Get Ready For The Construction Industry Unemployment Devastation Act

House Transportation and Infrastructure Chairman John Mica will call it the six year highway trust fund reauthorization legislation, but that will be a completely inappropriate title for the bill. Today Mica is expected to introduce a six year reauthorization package that will slash funding for roads, bridges and other infrastructure from past levels down to $230 billion over six years. If Mica’s version of the bill passes the House, it will collide with Senator Barbara Boxer’s expected version, which is predicted to call for funding at the level of $550 billion over six years.

Why am I calling this the “Construction Industry Unemployment Devastation Act?” Here is the arithmetic: Last fall, a panel of 80 experts on American infrastructure, headed by former Secretaries of Transportation Norman Mineta and Sam Skinner, concluded that maintaining U. S. infrastructure and meeting the needs of population growth should require investment of $262 billion each year, or a total of $1.57 trillion over six years. Senator Boxer’s bill is expected to propose about $550 billion over six years, or about 35% of the need. Mica’s bill which should come out today, will call for a mere $230 billion over six years, or just over 14.6% of the need. OUCH!!

Even the modest Boxer proposal would need an infusion of $12 billion, or $2 billion each year, from general federal revenues to make up for declining motor fuel consumption and a resulting shortfall in motor fuel tax revenue.

What this means for employment in the construction industry is that tradesmen who once worked for industry behemoths like Walsh, Bechtel or AMEC Morse Diesel will have to move overseas, or find work on crews remodeling houses, and the tradesmen now working in the home remodeling segment will end up at the unemployment office. It’s not a pretty picture, and the artists are those Republicans in the House who will do everything in their power to destroy any chance the Obama administration has of reviving the American economy before the 2012 elections.

Congress Stymies Better Buildings Initiative

Politicians in both Republican and Democratic parties say they believe issue number one in the upcoming Congressional and Presidential elections is job creation. You would think this would make it easy to move legislative initiatives that would create jobs, conserve energy, and lower taxes. Yet one such initiative proposed by the Obama administration is so stalled in Congress that no one is moving any bill to implement the program.

On February 3, 2011, the White House proposed its Better Buildings Initiative, to improve energy efficiency of existing buildings, reduce the energy bills of businesses and consumers, and conserve energy. According to a report released Monday, June 13, 2011 by The U S Green Building Council, The Real Estate Roundtable and The Natural Resources Defense Council, the administration’s proposed program would create 114,000 new jobs, 77,000 of them in the severely depressed construction industry. The Better Buildings Initiative was also the subject of a portion of testimony by U. S. Department of Energy Assistant Secretary David Sandalow before the Subcommittee on Energy and Power of the House Committee on Energy and Commerce on June 3. As described, the Better Buildings Initiative will provide new tax incentives for building energy efficiency, new financing for retrofits of existing buildings, and streamlined building code provisions and performance requirements.

According to Roger Platt, a senior vice president of The Green Buildings Council, the Better Buildings Initiative will “lower energy consumption, reduce our nation’s dependence on foreign oil and allow America to retain its competitive edge in the international economy.” What’s not to like?

Congressional Committees with jurisdiction include: House Ways and Means, Chairman Dave Camp (R-MI) and its Select Revenue Measures Subcommittee, Chairman Pat Tiberi (R-OH); House Energy and Commerce, Chairman Fred Upton (R-MI) and its Subcommittee on Energy and Power, Chairman Ed Whitfield (R-KY); and House Science, Space and Technology, Chairman Ralph M. Hall (R-TX) and its Subcommittee on Energy and Environment, Chairman Andy Harris (R-MD). The websites of these committees and subcommittees are filled with diatribe attacking the Obama administration for inaction on the jobs and tax reduction fronts, yet there is no mention whatsoever of the Obama administration’s Better Buildings Initiative.

Republican politicians at all levels say they want lower taxes, less dependence on foreign oil, and more jobs. Private sector evaluation of the proposals in the Better Buildings Initiative says it will achieve all three goals. A polite letter to the committee chairmen listed above, pointing out that there should be strong bipartisan support for this proposal, and inquiring why it is going nowhere in the House, might kick some Republican butt, and get this job creator moving.

Illinois Tax Hikes Driving Business Investment Out Of State

Knowledgeable observers predicted early in this legislative session that a major hike in state taxes would drive business investment out of state, and developments in neighboring states are already proving them correct. For example, 112 commercial and industrial construction projects worth $8.9 billion are already underway in 2011 just across the lake in Michigan.

The electric power industry in Michigan leads the way with 37 projects totaling $5.2 billion, representing 58% of new industrial construction investment in Michigan for 2011. The largest single power industry project in Michigan is the 765 KV Lower Peninsula Transmission Line, a 700 mile overhead extra high voltage transmission line extending into Ohio. American Electric Power Company will commence construction of this project this summer.

General industrial manufacturing construction, including auto industry plant expansions, accounts for 20 projects worth $1.4 billion, followed by 21 pharmaceutical and biotechnology investments totaling $467 million.

Illinois could have benefited greatly from the jobs created by this construction investment, as well as the new jobs in the completed or expanded facilities. Our state economy desperately needs new high tech jobs, but the income tax increase enacted by our legislature and signed by our governor is driving the money, construction jobs and manufacturing jobs across the lake.

High Speed Rail Shuffle Could Be Chicago’s Boon

Newly elected governors in Wisconsin, Ohio and Florida – all of whom have announced their opposition to high speed rail construction projects in their states – could be the secret ingredient in increased funding for high speed rail construction projects and rolling stock manufacturing jobs in the Chicago area. Under the stimulus appropriations from early 2009, $8 billion was set aside to fund high speed rail construction projects planned but not yet implemented across the United States. In January of this year the Obama administration announced allocation of $1.23 billion of that money to Illinois, to fund high speed rail corridors between Chicago and St. Louis, Missouri, and between Chicago and Milwaukee, Wisconsin.

Of the remaining $6.77 billion in high speed rail appropriations, $810 million was awarded to Wisconsin for construction of a high speed line between Milwaukee and Madison, and also the Wisconsin portion of the Chicago to Milwaukee service. Another $400 million was awarded to Ohio, for high speed connections between that state’s capitol, Columbus, and Cleveland and Cincinnati, Ohio’s other two major cities. Florida was awarded $2.06 billion for a high speed rail link between Orlando and Tampa.

Under the “claw back” provisions of the stimulus legislation, any money allocated to particular projects, but not spent by the states winning the funds, must be reallocated among other proposers who got less than they asked for in the initial grant process. Florida’s governor elect Rick Scott, Ohio’s governor elect John Kasich, and Wisconsin’s governor elect Scott Walker have all publicly stated their opposition to going forward with the high speed rail construction for which these federal stimulus funds were awarded, putting a total of nearly $3.29 billion back in play among the states seeking federal funds for high speed rail development projects.

IDOT’s original funding proposal under the stimulus appropriation sought a total of $4.5 billion, and the clawed back funds could more than make up the entire shortfall from the Illinois grant request. Though it is unlikely Illinois will be given the entire amount, U. S. Transportation Secretary Ray LaHood said last Monday, November 15, that he will soon be announcing the reallocation of the $1.2 billion coming back from Wisconsin and Ohio. Several governors who support high speed rail development, including Illinois Governor Pat Quinn, will be holding their breath until LaHood’s announcement is official, and maybe even longer, until Florida’s $2.06 billion grant is reallocated.

Quinn is already wooing Talgo, Inc. the rolling stock manufacturer that recently opened a plant in the Milwaukee facility formerly owned by Tower Automotive, where Talgo expected to put 125 people to work building cars for the Chicago to Milwaukee high speed rail corridor, which plans to include stops at Mitchell Field, Sturtevant, Wisconsin, and Glenview, Illinois, as well as the terminals in downtown Chicago and Milwaukee. Talgo has said it would consider moving to Illinois after fulfilling its spring 2012 orders for two high speed trains in Oregon.

So, because of politics in three other states, Illinois could end up a much bigger winner in the competition for high speed rail funding and jobs that initially seemed possible.

June Jobs Crash

Despite President Obama's insistence that the economy is still "headed in the right direction," the June jobs report shows the addition of 83,000 private sector jobs was more than offset by loss of 225,000 temporary Census jobs, for a June net loss of 125,000 jobs from the economy.

Balancing Federal Budgets On The Backs Of The Jobless

Three times in the last three weeks the U. S. Senate has filibustered legislation which would extend unemployment benefits for those who have been out of work for more than six months. Ben Nelson of Nebraska was the only Democrat to vote against cloture on the bill. A total of 1.7 million jobless folks will see their benefits run out by Independence Day. The bill would have extended the unemployment benefit period from 26 weeks to 99 weeks.

Jobs Data Points To Stabilization

Council of Economic Advisers Chair Christina Romer released a statement today commenting on the 0.2% drop in nationwide unemployment in which she characterized employment gains in temporary help services as hopeful for the future of the American economy. “It is important not to read too much into any one monthly report, positive or negative,” Romer said. “Bit, it is clear we are moving in the right direction.”

Yesterday, President Obama hosted a conference of 130 business and labor leaders at the White House to discuss job creation measures the federal government might undertake in the next month or two to keep the employment trend moving in a favorable direction. Stressing the unprecedented federal deficits and the strain they produce on the national economy, Obama pointed out that Washington presently lacks sufficient resources to fund direct government job creation legislation. “Ultimately, true economic recovery is only going to come from the private sector,” Obama told the assembled business and labor leaders and academic economists. “We have to face the fact that our resources are limited.” Obama is expected to detail forthcoming legislation to spur job creation and extend jobless relief for the unemployed in a speech next Tuesday morning at the Brookings Institution.

Expectations are that Speaker Pelosi and her Congressional colleagues will soon introduce legislation funding job creation programs with the $150 billion left over in the Troubled Asset Relief Program, despite Treasury Secretary Geithner’s preference to use the cash to pay down the national debt. Rhode Island Senator Jack Reed today proposed additional federal borrowings of as much as $100 billion to pay for one year of extended unemployment benefits and COBRA health care subsidies for those Americans still out of work. Reed may seek to attach his legislation to the forthcoming omnibus appropriations bill. About a million unemployed Americans will exhaust their benefits in January, and by March 2010 that number could rise as high as 3 million.

Additional proposals could include wage subsidies or tax benefits for hiring new workers.

Jobs Bill, Maybe, Wall Street Transaction Tax, Maybe Not

House Speaker Nancy Pelosi scoffs at the idea floated last week by some of her Democratic colleagues that new job creation legislation could be funded by a tax on stock, bond and futures transactions on Wall Street financial markets, and Obama administration officials are equally cool to the idea, though some executive branch officials have spoken favorably in recent days about the desirability of “targeted” proposals for quick new laws to boost American employment. Oregon Congressman Peter DeFazio and New York Congressman Michael Arcuri are circulating a proposal for a financial transaction tax to raise $150 billion every year. Pelosi says such a new tax could drive Wall Street jobs overseas. Treasury Secretary Timothy Geithner echoes that such a tax would be “inappropriate” for the United States.

Vice President Biden’s chief economic adviser Jared Bernstein says, though, that the administration is looking for new ways to make sure the economic recovery is not a jobless one. Bernstein’s suggestions include direct public works programs such as hiring the jobless to board up vacant buildings, help with child care, and paint school buildings.

Meanwhile, at a hearing last Thursday before the House Oversight and Government Reform Committee, Congressmen continue attacking the claim on Recovery.gov that the $787 billion stimulus package has created 640,000 jobs so far. GAO reported at the hearing that the web site was replete with “a range of significant reporting and quality issues,” including 60,000 jobs reported as created without any dollars being spent, and 9,000 reports of money spent with no jobs created. House Oversight and Government Reform Chairman Edolphus Towns said after hearing the GAO testimony, “It is clear that errors found by GAO and others should be corrected immediately, not months later, no matter how difficult.”

Finally, economists are beginning to challenge President Obama’s campaign emphasis on green job creation as a solution to continuing economic growth. Georgia State’s Economic Forecasting Center Director Rajeev Dhawan says green jobs are “not the spark. This is not the solution to the current big unemployment problem.” His sentiments are seconded by Manhattan Institute economist Max Schulz: “For all the talk about green job creation, there’s an unavoidable problem with renewable energy technologies and the policies that promote them: From an economic standpoint, they’re big losers. Renewables can’t produce the large volumes of useful, reliable energy that our economy needs at attractive prices. Government subsidizes renewable because – all things being equal – the free market won’t.”

A recent survey by the Transportation Construction Coalition is also putting a damper on the pet political theory that additional funding for road and bridge projects will be a job saving legislative measure. Despite injecting $27 billion into such projects through the stimulus package, more than a million construction sector jobs have been lost in the past 12 months. Furthermore, this month’s Coalition survey indicates that 44% of road and transit contractors expect to lay off more permanent employees this year, even though they have received stimulus supported contracts.

Job Creation On The Agenda

Quick action to stimulate employment and halt rising unemployment will be the next agenda item before Congress adjourns for Christmas. Leaders in both houses are already pressing for a compromise six month extension of the federal Highway Trust Fund at current levels, so the relevant committees can begin work immediately on a permanent six year reauthorization bill. Senate forces wanted an 18 month extension, while House Transportation and Infrastructure Chairman James Oberstar wants to finish the six year bill before Congress adjourns for the holidays. Senator Barbara Boxer, Chair of the Environment and Public Works Committee, has already accepted the six month extension strategy, and says a full six year reauthorization measure is her committee’s next priority.

Chairman Peter DeFazio of the House Highways and Transit Subcommittee, says that rising unemployment makes “infrastructure a front burner issue.” While Republican politicians say unemployment rates above ten percent show failure of the earlier stimulus legislation, House Majority Leader Steny Hoyer responds that Republicans consistently vote against economic growth bills. “Votes don’t lie. Republicans have consistently said ‘no’ to creating jobs and helping Americans during this recession,” Hoyer contends.

The renewed talk of job legislation is also bringing out lobbyists. The U. S. Conference of Mayors and the Associated General Contractors both press for transportation appropriations targeted at urban areas, where construction sector unemployment tops 18%. The Mayors are also encouraging votes in favor of increased block grants for energy efficiency and conservation, community development, and police services. Solar panel makers are lobbying for a new 30% tax credit for investments in equipment to make solar energy components, in addition to the grants already appropriated to support solar panel factory construction in California and wind turbine factory expansion in Idaho.

Proposals to fund all this job creation legislation include a new Wall Street financial transaction tax of 0.25% on stock trades, and 0.02% on commodity future trades. The annual expected revenue of $150 billion would go $75 billion for national debt reduction, $55 billion for miscellaneous job creation programs, and $20 billion for highway and other infrastructure construction. Retirement, education and health savings transactions would be exempted from the tax.

Another proposal being floated by Congressmen Barney Frank, Peter DeFazio and Earl Blumenauer is to dip into the $317 billion in as yet unspent TARP funds for infrastructure construction, assistance to homeowners facing foreclosure, and loans to small businesses. Any other unspent TARP cash or money repaid by financial institutions which got federal assistance, would go toward paying off the national debt. Unless legislators act on such measures before it adjourns December 18, Treasury Secretary Timothy Geithner is expected to notify Congress that he will extend the TARP program through October 2010.

Jobs Are Job One

House Majority leader Steny Hoyer said Tuesday that he and other House leaders are pushing for a December 18 floor vote on another job creation bill. He said the measure will focus on public sector jobs, job generating tax credits, infrastructure projects, and assistance to state governments. “Clearly, 10.2% unemployment is unacceptable and is causing great pain to literally millions of people around the country,” Hoyer stated.

Hoyer added that he believes the legislation ought to include another extension of unemployment benefits and health insurance premium assistance for those out of work.

On the Senate side, Majority Leader Harry Reid says his first priority after finishing health care reform legislation will be a jobs bill. Senate Democratic Policy Chairman Byron Dorgan echoes that sentiment. “With 10% unemployment, the first priority for our government is to focus on helping the private sector create new jobs,” Dorgan announced. Leaders in both houses are now considering the possibility that a six year Highway Trust Fund reauthorization measure could be designated a jobs bill and pushed through Congress on a faster track than anyone thought possible a few weeks ago.

Meanwhile, there are signs that the North American economy may be turning around. Since the beginning of this year, 6,080 new capital investment projects totaling $350.9 billion have begun in the U.S. and Canada. Another 3,633 capital projects, representing investment of $1.2 trillion, though delayed, are still expected to begin in a year or two. The discouraging factor is that 2,835 investment projects, representing $283 billion of investment, have been put on hold indefinitely or cancelled outright.

Highlights of economic investment are the light rail sector, with $17 billion of new construction begun this year, and semiconductor manufacturing, with $10 billion total investment in 2009.

A Recess Look At Stimulus Progress

So far only $31.1 billion of the $787 billion appropriated in the economic stimulus legislation has been spent. According to Recovery.gov this expenditure has saved or created a mere 150,000 jobs, very few of them in the construction sector, and less than one percent of the recent recession induced job losses in the United States.

Particularly disheartening are the following facts: only 13 of 50 states have received the money appropriated for education programs; 17 states report no jobs created as yet; Alaska governor Sarah Palin has vetoed $80 million of the recovery funds appropriated for her state; and Louisiana Governor Bobby Jindal has rejected $98 million in federal unemployment benefit funds for his state. According to USA Today, in the eight states with over 10% unemployment the contracts awarded amount to only $7.42 per capita, while North Dakota, with the lowest unemployment rate, has received about $26 per capita in stimulus contracts.

What are these state and local officials thinking?