Economist Joe Cortright urges weatherizing jobs

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Sunday, March 01, 2009
As our federal and state leaders consider what form the stimulus package should take, they should put a premium on efforts that put lots of people to work quickly. A stimulus program that doesn’t create jobs until 2010 will be of little value in preventing the recession from getting much worse.


{safe_alt_text}We now know that the U.S. economy has been in recession since December 2007. What is most striking about our current situation is how much it has worsened in the past months. What was a gradual slowing is now an accelerating downward spiral. Successive announcements of layoffs at Intel, Microsoft, Starbucks and other companies only further depress consumer confidence and aggravate the downturn.

The Fed and the Treasury have taken unprecedented heroic measures to quickly pump more liquidity into the financial system. Even so, banks, businesses, investors and consumers are still in full retreat. But with key interest rates near zero, monetary policy has essentially run out of ammunition. Something more needs to be done — and quickly — to reverse the negative, and self-reinforcing psychology that is driving all markets downward.

The bad news is that we don’t know how bad this downturn will be, or how long it will last. The good news is, we know what we need to do. This is the Keynesian moment. This is the time for a fiscal stimulus — public spending that creates jobs.

There’s lots of agitation for spending on big-ticket public works projects, like roads and bridges. But except in the case of projects that are already planned, designed and permitted, the lead time for such projects is frequently 12 to 18 months. While some projects truly are shovel-ready, the federal and state governments should pour resources into a program of fast-acting relief.

State and local efforts to boost the economy are well and good, but the heavy lifting must be done by the federal government. The Oregon Legislature’s plan to bond $175 million will help some, if it can be spent quickly, and the City of Portland is promising to accelerate plans for capital projects already in the pipeline, but the federal stimulus totaling at last count more than $6 billion statewide will be the real impetus for recovery.

One excellent choice would be to spend money on weatherization of homes and public buildings, and on addressing the backlog of deferred maintenance, particularly in the nation’s schools, universities and other public buildings. These projects not only put people back to work quickly, they produce long-term benefits in energy savings and lower operating costs that will also benefit the economy for years to come.

They can be undertaken quickly. Most such projects require no time-consuming planning or permitting. And it’s estimated that there are tens of billions of dollars of cost effective weatherization projects that homeowners and property owners don’t undertake primarily due to lack of financing systems that overcome upfront costs.

More of this money goes into worker wages that will be spent and gets the economy moving. Weatherization and maintenance projects are labor intensive — most of the cost is the wages paid to the workers who do the installation in a local community, rather than paying for materials, many of which can be imported.

Weatherization and maintenance projects have the added benefit of hiring exactly the kinds of construction workers who have been most affected by recent layoffs. The big decline is in residential construction, where home starts are off 50% or more around the country. The hard-hit occupations are carpenters, plumbers, dry-wallers, electricians and roofers, and the firms that supply them. In Oregon, employment in residential construction is down 17% compared to a year ago. The declines are not nearly so bad in other parts of the construction industry. Commercial construction (office buildings, stores, warehouses, factories) is actually up 1% over a year ago, and heavy and civil construction (roads, bridges) is down just 5%.

Weatherization and maintenance projects are very small, which means they can be organized quickly, and the activity can be spread out to every community in the state (or the nation). That way, workers can find work locally, rather than having to travel to job sites. A problem with large-scale projects is that they can create local job shortages in some places, while other communities get little relief.

Small-scale projects have another benefit: In addition to being started quickly, they also can be wound down quickly as the economy recovers. The history of past fiscal stimulus programs is that much of the money gets spent long after the economy has recovered.

Our economy needs fast-acting relief — and our stimulus package should focus on measures that can be implemented quickly.


Joe Cortright is vice president and economist with Portland consulting firm Impresa.


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