States, cities looking forward to promised federal infrastructure spending

November 14, 1992|By Gilbert A. Lewthwaite | Gilbert A. Lewthwaite,Washington Bureau

WASHINGTON -- Baltimore and Maryland, like cities and states across the nation, can't wait to get their hands on the sort of accelerated infrastructure spending President-elect Bill Clinton has promised in his administration's first year.

The U.S. Conference of Mayors has drawn up a list of 7,252 projects in 506 cities that it says would create 418,415 jobs at a first-year cost of $12.9 billion. On the list were 51 projects in Baltimore, which would create 3,570 jobs.

"It's something we eagerly look forward to," said George G. Balog, Baltimore's director of public works, citing $300 million worth of city highway and water projects waiting for funding. "By the time they give us the money, we could be ready to go on most of these projects."

John Goheen of Maryland's Department of the Environment, which has $3.5 billion worth of state water projects slated over the next five years, said: "We would welcome such an infusion of grant funds. Those funds would step up environmental benefits, health benefits -- and create jobs."

The department accelerated $100 million worth of spending on 52 projects in the first six months of this year. "We have had experience in accelerating projects for economic benefit," Mr. Goheen said.

Stephen G. Zentz, deputy state secretary of transportation, said his department was already drawing up a list of projects that would qualify for Mr. Clinton's program. "We probably have the capacity to do easily $50 million to $100 million fairly quickly," he said.

At his first press conference as president-elect, Mr. Clinton said Wednesday he wanted to accelerate funding for public projects "already on line . . . and ready to go in the first year." It will be the centerpiece of his effort to kick-start the economy.

One route he could take is to fund fully the existing highway and transit legislation. Such legislation authorized $20.5 billion for fiscal 1993 for the national highway program, but Congress limited the spending to $18 billion. Most states drew up plans on the assumption the program would be fully funded, which means there are at least $2.5 billion in highway projects ready to go.

The same legislation also authorized $5.2 billion for transit systems. But Congress made available only $3.8 billion, suggesting there are transit programs worth at least $1.4 billion on state books.

In August, the Federal Highway Administration asked states how much money they could use if any obligated funds were unused and returned. The demand was for a total of $1.8 billion but the returns amounted to less than $300 million, leaving another $1.5 billion of projects awaiting funding.

"The question is, how much more is there?" said Francis Francois, executive director of the American Association of State Highway and Transportation Officials. To answer that question, the association is surveying its members and expects to have a definitive total by December.

The problem for Mr. Clinton will not be finding worthwhile work to do on highways, transport systems and water projects, but paying for it.

The first-year cost of an infrastructure program is estimated at between $20 billion and $60 billion, depending on its scope. Most economists think he will have to borrow some of the money, increasing the deficit he promised to halve in four years. This could upset the financial markets and thus push long-term interest rates higher, which would counteract the economic expansion Mr. Clinton will try to produce.

"If it ends up being an honest $20 billion or so [increase in the deficit], the markets have that pretty well discounted now," said David Wyss, an economist with DRI/McGraw Hill. "But if it ends up being $50 billion, we are going to end up having some higher bond yields."

The trick for Mr. Clinton will be to convince the markets that any initial increase in the deficit will bring long-term economic growth, which will enable him to reduce the deficit in the next three years of his administration.

"I think the markets are reconciled to stimulus," said Jeff Faux, director of the liberal Economic Policy Institute. "I don't think anybody thinks that in the short term there are any negatives from increasing the deficit in order to jump-start the economy.

He continued: "The problem to worry about is whether this means the deficit will be out of control in the future. If you make it clear you have a government that understands that problem and is planning for deficit reduction . . . then I think the package certainly stands up."

To bolster his case, Mr. Clinton is likely to turn to the work of David Aschauer, an economist at Bates College, who has studied the links between infrastructure spending and long-term productivity growth.

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