AN INFRASTRUCTURE STIMULUS PLAN FOR THE COVID-19 RECESSION Adie Tomer, Joseph Kane, and Lara Fishbane July 2020 Overview Like most corners of American society, the Lower interest rates make borrowing cheaper COVID-19 pandemic has rattled the nation’s compared to recent years, reducing the upfront infrastructure. National driving levels dropped costs of generational projects. Infrastructure over 40% in April—the largest decline since World spending can also create immediate War II—while public transit continues to run with professional opportunities across a mix of few passengers. Internet data use is surging as design, construction, and operational jobs. The meetings, shopping, and social gatherings moved mix of short-term employment and long-term online. Safe water is an urgent concern and investment makes infrastructure an attractive electricity demand has been swinging wildly. area for federal stimulus. But even if these behavior changes subside, Which leaves a core question for federal there is already a more sustained threat to U.S. policymakers: How can Congress design an infrastructure: a large-scale recession. The labor infrastructure stimulus that responds to today’s market is completely upended, with over 45 recession while still making forward-looking million workers making first-time unemployment investments? claims between mid-March and mid-June. Household spending still hasn’t recovered, and At their core, the pandemic and its associated Black- and Latino- or Hispanic-owned small recession are stories of human suffering. This businesses have been hit especially hard. With means that any infrastructure stimulus program initial metropolitan data confirming a widespread must put people at the center. Congress should downturn, there is now little expectation for a fund policies that make essential services more quick, V-shaped recovery, despite some positive affordable, promote workforce development job reports. opportunities, and build projects with a more resilient, equitable future in mind. The benefit Such a swift economic contraction will be of a people-first strategy is it can stimulate overwhelming for governments and people. greater economic activity immediately while State and local governments have already cut ensuring benefits flow directly to households and infrastructure projects and related labor hours communities most in need. due to reduced sales and income tax revenue. These budgetary impacts will only grow if gas The country also should not simply replay the tax revenues stay below their targets, if transit 2009 stimulus. While the term “shovel-ready systems and airports remain half empty or worse, projects” still tends to lead conversations about and if unemployed workers stop paying their stimulus packages, few capital projects can move utility bills. For individuals, lost income starts a quickly enough to create substantial jobs or vicious cycle where some can no longer afford upgrade systems’ quality during a recession. Nor essential infrastructure services—whether it’s can the country afford to overlook environmental filling their car with gas or paying for in-home injustices that disproportionally impact our broadband—which only makes finding a new job most vulnerable communities. Instead, federal or getting to a grocery store that much harder. lawmakers should adopt policies that can immediately benefit disadvantaged households Amid these ominous trends, though, recessions and create training programs that lead to durable can also offer valuable opportunities to improve career opportunities. infrastructure and expand economic opportunity. AN INFRASTRUCTURE STIMULUS PLAN FOR THE COVID-19 RECESSION 2 This brief uses historical data and the earliest groups by securing multiyear funding for indicators from the COVID-19 downturn to workforce development in the skilled trades make the case for a people-first approach to and, potentially, full-time wages for 3 million federal infrastructure stimulus. We specifically apprenticeships recommend that Congress: • Launch a Boost Program (and associated • Launch an ASCEND Program to promote Boost Card) to help cover the cost of essential long-run economic competitiveness by transportation, water, energy, and broadband launching four public competitions and four services for over 50 million households private research investment programs that modernize water infrastructure, accelerate • Pass a Keep America Moving grant program clean energy adoption, expand broadband to protect state-of-good-repair initiatives networks and skills development, and address and labor markets by expanding direct transportation and land use environmental grants to state and local governments injustices. with requirements to spend on short-term The total cost of these programs would range maintenance projects from $167 billion to $327 billion. • Launch an InfraCorps Program to create and strengthen infrastructure career pathways for underrepresented and disadvantaged AN INFRASTRUCTURE STIMULUS PLAN FOR THE COVID-19 RECESSION 3 2 3 19-19 Figure 1.Annualiedvehiclemilestraveled(inbillions) system—the highway theU.S. of construction withthe 2020—corresponding to 1956 From thisdistinction. exemplify National drivinghabits equipment. energy-efficient of and development occupations, service to manufacturing shift from the suburbanization, suchascontinued changes, aslongstructural last don’t impacts these Yet use. infrastructure less into translates activity economic thatreduced isnoquestion there recession, andthecurrent recessions historic lookingatboth When sales.” wholesale-retail and production, industrial employment, income, real GDP, normally visibleinreal months, thanafew more lasting economy, the across spread activity decline ineconomic (NBER) Research Economic of NationalBureau The enduringimpact a more have factors demand,butstructural shockinfrastructure can Recessions S 1919HS TVM-119S19TV T 2 3 1 1 , , , , , , 0 0 0 5 5 5 5 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Dec-56 Jun-58 recession a defines Dec-59 Jun-61 Dec-62 Jun-64 Dec-65 Jun-67 Dec-68 Jun-70 asa“significant Dec-71 Jun-73 Dec-74 Jun-76 Dec-77 Jun-79 Dec-80 Jun-82 Dec-83 Jun-85 2). However, the largest sustained drop—which drop—which sustained thelargest 2). However, (Figure recessions and2007 2001, the 1990, during dropped Nationalridership distinction. asimilar demonstrates ridership Transit communities. automobile-oriented more building anddevelopers highways, building more governments activity, freight demanding more longersupplychains drivinghabits: reinforced due to rising VMTkept decades, six-plus over Yet 2007. in Recession andtheGreat the1970s of crises energy duringthetwo thecase especially was 1).This (Figure duringrecessions were (VMT) fell traveled miles only periodsinwhichvehicle Dec-86 concern thechief COVID-19, Priorto history. periodinU.S. expansionary economic longest duringthe in2014, underway—started is still Jun-88 Dec-89 Jun-91 structural patterns structural Dec-92 Jun-94 Dec-95 Jun-97 Dec-98 Jun-00 Dec-01 Jun-03 Dec-04 thatoverwhelmingly Jun-06 Dec-07 Jun-09 Dec-10 Jun-12 Dec-13 Jun-15 Dec-16 Jun-18 4 Dec-19 AN INFRASTRUCTURE STIMULUS PLAN FOR THE COVID-19 RECESSION Figure 2. Annualied public transportation ridership (in thousands) 199-19 11 1 1 9 9 8,500 8,000 7,500 7,000 6,500 O-9 A-9 O-9 A-9 O-9 A-9 O-99 A-1 O- A- O- A- O- A-1 O-11 A-1 O-1 A-1 O-1 A-19 S 1- A C S among transit professionals was investigating While structural changes keep pushing up what structural issues caused this drop-off—not most transportation usage, the pattern works temporary impacts from past recessions. in reverse for the energy and water sectors. The threat of climate change, potential for The same core pattern appears within intercity technological innovation, and changing consumer transportation. Commercial air travel dips during tastes all push toward greater efficiency and recessions, but long-run passenger levels keep sustainability across both sectors. This has growing as inflation-adjusted ticket prices fall resulted in 14% less electricity generation and the global economy continues to demand between 2001 and 2019, while total water use in more face-to-face interactions. In fact, the longest 2015 was lower than 1970 levels. While recessions period of sustained passenger drops after 9/11 have the potential to temporarily decrease had less to do with the 2001 recession than with demand within these two sectors—through security fears. Amtrak ridership—which began diminished industrial production and household a steady period of growth around 2000—also consumption in certain cases—the impacts are changed less due to economic cycles and more still fleeting relative to long-run trends, given because of improved performance, corridor the essential nature of energy and water use for investments, and changing consumer tastes. households and businesses. Freight activity has seen a similar trend (Figure So where does the 2020 recession fit within this 3). Though freight activity did fall during the past historical context? two recessions, there is a long-term upward trend over the past two decades. Unlike other recessions since the 1950s, COVID-19 shocked multiple infrastructure systems all at AN INFRASTRUCTURE STIMULUS PLAN FOR THE COVID-19 RECESSION 5 Figure 3. Transportation Services Inde, freight and ross Domestic Product (in billions of dollars) - A 1 $25,000 ross Domestic Product 1 $20,000 1 1 Freight Transportation Services Inde 1 1 80 $5,000 - - - -9 -1 -1 -1 S T S US E A once, and at an unusual