dependent housing and schools at European military bases. Another interesting add on could be $4 billion for development and implementation of a satellite based civilian air traffic control system.

Other major components of the economic stimulus under discussion include $80 billion in education block grants, $90 billion increase in Medicaid assistance, $35 billion in extension of unemployment insurance benefits, and $150 billion for the promised middle class tax cut. Senator Ben Nelson of Florida also expects to add in cash for NASA's development of the Constellation, to replace the Space Shuttle fleet, and for restoration of the Everglades.

Representative Barney Frank still wants at least $40 billion for home mortgage foreclosure relief, but that money could come out of the remaining $350 billion in TARP funds. Expect the proposed restriction of private aircraft ownership and leasing by banks receiving TARP funding to be dropped at the request of Dennis Moore and Todd Tiahrt of Kansas, where manufacture of general aviation planes is a big part of the state's economy.

Getting Down To Brass Tacks On Stimulus Legislation

In preparation for introduction of an actual bill later this week, Democratic leaders in Congress are beginning to tinker with the proposals of the Obama transition team for economic stimulus legislation. It looks like some of the business tax breaks inserted by Obama's team in efforts to garner Republican support will be removed from the initial draft bill in order to keep the total cost in the range of $850 billion, while making room for some Senators and Congressmen to insert additional spending appropriations. This will put the onus on Republicans who will have to accept a package at or near the trillion dollar level if they want to restore their beloved business tax relief provisions.

For example, first to be eliminated is likely to be the proposed $3,000 business tax credit for each new hire, which could cost $50 billion. Next to be cut would probably be extension of operating loss carry backs for five years. These two changes would make room for a one year patch of the alternative minimum tax, which costs about $70 billion.

Democrats in both houses favor adding an alternative energy tax credit costing $25 billion to the legislation, as well as energy infrastructure spending of up to $60 billion. Rural development initiatives are being pushed by House Majority Whip Clyburn and House Appropriations Chairman Obey. Senator Durbin is looking to insert mortgage cram down revisions to the bankruptcy laws in the bill.

Other initiatives under discussion include money to assist with insulation of homes owned by lower income families, and tax incentives for small businesses in economically distressed communities. Accelerated depreciation or expensing of small business equipment purchases are also in the mix.

NASA is looking for a budget increase of $2.9 billion, including $1 billion to accelerate development of the Constellation, the replacement for the aging fleet of space shuttles.

Senate Budget Committee Chairman Kent Conrad and Ranking Member Judd Gregg are emphasizing increased appropriations for road building, electric grid construction, and medical record computerization. Their committee will also be taking up the cabinet nomination of former Congressional Budget Office head Peter Orszag as the head the Office of Management and Budget.

In a big bow in the direction of long term deficit control, Conrad, Gregg and Senate Finance Chairman Max Baucus are pushing for creation of a commission or panel to study health care and social security entitlement cost control.

Finally, Federal Reserve Chairman Ben Bernanke said in a speech January 13 at the London School of Economics that he expects the new administration's economic stimulus package to produce a "significant boost" to economic activity.

Illinois Commits $18 Million For Clean Coal Power Plant

Illinois legislation approved today commits $18 million in state funding to environmental studies required preceding construction of a clean coal power plant near Taylorville, which would be the first commercial scale application of carbon dioxide capture technology to reduce climate change from plant emissions. Half the carbon dioxide emissions of the coal burning plant will be injected deep underground, either at the plant location, or after pipeline transmission to assist offshore oil recovery in the Gulf of Mexico. The new law will require Illinois electric utilities to purchase 5% of their electricity from the new plant.

Draft Stimulus Bill Expected January 15 or 16

Speaker Pelosi expects the draft of the major economic stimulus bill to be introduced late this week, and Capitol Hill talk now puts the price range of the legislation in the range of $800 billion to $850 billion. Michigan Senator Carl Levin is pushing for inclusion of $1 billion for development of better batteries for electric cars. Wisconsin Representative Ron Kind of the Ways and Means Committee expects a one year alternative minimum tax patch to be included, and the debate continues about whether or not to exclude financial institutions receiving TARP assistance from the tax loss carry back extension to five years.

Meanwhile, Michigan Senator Debbie Stabenow and Maine Senator Olympia Snow are cosponsoring Senate Bill 179 providing grants to hospitals with a large proportion of Medicare, Medicaid and SCHIP patients for computerization of their patient medical records.

President Bush, at the urging of president elect Obama, has requested release of the remaining $350 billion in TARP funds, and House Financial Services Chairman Barney Frank is expected to introduce a bill Wednesday requiring $40 billion of that money to be used for foreclosure relief, and to require banks getting TARP assistance to get rid of private aircraft they own or lease.

There is some discussion of using a portion of the infrastructure construction stimulus finding for repair and replacement of family housing and school buildings on European bases of American armed forces, but according to Pentagon sources the total needed in Europe will be less than a billion dollars out of the anticipated $110 billion in direct construction spending, so the impact of this diversion would be minimal as far as the construction industry is concerned.

Trillion Dollar Stimulus?

The whispers on Capitol Hill are beginning to put the value of the forthcoming stimulus legislation in the range of $800 billion up to $1 trillion. Expectation remains that the legislation will pass and be signed by Presidents Day, February 16.

The House Ways and Means Committee, chaired by Charles Rangel, will meet Tuesday with Obama's economic team to flesh out the provisions of the new laws required to put these plans into effect. Democrats in the Senate want to see more emphasis on infrastructure and alternative energy spending, and the dollar increases are more likely to go in that direction than into additional tax cuts, although certain taxation revisions being proposed include renewable energy tax incentives, tax-credit bond financing for local transit construction, increased availability of Qualified Zone Academy Bonds for school rebuilding, and changes to make it easier for municipal governments to market tax exempt bonds for airport, public housing, and public hospital construction.

Representative Earl Blumenauer of Oregon seems satisfied to wait for major renewable energy appropriations until a second bill after the initial stimulus package is in place. Democrats in both houses are seeking to add provisions for a bolstered Trade Adjustment Assistance program to the stimulus legislation to help displaced American workers, according to Ways and Means Trade Subcommittee Chairman Sander Levin.

Meanwhile, a separate bill to be introduced by House Financial Services Chairman Barney Frank requiring that at least $40 billion of the remaining $350 billion in TARP funds be devoted to mortgage foreclosure relief seems likely to take that particular issue off the list of things which need to be resolved before the stimulus legislation passes. Frank's bill is expected to also include limits on executive compensation for financial institutions accepting TARP aid, and a requirement that all such banks get rid of private aircraft they own or lease.

As details of the stimulus legislation are marked up in various Congressional committees, the biggest challenge for the incoming administration will be sticking to its promise of eliminating all earmarks from the bill.

Without regard to the battles ahead, or the ultimate timing of passage and signing of this stimulus legislation, there is still likely to be at least $110 billion of opportunity for the construction industry in its terms, and the contractors prepared with information of where, when and how the projects to be funded by these appropriations will be released for bidding are the ones which will benefit most from its passage.

Stimulus Details Trickle Out Over The Weekend

In an effort to avoid having negotiations between the Obama transition team and Congressional leadership become a zero sum game, the president elect is still reluctant to release specific numerical details of the proposed economic stimulus legislation under discussion in Washington, but his Saturday morning radio address did refer to a 14 page report on job creation from his economic advisers which is now posted on his change.gov website.

The numbers in this report are numbers of jobs the transition team predicts will be generated in different sectors of the economy, directly and indirectly, by the legislation's appropriations and tax cuts once the bills are passed and signed into law. Careful study of the economic assumptions set out in the report, and a little reverse engineering of the math, indicates that the proposed package still totals somewhere in the neighborhood of $800 billion, with 20% allocated for aid to cash strapped state and local governments, 40% for direct spending on infrastructure construction and other state and federal procurement programs, and 40% to cover the expected revenue reduction from the transition team's proposed tax cuts targeted at middle class taxpayers, small businesses, and alternative energy incentives.

Appropriations targeted directly for the construction industry still will total in the neighborhood of $110 billion, expected to create 236,000 jobs in the construction trades, and an additional 142,000 jobs among material suppliers and service providers related to construction.

Some Democratic leaders in Congress are pressing for even larger appropriations for infrastructure construction, especially for alternative energy projects like manufacture and installation of power generating windmills and solar panels, and upgrading of the national power transmission and distribution grid. Representative Earl Pomeroy of North Dakota, in particular, is pressing for increases in the infrastructure appropriation amounts.

The one part of the Obama team's proposals which seems likely to get deleted from the final legislation is the proposed $3,000 tax credit for new hires the team proposed.

Obama's Saturday morning radio address refers to the stimulus package by his new title, the "American Recovery and Reinvestment Plan," and emphasizes that the program will modernize 75% of federal government buildings, and improve energy efficiency of two million homes - bowing in the direction of both commercial and residential construction sectors. He also mentioned laying "miles of new broadband lines," so oil up those trenching machines.

The report released on the Obama team's website predicts the total stimulus package will create between three and four million new jobs in the next two years, with 90% of them in the private sector. The 10% public sector jobs created or saved from elimination will include mostly teachers, firefighters and police officers. The report anticipates "substantial investments in infrastructure, education, health and energy, with increased gross domestic product of 3.7% expected to generate a total of 3,675,000 jobs in the next two years. According to the report, this will reduce unemployment from an anticipated level of 8.8% without this legislation, to a level of 7.0% if the bills are passed and signed into law.

Predictions include a two year increase of 678,000 jobs in the construction industry, with 88,000 of those new hires expected to be female. The report says that, although construction and manufacturing represent only 15% of the overall American economy, these sectors are slated for 30% of the new jobs, since jobs in these sectors represent more skilled, higher paying union jobs which are less able to be outsourced overseas.

The report is located at:

http://otrans.3cdn.net/ee40602f9a7d8172b8_ozm6bt5oi.pdf

Stimulus Details Taking Shape

As the annoying rattle of Congressional startup settles down into the more familiar quiet hum of Washington's well oiled political machinery, the details of the Obama team's economic stimulus legislation are beginning to take shape, and the battle lines over certain more controversial provisions have now been drawn. The whispers are about a total package of $800 billion to save or create 3 million jobs.

Senate Finance Chairman Max Baucus of Washington expects to begin marking up legislation January 19, and has mentioned a total of $274 billion in tax cuts, including $188 billion for middle class individuals, $76 billion for businesses, and $10 billion for energy incentives. He also wants to include an unspecified appropriation for COBRA subsidies to help the unemployed pay for health insurance, which now takes 80% of unemployment insurance benefits for family coverage. Senate Budget Chairman Kent Conrad and Senator Maria Cantwell also want increased funding for energy tax incentives.

House Speaker Nancy Pelosi of California and Senate Democratic Caucus Chairman Charles Schumer of New York are both pressing for a $4,000 annual college tuition tax credit, and Pelosi is pushing immediate repeal of the Bush administration tax cuts. Pelosi and Senator Mitch McConnell both promise action on stimulus legislation before the scheduled February 13 adjournment.

House Financial Services chairman Barney Frank is drafting requirements for $40 billion in mortgage foreclosure relief for homeowners, but that money will probably come from the remaining $350 billion in TARP funds rather than from the stimulus appropriations.

Representative Earl Blumenauer of Oregon and House Ways and Means Chairman Charles Rangel are both insisting that any enlargement of tax loss carry backs must exclude any financial firm which has received TARP bailout money.

Finally, committee staff members on both sides of the aisle are discussing a one year patch for the AMT to avoid giving refunds with one hand and taking them back with the other, and inclusion of $48 billion in financial relief to state governments in the stimulus package.

Some of the numbers under discussion overlap from one category to another. It still looks like there will be hard money of about $110 billion for the construction industry in the final legislation, though some of the military construction portion may end up being spent in Europe rather than in the United States.

Stimulus Package Committee Markups Scheduled

While president elect Obama's stimulus package speech at George Mason University in Virginia was short on specifics, both sides of the Capitol are buzzing with activity filling in the details of the proposed legislation. The House Appropriations Committee is scheduled to begin marking up the bill the week of January 19, and House Ways and Means Chairman Charles Rangel has set a markup in his committee January 21. The Senate Finance Committee expects to begin a markup on January 22. Speaker Pelosi insists she won't adjourn for Easter recess February 16 as scheduled unless legislation is on the President's desk.

Meanwhile, there is a lot of talk about certain provisions of the proposed legislation which some in Congress think are missing or should be eliminated.

UNDER ATTACK:

Senator Ron Wyden of Oregon doesn't think the proposed $3,000 tax credit for job creation will have any significant stimulating effect on the economy.

The proposed extension of tax loss carry backs to five years has been criticized by both Ways and Means Chairman Rangel and by Senator Olympia Snow of Maine.

ADD ONS:

Several leaders in both houses proposed adding a one year patch to the alternative minimum tax into the stimulus legislation.

Housing assistance appropriations and money for energy assistance for low income households will also likely be added, with support form Senator Judd Gregg, Ranking Member of the Senate Budget Committee.

Foreclosure relief in some form or other was mentioned by Obama in his speech, and will also likely be added into the bill.

Homeland Security appropriations totaling $2 billion are also under discussion, including $500 million for explosive detectors, $350 million for consolidation of the Homeland Security Headquarters in Washington, D.C., $300 million each for the Coast Guard and border security in the southwestern United States, and $100 million for seaport infrastructure.

The total package, now being whispered to amount to $800 billion, looks like it will include about $110 billion for the construction industry.

Obama Names Spending Oversight Chief

Mollifying some congressional critics of the prospect of unsupervised spending of $800 billion in taxpayer money, president elect Obama named Nancy Killefer, a former Clinton administration Treasury department official, to the newly created White House position of Chief Performance Officer, responsible for detailed oversight of all federal spending under his administration, including the enormous infrastructure spending and tax reduction stimulus package expected in February.

Congressional leaders are now discussing $800 billion as the price tag of the stimulus legislation, which the Congressional Budget Office expects will create a federal deficit of more than $1.2 trillion next fiscal year. The construction industry can expect to get at least $105 billion of the anticipated appropriations, with $30.25 billion for roads and bridges, $20 billion for military construction, $14.3 billion for environmental projects, $12.4 billion for public transit, $10 billion for federal office building construction and renovation, and $4.9 billion for Amtrak. Renewable energy advocates are pushing for a much larger allocation than $500 million for demonstration projects included in HR 7110. Representatives from rural areas of the nation are already looking for specific provisions guaranteeing cities don't gobble up all the infrastructure money. Some provisions likely to be similar to HR 7110 will end up in the new legislation, including "use it or lose it" claw back clauses to force the money out into the hands of contractors, suppliers and tradespeople within 180 days of passage. However, unlike HR 7110, look for language giving cities, counties and other local government units a crack at the cash before it is redistributed from one state to another. This stems from statements by the governors of Texas and South Carolina that their states "don't need the money."

Because of a precipitous drop in domestic steel production during the fourth quarter, look for the "buy American steel" requirement to expand from school construction to all of the infrastructure and transit projects, and also for "buy American" provisions across the board, possibly with limited exceptions for products and materials not available domestically. After all, the idea of this legislation is to put Americans back to work.

Congress has been in session for only two days, and the feeding frenzy is already underway. Every Representative and Senator is looking for ways to bring money to his or her state or district without having any project labeled as an "earmark" subject to elimination by Obama administration watchdogs. No matter what ultimately happens with this legislative package, there will be a big benefit for those construction managers, contractors, subcontractors and suppliers who position themselves to take best advantage of these projects as soon as they are put out to bid.

Congress Dashes Out Of The Starting Blocks

With president elect Obama acknowledging that his proposed economic stimulus legislation will likely more than double the federal deficit to $1 trillion from $455 billion for the foreseeable future, the House and Senate got right down to business putting in place rule changes which are designed to speed the stimulus legislation along and smooth the way for prompt passage. House Appropriations Chairman David Obey and Senate Appropriations Chairman Daniel Inouye both announced institution of a requirement that any member requesting an earmark on spending legislation immediately post on his or her website information explaining the purpose of the earmark and the nature of its value. Meanwhile, the House repealed the Republican imposed term limits on committee chairmanships.

The Obama transition team began unveiling some details of the stimulus proposals, including creation of an "Economic Recovery Accountability and Transparency Board" composed of administration officials and outsiders to deliver periodic reports to Congress and the nation on how stimulus appropriations are being spent, and creation of a publicly accessible website detailing where and how the money is being spent. Transition team members report a price tag on the legislation of $775 to $850 billion, designed to create 3.2 million new jobs by the first quarter of 2011. Some congressional aides say the cost could go as higher, and Senator Reid has predicted a final cost of as much as $1.3 trillion.

Senate Budget Chairman Kent Conrad and ranking Republican member Judd Gregg both are proposing a requirement that the legislation outline proposals for deficit reduction once the stimulus money has been spent over the next two years. This proposal is expected to generate a lot of discussion at a January 8 hearing where Congressional Budget Office Acting Director Robert Sunshine will testify about the proposed budget and the economic outlook for the near future.

Consensus on the hill and the Obama Washington transition office seems to be that stimulus legislation will not be passed by inauguration day, and that the hope is for a bill to be through both houses and the conference committee before Congress adjourns February 13 for its Easter recess. Obama has said he would like to sign the bill on President's Day, February 16, 2009.

This calendar, if the politicians adhere to it, means the construction industry will not likely see any of this cash before August 10, 2009, although individual paychecks affected by the middle class tax relief provisions could go up $15 per week as soon as March 1.

Conference Of Mayors Report Available

On the right is a gadget with a link to the Conference of Mayors 1557 page report listing the "shovel ready" projects in their cities. This is as good a list as there is presently available of contracts which will likely be let for bid in your area once the infrastructure stimulus appropriation passes and is signed into law. It wouldn't hurt to peruse this list now for projects you might want to bid on, and to team up with other contractors who could help you land the business once the money is released form Washington.

Stimulus Legislation: Construction Spending and Passage Timetable Both Expanding

While most political leaders agree that the wished for legislative package will not be ready for signing by President Obama on inauguration day, Senate Finance Committee Chairman Max Baucus still entertains the possibility of an early January markup, despite the transition team's failure to meet a December deadline for delivery of the Obama team's stimulus package principles to the House and Senate leadership. Nevertheless, while time passes, the total price tag quietly discussed among staffers seems to have topped out at $775 billion, with up to $136 billion for infrastructure construction projects by state and federal government agencies. One price which may be exacted in return for this increased spending is a "buy American" provision covering not only steel, which is already in the school construction provisions of HR 7110, but for all construction materials and equipment in all aspects of the infrastructure program. This will be sought by those Congressmen and Senators most vocal about the export of American manufacturing jobs.

The price of tax relief for middle class families and small businesses is generally thought to be about $300 billion, to be delivered to families by reducing withholding amounts for the first four months after the bill passes, and accelerated depreciation for business investments of up to 50% write off in the first year of capital investment. Small businesses will be permitted to expense capital purchases 100% up to $250,000.00 in the year of purchase. Additional benefits to businesses are expected to permit tax loss carry back for five years instead of the present limit of two years, effectively providing business tax refunds for losses suffered in 2008. And there may be tax incentives for businesses hiring new workers.

An additional $200 billion in increased health care subsidies to states is also contemplated.

Another indirect benefit to the construction industry will likely be included: repeal of the alternative minimum tax on municipal bonds issued for infrastructure construction.

With respected economists like San Francisco Federal Reserve President Janet Yellen and Chicago Federal Reserve President Charles Evans backing the need to "pull out all the stops" and provide "big stimulus," respectively, it seems pretty clear the question is not whether the legislation will pass, but only how soon.

Obama Promises Searchable Stimulus Project Database

Stimulus Package Breakdown To Become Public

In his initial meetings with Congressional leadership January 5, president elect Obama promised his transition team will post the details of his proposed stimulus spending program on the internet, in a searchable format which will enable people to identify specific projects within their Congressional districts to be paid for with the stimulus appropriations. We won't know how well this really works until we see it, and no date was announced when it will be available.

We will keep everyone advised of this development, as searching districts near your location will be the fastest way to find out ahead of time which projects will be relased for you to bid on in the near future. I only hope the transition team is as good as its word on this one!

Non Residential Construction Spending Increases

According to figures released January 5, 2009, by the U. S. Department of Commerce, nonresidential construction in November 2008 increased 0.7%. Offsetting this modest increase was a 4.2% decline in housing construction, resulting in a net November 2008 construction spending decline of 0.6%.

Total construction spending of $1.078 trillion is down 3.3% from a year ago, while housing construction of $328.3 billion is off 23.4% from a year ago. Nonresidential construction spending of $428.2 billion annually is at an all time high. Government construction spending of $321.95 billion makes up the balance of the $1.078 trillion annual total pace for construction spending.

State and local government construction spending is up 1%, while federal construction spending rose 6%.

Stimulus Package Delays Seen

Congressional leaders are now backing down from their intention to have the economic stimulus legislation on the Oval Office desk inauguration day. House Majority Leader Steny Hoyer and Senate Majority Leader Harry Reid have both said on the Sunday morning talk shows yesterday that they expect hearings and committee study of the legislation to last until mid February. While the Obama administration could push a final bill faster in the House, there are not enough votes for cloture in the Senate to cut off a Republican filibuster, and Republican senators do not want to be rushed, or denied the chance to hang their pet projects on the Christmas tree.

The net result of this likely delay is that the money will not begin flowing until March, but when it does, there will be even more of it. Estimated costs of the total package now range from $650 billion up to $1 trillion.

Whatever the ultimate date of passage, or the final total of the appropriation, this is no time to slacken your efforts to find out from your Congressman and state legislators which particular projects will benefit from this federal assistance. Put your team together now, get your hands on bid documents as soon as you can, and be ready to sharpen your pencil as soon as the package is finalized and signed into law. The early bird will get all the worms in this situation.

Obama Throws Out The First Pitch

Without even waiting for Congress to reconvene, president elect Obama used his Saturday morning four minute radio address to begin selling the terms of what he and his transition team are now calling the "American Recovery and Reinvestment Plan" to the general public. Without mentioning any specific dollar values, he stated his goal as creating three million new jobs, eighty percent in the private sector, by means of investments in renewable energy production and energy efficiency, infrastructure construction, medical record computerization, school reconstruction, and middle class tax relief.

He emphasized that "... we must engage contractors across the nation to create jobs rebuilding our crumbling roads, bridges and schools."

We can expect to hear a lot more of this in the coming days, since it is now only sixteen days until inauguration day, the target date the president elect and speaker of the house have set for passage and signing of the stimulus legislation. Look for more details about the development of the final version of this legislation to be released each day over the next two weeks. If you have been acting on what we already know about it, you are quite likely to be miles ahead of your competition when the projects in your market are advertised for bids.

Stimulus Package Pegged At $775 Billion

Speaker Pelosi still says she wants the economic stimulus legislation on Obama's desk in the oval office on inauguration day. Senate Majority Leader Harry Reid thinks it may take until mid February to garner sufficient support for the bill in the Senate. Both leaders and the transition team are now talking about a total package costing $775 billion, which would increase the construction industry share from the present level of $40.7 billion up to $63.1 billion.

Team up now with your best business partners to be in a position to take advantage of this unprecedented opportunity. In spite of Senator Reid's reservations, I'm still looking for a bill signing on inauguration day.

Stimulus Package Is Growing

Congress reconvenes January 6. High up on the Senate agenda is HR 7110, the infrastructure stimulus appropriation bill which passed the House last September. As presently written the legislation calls for spending nearly $63.5 billion dollars on state and federal construction projects, electric car battery development projects, job training programs, temporarily extended unemployment benefits, temporarily increased Medicaid assistance to states, and temporarily increased food stamp benefits. Of the $63.5 billion total appropriation, $40.7 billion is for construction projects.

Negotiations are underway to significantly increase both the total appropriation and the construction portion, up to a total appropriation of as much as $114.9 billion, with a construction portion of as much as $92.3 billion. When the bill leaves the conference committee, the total appropriation will likely be less than $100 billion, but a lot closer to that number than it is now. The proportion now allocated for construction projects is 64.2%. Environmentalists and other lobbies claim this represents overemphasis on construction, and will make every argument they can in efforts to reduce the share of the final appropriation allocated to construction. They want the difference to be devoted to their projects, at the expense of the construction industry and the skilled tradespeople who would otherwise be put back to work in the jobs created by the stimulus package.

Once the bill leaves the conference committee, it will be too late to preserve these lost jobs. Call your Representative and both Senators from your state as soon as Congress reconvenes, and let them know how important these skilled trade jobs are to the economy of your industry, your locality, and your state, or special interests will do everything they can to take federal dollars away from this important revitalization of the construction economy.