The competing claims about economic “stimulus” proposals appear complicated. However, simple economic analysis goes a long way toward providing a neutral assessment of them.
Category Archives: Infrastructure
On July 19, the Senate approved by roll call vote of 56-43 an amendment to the Water Resources Development Act of 2005 that would require peer review of water projects undertaken by the Army Corps of Engineers.
The text of Senate Amendment No. 4681 is below, as reported in the Congressional Record
Neutral Source will return with an analysis of the text, comparing it and contrasting it with the peer review models that apply to federal regulation.
Recently Neutral Source posted a discussion of whether benefit-cost analysis is ethical, using China’s Three Gorges Dam as an illustration. Benefit-cost analysis has many opponents in U.S. regulatory settings. Some like Lisa Heinzerling of Georgetown University Law Center have argued strenuously that the methods are “inherently flawed” and thus inappropriate for informing decision-making, much less for guiding them. We were intrigued because environmentalist opponents of the Three Gorges Dam are plentiful, but we could not locate any who said that the decision whether to build it ought not rest on a rather strict normative application of benefit-cost analysis. Rather, all the objections we have found concern whether the analysis was performed properly.
The Environmental News Service reports that the Three Gorges Dam will “open” on June 6. Cofferdams that were built as temporary barriers are scheduled to be demolished by explosion that day.
The Washington Post has a Page One story by Edward Cody about the impending completion of China’s Three Gorges Dam. The massive water project has been the target of extensive criticism from (mostly Western) environmentalists, primarily because they say it fails a benefit-cost analysis.
The Post’s headline writer says, “Three Gorges Dam Nears Completion, at High Human Cost.” What costs does Cody mention? In the lede he says the dam has “displaced more than a million villagers,” but also acknowledges that the Yangtze river is a “flood-prone waterway that has nurtured and tormented the Chinese people for 5,000 years.” In the 12th paragraph, Cody notes that thousands of people have died in periodic floods, most recently 2,000 people in 1998. So both leaving the Yangtze River untamed and building the Three Gorges Dam have “high human costs.” How should these costs be measured and compared?
Two articles of interest appeared in the Washington Post Sunday “Opinion” section, one by reporter Michael Grunwald and the second by freelance author John Barry. Grunwald and Barry say the Army Corps of Engineers is a failed civil works agency whose errors were responsible for the flooding of New Orleans after Hurricane Katrina. Moreover, they place the blame for the Corps’ failure squarely on Congress.
One thread running through both articles is that it really doesn’t matter whether these projects actually deliver any of the benefits promised. The essence of earmarking is that Federal spending is its own reward. It is in every Member’s interest to deliver the largest possible share of federal spending to his own district or state. Spending on construction projects is especially attractive because it creates or sustains employment.