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The Potholes in Public Works Programs : Infrastructure: Lessons from the New Deal and other programs show wide-ranging benefits, but also how waste and delay can thwart the goal of stimulating the economy.


In the Great Depression, President Franklin D. Roosevelt's New Deal put people back to work with multibillion-dollar public works programs that built schools, roads and dams--but also paid people to lean on their shovels and, the saying goes, gave a bad name to leaf-raking.

Similarly, in the post-war boom of the 1950s, President Dwight D. Eisenhower launched the Interstate Highway system, another massive program that employed millions and changed the way the nation works--but also, some say, enriched many relatives of politicians.

Now, as the nation struggles to emerge from the worst economic downturn since the Depression, President-elect Bill Clinton has proposed spending billions of dollars to rebuild infrastructure--the nation's aging system of roads, sewers and communications lines--as a way to put people back to work and stimulate economic growth.

He can learn a lot from history, economists say. Past programs show that public works projects can result in wide-ranging benefits to the economy over the long haul. But they also demonstrate how waste and inefficiency can dilute the effects of such federal spending: Costs can rise, money finds its way into useless projects or politicians' pockets and projects take so long they fail to stimulate the economy in a meaningful way.

Economists still argue over how much public spending can improve the nation's competitiveness or productivity, compared to private investments. Some say it can spur significant economic growth; others say it helps only modestly.

"The consensus view at this point is that infrastructure spending is probably useful to the economy, but it is in no way, shape or form an elixir," said David Luberoff, assistant director of the Taubman Center for State and Local Government at Harvard's Kennedy School of Government. "Infrastructure spending encompasses a wide range of things that money can be spent on, and does not distinguish between good or bad investments."

Clinton has proposed $20 billion in new spending over the next four years to rebuild roads, bridges and sewer lines, as well as construct a high-tech telecommunications network. The goal is to create millions of new, high-wage jobs, smooth the transition from a defense-based to a civilian-based economy and improve the competitiveness of American industry.

Money would come from new taxes on corporations and wealthy individuals, deficit financing and user fees such as tolls and waste disposal charges. State and local governments would be asked to match any federal spending--and given responsibility for project development and management.

A crucial challenge for Clinton is to overcome fears that such a program will exacerbate the immense federal deficit. He has said it won't, partly because infrastructure spending will be offset by defense cuts.

Wherever the money comes from, the need for such work is clear. One widely quoted study, by economist David Alan Aschauer, estimates that total reductions in infrastructure spending over the past 25 years have contributed to a drop in productivity, depressed profits and impeded private investment.

While many economists dispute Aschauer's conclusions, others argue that Clinton's $20 billion amounts to less than half the total needed to restore the nation's crumbling roads, bridges and sewers and prevent further deterioration.

Even so, one has to reach back into history to find examples of comparably sweeping public works programs.

The first programs designed to boost a sagging economy and create jobs were those of Roosevelt's New Deal, notably the Public Works Administration and the Works Progress Administration.

From 1935 to 1942, the WPA spent $10 billion--roughly equivalent to $87 billion now--to provide mostly low-wage, low-skilled jobs to more than 8 million people, or about 20% of the labor force.

"To those who say that our expenditures for public works and other means for recovery are a waste that we cannot afford, I answer that no country, however rich, can afford the waste of its human resources," Roosevelt said in defense of the program in a 1934 radio address. "Demoralization caused by vast unemployment is our greatest extravagance. Morally, it is the greatest menace to our social order."

In just six years, WPA workers built nearly 20,000 schools, hospitals, libraries, gymnasiums, water and sewer lines, and about 130,000 rural roads. It's said now that a visitor to almost any small town in America can still see a park or post office built by WPA workers.

Still, because the program was designed primarily as a jobs program, it often funded projects with little utility or efficiency.

"Because they were concerned with getting people wages, the projects weren't thought out in ways that made them have some sort of goal," said Linda J. Lear, a history professor at the University of Maryland in Baltimore County and an expert on the New Deal. "They'd make a road, then fill it in."

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