Why leaders look to infrastructure spending in recessions
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New York Gov. Andrew Cuomo on Wednesday called for major infrastructure spending in the New York City area as a way to jump start the region’s economy, which has been badly battered by the COVID-19 pandemic. Cuomo asked President Donald Trump to approve projects that would build a train to LaGuardia airport, expand the Second Avenue Subway and build a second set of tunnels under the Hudson River.
It’s not the first time leaders have turned to big infrastructure projects to spur growth during an economic downturn. During the Great Depression, the government employed millions of Americans through New Deal programs like the Works Progress Administration and the Public Works Administration that built roads, bridges and dams still around today.
So, with interest rates so low, could infrastructure investment help pull us out of the coronavirus crisis?
“The Keynesian-style folks would say [that] as the economy moves towards a recession — and all signs point towards a relatively sustained one — the government stepping in, stimulating demand in the marketplace, in particular for the purchase of everything from steel to concrete to actually employing folks, could be extremely helpful,” said Adie Tomer, a fellow at the Brookings Institution, in an interview with “Marketplace Morning Report” host David Brancaccio.
“But it really depends on what we’re building, where we’re building it, and at what point of the economic cycle we’re trying to execute that spending,” he added.
That’s because infrastructure isn’t a perfect answer to our current economic woes. Big construction projects wouldn’t likely provide the same kinds of jobs that were lost during COVID-19 lockdowns — jobs that were, more often than not, done by women.
“One of the challenges of thinking of infrastructure as supercharging the economy during this current recession is that folks working in retail and hospitality and other kind of leisure activities, they’re the folks that are really struggling right now. But they’re not necessarily best suited to take on construction and other infrastructure-related occupations,” Tomer said.
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COVID-19 Economy FAQs
How many people are flying? Has traveled picked up?
Flying is starting to recover to levels the airline industry hasn’t seen in months. The Transportation Security Administration announced on Oct. 19 that it’s screened more than 1 million passengers on a single day — its highest number since March 17. The TSA also screened more than 6 million passengers last week, its highest weekly volume since the start of the COVID-19 pandemic. While travel is improving, the TSA announcement comes amid warnings that the U.S. is in the third wave of the coronavirus. There are now more than 8 million cases in the country, with more than 219,000 deaths.
How are Americans feeling about their finances?
Nearly half of all Americans would have trouble paying for an unexpected $250 bill and a third of Americans have less income than before the pandemic, according to the latest results of our Marketplace-Edison Poll. Also, 6 in 10 Americans think that race has at least some impact on an individual’s long-term financial situation, but Black respondents are much more likely to think that race has a big impact on a person’s long-term financial situation than white or Hispanic/Latinx respondents.
Find the rest of the poll results here, which cover how Americans have been faring financially about six months into the pandemic, race and equity within the workplace and some of the key issues Trump and Biden supporters are concerned about.
What’s going to happen to retailers, especially with the holiday shopping season approaching?
A report out recently from the accounting consultancy BDO USA said 29 big retailers filed for bankruptcy protection through August. And if bankruptcies continue at that pace, the number could rival the bankruptcies of 2010, after the Great Recession. For retailers, the last three months of this year will be even more critical than usual for their survival as they look for some hope around the holidays.
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