Even if it's too early to say the recession has completely ended for the United States, there's a growing consensus among economists that we're past the bottom of the trough. There's also general agreement that the whopping $787-billion stimulus package, known formally as the American Recovery and Reinvestment Act of 2009 (ARRA), has not done what it was supposed to do get the economy moving.
While certain statistics may signal a waning recession, average Americans are not feeling it. Unemployment remains high at close to 10 percent and home foreclosures continue at a record pace. The unemployment rate doesn't include the 3.7-million-plus people who are reluctantly working only part time because of the poor labor market, and it doesn't include the workers who have given up scouring want ads for seemingly nonexistent jobs. When those people are added to the numbers, the real unemployment rate rises to 15.6 percent, according to the U.S. Bureau of Labor Statistics.
Nearly seven months after the economic stimulus package was passed, only about 12 percent of the spending portion of the $787-billion package—$288 billion is tax cuts—has been given out. The limited capacity of government to swiftly push stimulus funds into the economy has contributed to a backlash in public support for health-care reform, with its estimated $1.3-trillion price tag.
A central problem, which the American Iron and Steel Institute (AISI) leadership indicated at the time the details of the stimulus package were being developed, is that too small a portion of it was dedicated to infrastructure projects, the type of contracts that directly generate jobs while making much-needed improvements to America's transportation system. Funds directed to education or social programs do not serve to stimulate the economy, yet a significant portion of the dollars spent thus far have gone to those types of projects, including child care and food stamps.
Although some stimulus funds were targeted toward infrastructure, little of that money has made its way into the economy. The Transportation Department and the Energy Department, for example, have spent less than 2 percent of the more than $45 billion each was allocated. And once the money is awarded, recipients will need time to bid out the work. Unfortunately, in the early going most infrastructure-related stimulus funds have been doled out for road resurfacing, pothole repair and other immediate needs that are not of the longer-term, jobs-producing type of contracts.
Another challenge to the success of the stimulus package is that the logical "Buy American" provision, which requires that projects favor U.S.-made iron and steel as well as other manufactured goods, was met by some of our trading partners with a negative outcry. It seems like simple common sense that "Buy American" provisions should help generate demand for U.S.-produced materials and create American jobs, exactly what a stimulus plan is supposed to do with U.S. taxpayers' dollars.
Perhaps because the Chinese just went ahead and launched its own $586-billion stimulus program and quickly funneled Chinese funds directly into construction projects using Chinese-made materials but without calling it "Buy China," they escaped the kind of global scrutiny to which the United States has been subjected. One defender of "Buy American" suggests that Congress should have called it something closer to what it is supposed to do, such as the "American Stimulus Provision."
Because the Obama administration was slow to respond and position the "Buy American" provision properly, it unfortunately enabled the Europeans and others to incorrectly characterize Americans as protectionist despite the fact that "Buy American" provisions in the economic stimulus package are consistent with U.S. international obligations. Not until five months had passed did we see Secretary of State Hillary Clinton defend "Buy American" restrictions in the U.S. economic stimulus legislation at a June 13 meeting with Canada's foreign affairs minister. More recently, President Obama spoke up at the "Three Amigos" summit Aug. 10 in Mexico and reiterated that the "Buy American" clause is legal within existing trade agreements and does not threaten America's trading partners.
It's interesting that a number of newspapers have been slow to point out in regard to Canadians' complaints about the "Buy American" provisions that they have only themselves to blame because the Canadian provinces never signed onto the federal trade procurement agreement between the U.S. and Canada negotiated in the mid-1990s. For example, this fact is only pointed out in the last few paragraphs of a 15-paragraph Aug. 13 story in the Washington Post headlined "'Buying American' Puts Strain on U.S. Trade with Canada." If you work your way down to paragraph 12, the reporter reveals that Canada's federal government, at the time that the World Trade Organization's Procurement Agreement and the North American Free Trade Agreement (Nafta) were negotiated, exempted its provinces from coverage, thus excluding them from U.S. state procurement markets (a function of reciprocity).
The office of the U.S. Trade Representative (USTR), by the way, has made clear that it is willing to discuss a deal with Canada, but that any deal must be reciprocal. Its recent statement noted, "USTR is always willing to sit down with our trading partners to discuss access to our procurement market when they are ready to enter agreements with specific commitments to provide reciprocal opportunities for U.S. goods, services and suppliers."
But let's get back to the logic of making transportation and infrastructure projects part of the stimulus package as a way to achieve economic headway. The steel industry is just beginning to see contracts being awarded throughout the states for projects funded with ARRA dollars. For the most part, they are not generating huge demand. For example, a truss bridge replacement project in Lewis, W.Va., requires 98 tons of steel; another in Portage Kent, Ohio, will use 270 tons of steel; and four bridge replacement projects in Kalamazoo-Portage, Mich., will use 1,510 tons of steel. Probably the best example of a favorable impact is in North Carolina, where 2,900 tons of structural steel will be used in the state's bridge projects partially as a result of the ARRA funding
The stimulus package, while helpful in the long run, will probably not provide the bump that many people anticipated for steel construction. That is why we are not seeing a more decided boost in steel demand thus far. Since the stimulus was more of a jobs bill, it will more likely be 2010 when we see contracts for long-span bridges and more sizable building projects get under way with a resulting impact on steel construction.
While I don't want to discount the stimulus funding, we shouldn't encourage any thinking that it can substitute for full funding of the next surface transportation bill. The stimulus was helpful, but it isn't a panacea for U.S. infrastructure needs or the steel industry. It was only a good start.
The AISI continues to actively lobby for swift passage of the Surface Transportation Authorization Act at a robust funding level in a timely manner. Some members of the Senate and the administration are pushing for an ill-advised 18-month extension of current law. This uncertainty is causing state transportation departments to delay moving forward with major projects.
A six-year reauthorization of funding now of transportation infrastructure needs (highways, bridges, waterways, rail, aviation and pipelines) would ensure the United States has an effective and efficient infrastructure system. The surface transportation bill would provide the federal funds for infrastructure projects that generate jobs and revenue at the state and local level. That, in turn, would have a positive impact on a wide array of individuals from steel producers, to suppliers, to manufacturers of goods, all which will aid in the recovery of our national economy.
Thomas J. Gibson, is president and chief executive officer of the American Iron and Steel Institute (AISI).
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