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The Corner

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What’s in the ‘American Jobs Act’?



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Republicans wanted President Obama’s jobs plan in writing, and now they have it. Here is the text of the “American Jobs Act.” At 155 pages, it is (by Obama standards) relatively easy reading. I haven’t digested the whole thing just yet, but here are a few nuggets that stand out at first glance:

Transportation funding: The bill sets aside $50 billion for transportation projects, mostly in the form of grants and guaranteed loans, including $27 billion for “immediate transportation infrastructure investments” on highway and rail projects, including:

  • $4 billion in grants for “high-speed rail projects,” at least 85 percent of which must be spent on “the development of entire segments or phases of intercity or high-speed rail corridors.”
  • $2 billion (on top of that $4 billion) for Amtrak.
  • $2 billion for “airport improvement.”
  • $105 million for “the Puerto Rico highway program.”

I can’t speak for Puerto Rico, but it’s pretty hard to dispute the notion that the United States’ infrastructure could use improving. That said, the Obama administration has already spent billions on transportation infrastructure projects and what do they have to show for it? Consider the following chart, which shows funding levels for the Department of Transportation since Obama took office:

               DEPARTMENT OF TRANSPORTATION FUNDING

2008 level: $10.7 billion
2010 level: $21.3 billion
“Stimulus”: +$48.1 billion
Increase (2008-10)
$10.6 billion (+99%)
Total two-year increase (including stimulus):
$58.7 billion (+549%)

By comparison, between 2000-2008, the department’s budget grew just 35 percent. Add another $50 billion from the AJA and you’d have a whopping 1016 percent increase from 2008 levels. Again, what does the administration have to show for it? Plenty of signs proclaiming the brilliance of the first stimulus, but what else? Obama himself admitted that “shovel ready wasn’t as shovel ready as we expected.” And yet the money got spent, and now he wants $50 billion more. Maybe it’s because all that money is being poured into speculative black holes like “high-speed rail.” As The Washington Examiner’s Conn Carroll explained in August:

Obama’s failed stimulus included $8 billion in spending for high-speed rail projects including $3 billion for a California project…

So how is that California high-speed rail project going? When California voters first approved state funding for the project, they were told it would cost $33 billion to build a line from Los Angeles to San Francisco.

But last Tuesday, the California High-Speed Rail Authority released new cost estimates showing the initial section of track between Merced and Bakersfield will cost $13.9 billion alone. The cost of that stretch had been originally pegged at $6.8 billion.

Extrapolating that cost increase out for the whole project and the final price tag could reach $87 billion. California only has one-fourth of that total on hand and no plan for where to find the rest…

Oh well. Now that President Obama has shown that he has no qualms about blowing $500 million on “green” boondoggles like Solyndra (more on that later), what’s another $4 billion (on top of the original $8 billion) wasted on something as demonstrably impractical as high-speed rail? And there could be even more money on the line if the next item were to be enacted.

Infrastructure bank: The AJA establishes the “American Infrastructure Financing Authority” (a.k.a. the infrastructure bank) as a “wholly owned government corporation.” The purpose of this new “government corporation,” is according to the bill, “to facilitate investment in, and long-term financing of, economically viable infrastructure projects of regional or national significance.”

Who decides which projects are “economically viable” and “of regional or national significance”? A board of unelected bureaucrats, that’s who. AIFA’s board of directors will consist of 7 members, each appointed by the president, “not more than 4 of which” can be from the same political party. They will preside over an annual fund of $10 billion that is set to grow to $20 billion after two years, before settling at $50 billion (annually) after 10 years. By 2014, AIFA’s “administrative costs” alone will reach up to $50 million per year. A few other notable provisions of the infrastructure bank:

  • Creates a “Center for Excellence to provide technical assistance to public sector borrowers.”
  • Contains a provision prioritizing “geographic diversity” in the selection of projects for funding.

“Green” projects: A number of the bill’s provisions refer directly to the terms outlined in the American Recovery and Reinvestment Act (Stimulus 1.0), which, of course, contained myriad special preferences for “green” technology (Solyndra) and other “clean energy” projects. The AJA is no different. In authorizing $25 billion for the “modernization, renovation, and repair”of secondary and elementary schools,” the bill lists the following activities as things that would qualify for funding:

  • “repairing, replacing, or installing roofs (which may be extensive, intensive, or semi-intensive ‘green’ roofs).”
  • “green cleaning” programs.
  • “installation or upgrading of renewable energy generation and heating systems, including solar, photovoltaic, wind, biomass (including wood pellet and woody biomass), waste-to-energy, solar-thermal, and geothermal systems, and energy audits.”
  • “modernization, renovation, or repair activities related to energy efficiency and renewable energy, and improvements to building infrastructures to accommodate bicycle and pedestrian access.”

When applying for funding, states are required to include “a description of how the State will give priority to the use of green practices,” as this will be taken into account and considered a priority in determining who gets funding and how much. Again, perhaps a noble goal, in the absence of any practical concerns (e.g. cost), but the administration’s unwillingness to scale back its “green” agenda in the wake of the Solyndra debacle is downright astonishing.

“Offsets”: This is the part where the administration proposes to “pay for” the cost of the plan — by way of a massive tax increase. However, the bill makes clear that these are merely recommendations to be presented to the supercommittee on deficit reduction. The AJA, if passed, would amend the Budget Control Act enacted last month and replace the current supercommittee goal of $1.5 trillion in deficit reduction (over 10 years) with a new goal of $1.95 trillion, in order to “pay for” the new spending (which would go into effect immediately). But the bill goes on to say that if the supercommittee introduces — and Congress passes — a plan that reduces the deficit by just $1.65 trillion over the next decade, the new tax provisions would no longer go into effect. Here’s the text:

If a joint committee bill achieving an amount greater than “$1,650,000,000,000″ in deficit reduction… is enacted by January 15, 2012, then the amendments to the Internal Revenue Code . . . shall not be in effect for any taxable year.

In other words, the administration wants to spend $450 billion now, and plans to “pay for” the new spending by raising that same amount in taxes over ten years. But according to the language of the bill, if I’m reading it correctly, it’s totally cool if the supercommittee only comes up with an extra $150 billion (again, over a decade). If that happens, the tax hikes are off. But we’d still be $350 billion deeper in debt, and actually quite a bit more when you consider the backloaded cuts vs. upfront spending and additional interests payments on the new debt the president wants the government to take on “right away.” Go figure.



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