Rebar Getting Its Fair Share of Stimulus Dollars?

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Ferrous Metals, Macroeconomics

This is a tale of two cities (states rather), Ohio and Illinois. The first story, mentioned to us by a colleague in Ohio, covers $774m of stimulus dollars given to the state of Ohio for shovel-ready highway projects, according to this story from the Associated Press.   Of this $774m, approximately 7% (or $57m) will go toward planning and preliminary studies. Infrastructure stimulus comes in many different packages, I guess, though this does raise some interesting questions.

What will irk some, no doubt, is not that these studies don’t have value (I’m sure some of them do) it’s that they don’t have a multiplier effect in terms of stimulating the economy right now. Let’s think about it – $57m spent to conduct feasibility and planning studies at an average cost of $150/hour per employee vs. let’s go crazy here (using GM’s fully loaded cost of an FTE) at say $75/hour per employee (not to mention the materials used for infrastructure projects) and it’s easy to see which use of taxpayer dollars will have a bigger impact on the economy. But my next question (and that of my colleague) relates to who would conduct the feasibility studies? Would that $57m go toward external firms or be used by existing state government workers as a means to help retain government jobs?

As for the tale of the other state, Illinois, (and please note, I live in this state), according to Crain’s Chicago, Illinois is getting a jump on the federal stimulus program, claiming more than 12% of the road and bridge projects approved so far by the U.S. Department of Transportation. The article almost makes it sound like Illinois will receive more than its fair share of federal dollars. But according to the article, Illinois can receive up to $935m in funding for highways and bridges. Though larger than Ohio’s share, the dollar amount may be comparable. According to this somewhat dated (but chock full of good Illinois transportation nuggets) article (2005), Illinois has the third largest interstate highway network. Another interesting point from that article relates to the dollars needed annually to support Illinois’ roadway needs ($2.5b to $3.7b).

If you happen to do business in New York City, you can track how the city is spending its $260m+ of infrastructure stimulus dollars to improve roads and bridges. The site provides a paragraph description of specific projects, many of which will stimulate some metals demand. But if you really need a laugh today, check on this site where you can see how each state creates visibility into how stimulus dollars are spent. I love the Illinois site because it allows visitors to actually suggest their own projects.

What’s not to love about politics in Illinois? Re-bar anyone?

–Lisa Reisman

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