Opinion: A Believable Stimulus

By Joel D. Anderson

President

International Warehouse Logistics Association

This Opinion piece appears in the July 19 print edition of Transport Topics. Click here to subscribe today.

With President Obama and the Democratic leadership in Congress pressing for new stimulus legislation — now called a jobs bill — it’s time to pose this question: If we are going to invest federal money in projects with the stated aim of creating jobs, where is it best spent?

When the first massive stimulus bill was enacted early in the new administration, we were told it would keep unemployment below 8% and stabilize the economy, building the foundation for a robust economic recovery. But with official numbers showing unemployment continues to push 10%, it has become evident that the enormous federal spending has done nothing but create or sustain federal and state public employee jobs, while helping states to postpone for only a short time the day of reckoning over their unsustainable deficits and public pension fund obligations.

Recently, I was at an event where a speaker from a state governor’s office reported on the application of stimulus funds, including a discussion of how the first round of money was distributed to state and local governments to employ public workers.

I asked the speaker: “If the purpose of the stimulus is to put people back to work, why are we spending the money first on those jobs that are subsidized by taxes, versus the kind of jobs that help create more jobs?”

He argued that teaching, police and fire service jobs are positions essential to a society and require first attention.

I responded: “Why wasn’t the initial expenditure of stimulus money aimed at creating manufacturing jobs that have a four- to five-to-one multiplier effect on the economy, or in promoting the logistics industry with its two- to three-to-one multiplier, instead of public employee salaries and benefits, which have little or no multiplier effect?”

The speaker answered that the public sector can convert cash into jobs more quickly than the private sector.

However, recent research by economists, including the International Monetary Fund, has found the opposite: This kind of public sector spending immediately crowds out other components of the gross domestic product — investment, consumption, net exports — and by a large amount.

This explains why we have seen nearly zero private sector job creation and burgeoning public debt resulting from stimulus spending. The first jobs state and federal governments sought to protect were jobs that do not grow the economy or develop opportunities for laid-off workers to return to the workforce. Instead, they were those that boast powerful public-sector constituencies but do nothing to ensure that more private-sector people can bring home a paycheck.

I intend nothing negative regarding the value, necessity or quality of public-sector jobs. Instead, I would like our policymakers to take some time to focus on our spending in terms of which jobs create the most other jobs, while at the same time building a strong foundation for future economic growth.

During the Great Depression, President Roosevelt invested public funds in vast public works projects like the Tennessee Valley Authority, Hoover Dam, highways, harbors and waterways.

These projects leveraged government spending to put private-sector people back to work, while forming the first building blocks of an infrastructure system that later became the underpinning of our nation’s unprecedented post-war prosperity — and the envy of the world.

Although some highway projects have been touted as “shovel-ready” by stimulus advocates, the vast majority were already under way, and there has been no attempt to address major traffic choke points in a bold and systematic way. I would challenge anyone in the administration or Congress to identify a single project funded by the current stimulus spending that has engaged the private sector to benefit our country on a scale similar to the Roosevelt-era projects.

It is because of this insufficient focus on America’s infrastructure needs by our policymakers that those of us who work in the nation’s supply chain now find we have incredible table stakes at risk in the most recent job-creation debate.

In fact, the stakes at risk are nothing less than our future as an industry.

No one can get around the fact that the United States is a global trading economy based in a country that spans an entire continent. We depend on all modes of transportation to sustain and grow our economy. Each mode relies on a dependable, safe and reliable highway system to move both freight and people efficiently and productively. Spending on highways strengthens connectivity for people and freight by reducing costly congestion and delays.

We know that increasing supply chain velocity puts people back to work in jobs that inevitably result in additional jobs being created and more tax revenues that support teachers, police and firefighters.

The International Warehouse Logistics Association, American Trucking Associations and everyone else in America’s supply chain need to unite in beating this drum: If we are going to have a true stimulus program, we need to apply the money first to the choke points in our freight transport system identified by ATA. Let’s fund those improvements and get people back to work on jobs that produce more jobs.

For a stimulus we can believe in, begin by remembering what those who came before us accomplished by building a revitalized economy instead of undermining it.

Founded in 1891, the International Warehouse Logistics Association, Des Plaines, Ill., represents commercial warehouse operators and third-party logistics providers in the United States and Canada.