Putting Infrastructure Spending Estimates in Context

Source: Ethan Pollack, Economic Policy Institute, January 2009

On Monday morning, the Congressional Budget Office released a report estimating that infrastructure investments would have a “delayed outlay rate”. According to the CBO report, only 8% of the recovery package money would get spent in what remains of fiscal year 2009 and 40% through fiscal year 2010. Opponents of infrastructure spending seized on this as evidence that such spending is ineffective as economic stimulus. It appears as though the CBO has directly contradicted the argument behind the centerpiece of President Obama’s recovery package.

The CBO report, however, is partly based on historical spending patterns, which are of limited relevance for a number of reasons. In the past there was no need to get money into the economy quickly; this time around, government agencies have an incentive to speed up the spending. The recovery package will probably also contain a “use-it-or-lose-it” provision, which will give priority to projects that can be started quickly.

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