• On initial impact, the multipliers range from 1.5 to 3.

• In the medium run, the multipliers can be as high as eight.

• Over a 10-year horizon, there is an average multiplier of about 2.

The bank was actually surprised to find that these numbers were noticeably larger than those typically found in the literature on the effects of government spending.

Stimu-dollars

So just how did the infusion of $27.5 billion in federal highway grants to states as ARRA stimulus money affect state GSPs?

As the bank notes, “ARRA was designed to have strong short-term effects. In general, infrastructure projects are not viewed as effective forms of short-term stimulus because of the long lags between authorization, planning, and implementation.

By the time the projects get under way, a recession may be over. The extra spending could ultimately end up feeding an already booming economy.” Clearly not a problem in this case.

To address this problem the Administration said the money had to be used quickly.

But highway spending, even rapid highway spending, in a recession (when productive capacity is underutilized)might affect output in a substantially different way than spending during more normal times, the bank hypothesized.

So the bank looked into whether unanticipated changes in highway spending in 2009 and 2010 had a different effect on GSP than in other years they looked at. And found that the multiplier was around four times.

“This suggests that highway spending can be effective during periods of very high economic slack, particularly when spending is structured to reduce the usual implementation lags,” says the bank report.

SAY WHAT?

“I think they do represent the wave of the future in the 10-15 largest urban areas,”

— Bob Poole, director of transportation policy at the Reason Foundation, on HOT “dynamic pricing” toll lanes.

Red State, Blue State, Slow State, Stopped State.

What color is your highway congestion?

A new analysis by the Washington Policy Center shows that nine of the top ten cities with the worst traffic delays in the country are blue states. The odd one out is number 10, Austin, Tex.