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Economics

When $1 Billion Doesn’t Buy What it Used To — And When it Does

Since Washington's economic recovery debate first began last fall, advocates for greater infrastructure investment have invoked one phrase more often than almost any other: "Every $1 billion spent on transportation creates 47,500 jobs."

one_billion_dollars.jpgHow many transportation jobs could this $1 billion create? (Photo: Infosthetics)

Sen. Charles Schumer (D-NY) and Rep. Jerrold Nadler (D-NY) used that figure in December, attributing it to the American Association of State Highway and Transportation Officials (AASHTO). Sen. Ben Nelson (D-NE) was a little less specific in March 2008, shortening the claim to "over 40,000 jobs created."

But by the time Democrats were using AASHTO's estimate, the group had already lowered its number to 35,000 jobs created, attributing the claim to "analysts." And it turns out that members of Congress have been using the "over 40,000" range since at least 1997, before years of inflation limited the value of that hypothetical billion dollars.

Former Transportation Secretary Mary Peters told Streetsblog Capitol Hill yesterday that she was amazed the outdated "47,500 jobs" number  had remained an article of faith at the U.S. DOT. In fact, Peters' chief economist tried to use the number last year to bolster a bizarre argument against spending stimulus money on infrastructure -- before getting taken down by my colleague Ryan Avent.

As Ryan observed at the time, casting transportation spending as a matter of economic productivity rather than job creation was a stunningly out-of-touch move by the Bush administration, and one that ignored the likelihood of imminent double-digit unemployment.

But focusing on that aging AASHTO estimate of job creation (also credited to the Federal Highway Administration) overlooks the fact that a more updated study of that billion-dollar hypothetical was recently completed ... for transit.

The American Public Transportation Association (APTA) concluded in March that $1 billion in transit money would create "betwen 24,000 and 41,000 jobs," depending on how the spending was targeted. And APTA's data showed that transit operating money, i.e. what it takes to run trains and buses, creates more than 50 percent jobs per dollar than money for capital investments.

So until the puzzle of counting highway stimulus jobs can be solved, one might think Congress would focus on the demonstrable job-generating potential of transit operating aid. And they have -- to the tune of 10 percent.

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