Nearly a decade ago, Washington turned to tax cuts as the solution to unemployment in the economic recession following the September 11th attacks. But at President Obama's jobs summit this Thursday, he will be getting advice to go down a different route--direct federal spending through public works programs to create jobs. Economist Paul Krugman, who will be attending the summit, wrote in the New York Times on Sunday that "it’s time for at least a small-scale version of the New Deal’s Works Progress Administration, one that would offer relatively low-paying (but much better than nothing) public-service employment."
Tax credits will still be on the table, of course--a $3,000 to $5,000 per-employee credit is likely to be offered to businesses. But Obama has also come under pressure to spend billions on public works. Last month AFL-CIO President Richard Trumka gave a speech calling for the federal government to "directly create jobs that put people to work in our communities." A pro-public works stance would fit in with previous comments Obama has made in speeches about a greater federal government role in infrastructure and jumpstarting the green economy.
But while public works spending would be a break from the Bush administration, many American presidents have launched ambitious jobs programs in the past. Decades after their passage, economists and historians are still divided in many cases over the effectiveness of these job creation plans. Expect any plans that might come out of this summit to be divisive as well.
A look at two of the most significant federal public works programs illustrates why:
Works Progress Administration:
The Works Progress Administration was the big daddy of New Deal public works programs. Championed by President Franklin Delano Roosevelt and passed by Congress in 1935, the WPA spent about $11 billion until its completion in 1943 to employ millions of Americans a month to build roads, bridges, art installation, parks, airports and much more.
How was it sold? Roosevelt campaigned for reelection in 1936 on promises of a second New Deal, with the WPA as the centerpiece. In a campaign speech Roosevelt explained the logic beyond the new programs, saying "…we will provide useful work for the needy unemployed; we prefer useful work to the pauperism of a dole."
Did it work? Whether or not the New Deal actually alleviated the Great Depression continues to be debated by historians, and the effectiveness of the WPA is at the heart of that debate. Defenders of the WPA point to the fact that unemployment and gross domestic product recovered to pre-Depression levels in the years following the second New Deal. Critics respond that the WPA had little to do with the recovery. GDP actually fell from 1937 to 1938, and unemployment did not fall out of the double digits until the onset of World War II. A 1990 paper by Boston University economist Robert Margo found that the WPA may have "exacerbated" long-term unemployment by keeping people in unskilled jobs, which made it harder for them to join the private sector when the public works jobs ended.
Interstate Highway System:
At an estimated cost of $128.9 billion in 1991 and spanning over 40,000 miles, the Interstate Highway System is one of the largest public works projects on the planet. President Dwight Eisenhower signed the initial legislation to build the system in 1956, though it would take over three decades to complete.
How was it sold? The Interstate was borne out of not economic recession, but national security concerns. At the beginning of Cold War tensions, and less than a decade after World War II, Eisenhower sold a more comprehensive road system as necessary to efficiently move troops around the country in case of military invasion. But economics did play a role--before the 1952 election, Eisenhower said that the highway system was "as necessary to defense as it is to our national economy and personal safety."
Did it work? The Interstate is typically regarded by historians as a highly successful investment that significantly reduced barriers to interstate commerce. One study claims that every dollar spent on the system generated a return of six dollars of benefit. But even here, there is a legacy of controversy. Some scholars have maintained that the political choices behind the construction of the Interstate were driven by the influence of automotive companies, not the public interest. They argue that the Interstate entrenched the car as the only choice of transportation for most Americans, leading to environmental pollution, congestion, suburban sprawl, and unwalkable communities. Some historians also link the Interstate to the growth of poverty and crime in the latter half of the century--the construction of highways also resulted in "urban renewal" projects in inner cities in which entire neighborhoods were torn down and many residents displaced to public housing.