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Viewpoint: Bouncing Back?
By Blake V. Peck, PE, CCM
McDonough Bolyard Peck, Inc.
It is no secret that the construction industry has suffered a number of setbacks over the past year. By any account, we are in the most severe economic downturn in a generation. Of course, we know that historically every recession has been followed by an upswing, and a recent Wall Street Journal survey of economic experts indicated that the recovery should begin by late 2009. However, this has been a full-scale global recession affecting the entire world’s financial institutions, and those same experts believe it will take anywhere from three to five years to dig out.
To assist in the U.S. recovery, President Obama proposed aggressive federal spending to create jobs. To this end, Congress has passed a $787 billion “stimulus” package. Unfortunately, only 17% of this package, the $131 billion targeted for public works construction, appears to have any real job creation potential. Moreover, due to the number of requirements and restrictions associated with these stimulus construction funds, most agencies appear to be forced to go with short term or maintenance projects instead of the many needed larger projects. These larger programs would address longer term infrastructure needs as well as create and sustain far more jobs throughout the design and construction industry. One has to believe that this would be a far better overall investment of our public monies.
Additionally, many public works agencies were struggling with funding of their construction programs before the economy faltered, and there is a need for developing a more permanent solution than stimulus funds. To be candid, infrastructure needs in this country have been neglected far too long for the political expediency of not raising taxes while not developing alternate funding mechanisms. Infrastructure deficiencies have now reached a critical mass that cannot wait any longer without risking catastrophic consequences. We simply must develop long term, sustainable funding streams to enable our engineering and construction professionals to address this critical need.
Regardless of where the money is invested, almost everyone agrees that there needs to be better accountability and transparency for how it is spent. Experience gained from Iraq and post-Katrina tells us that emphasis on speed over process produces inefficiency and increased costs. A disciplined programmatic approach is necessary to provide the proper management and oversight for this significant investment.
President Obama has furthermore correctly identified that we must also solve the credit crisis. Since last summer, many worthwhile projects throughout the country have been suspended, postponed or completely cancelled due to the sudden lack of available financing. Despite huge federal investment in the nation’s financial institutions, project financing continues to lag.
The U.S. has put up trillions of dollars to combat this recession, and there is great fear that this large debt will produce results similar to the spending of the late 1970’s. We spent freely to fight a recession until the ultimate result was a rare economy with both high inflation and high unemployment when these are normally mutually exclusive. The Federal Reserve and our nation’s leaders have a great challenge on their hands to show the appropriate discipline and restraint not to repeat this mistake.
Despite the current challenges to the industry, MBP is confident that recovery is feasible by adopting long term, larger programs and increasing transparency in the management of stimulus funds. Rest assured, like other recessions before this one, we will bounce back, and have already begun to do so. In these tough economic times, know that the construction industry, like other industries, will once again prosper.
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