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Friday, March 18, 2005

Federal Public Works Projects: Wastefulness by Design

Boston’s Big Dig is up to $1.87 billion per mile and still counting.

An article in the March 18 Wall Street Journal internet Evening Wrap updates the mother of all public works boondoggles.

“Big Dig-saster

“The Big Dig highway project, which diverted Interstate 93 beneath Boston and made other major changes to the city’s road system, has taken more than 20 years of planning and construction and cost about $14.6 billion. It’s the biggest, most expensive highway project in U.S. history, ostensibly solving Boston’s awful traffic problems, opening up several acres of downtown space and connecting distant corners of the city. It’s also been fraught with cost overruns—its original budget was about $2.6 billion—and accusations of mismanagement, and today the U.S. Attorney’s office and the Department of Transportation said they were investigating it. Federal prosecutors wouldn’t comment on the target of their probe, but the Boston Herald reported that Bechtel and Parsons Brinckerhoff, the contractors running the project, and Modern Continental, a Cambridge, Mass.-based contractor, are under the microscope. The Massachusetts attorney general is also investigating those companies. A spokesman for Bechtel/Parsons Brinckerhoff said it would cooperate with any probe. Modern Continental had no comment, the Boston Globe reported. All three companies have said they stand by their work on the project.

“But inspectors with Bechtel/Parsons Brinckerhoff also said they’d found 11 more flaws in the tunnels at the heart of the project, which sprung a massive leak in September that completely flooded one lane of I-93. The inspectors still have to inspect hundreds more sections of tunnel wall, having identified 55 flaws so far. Recently, an independent engineer who inspected the tunnels said he could no longer vouch for their safety. A top Bechtel/Parsons Brinckerhoff official today said the tunnels were “safe; absolutely safe.”

For politicians, this sort of thing is good news, because it means more Federal spending to correct problems, more Federal jobs, and more votes purchased in their election districts.  In addition, Senators and Congressmen can stage public hearings to investigate and to point self-righteous fingers at the private companies involved in the project.  Similar scrutiny of Massachusetts politicians charged with supervision is somewhat less likely.  Senator Edward Kennedy, in any event, can remain continually in the Boston news for decades “doing more Massachusetts,” as he promised in his very first election campaign in the early 1960s.

In Slaves to Socialism, I explained:

“Keynesian economics championed by the New Deal taught that people needed to stop saving and start spending.? Harvard economist Alvin Hansen, one of the main American advocates of Keynes, declared that private business had fully matured and would never again be capable of fully employing American workers.? Only government, he said, could fill the gap.? It would be necessary to tax the rich and employ everyone else in Federal jobs, without regard to whether those jobs produced goods and services that the general public would buy of its own free will.? As Keynes put it, how the government spends its money is of no consequence.? Men could be hired to dig holes one day, fill them the next day, re-dig them the day after, then re-fill them on the fourth day, ad infinitum.? The only important thing was to put money into circulation and get people buying things.? Inflation was to be the engine driving the economy.”

Boston?s Big Dig in Teddy Kennedy?s backyard is a perfect example of the Keynesian hole-digging policy.? The Big Dig is a mostly-underground highway running through downtown Boston.? It began thirty six years ago, in 1969.? Construction dragged along, decade after decade, plagued with design mistakes and poor workmanship that to date has cost reportedly about $14.6 billion, roughly $1.87 billion for each of its 7.8 miles, funded hugely with Federal grants.? Granted that we are talking about an underground highway and bridges and tunnels for the Charles River, the Big dig is still almost certainly the most expensive highway project in world history, on a per-mile basis.

What accounts for the year-after-year survival of extravaganzas of inefficiency and incompetence like Boston’s Big Dig?  Any private business undertaking the Big Dig as a commercial project would have gone bankrupt, and the project would have been terminated decades ago.

Couple the “me first” culture of the welfare state with politicians’ quest for power, and little if any thought is given to whether a government project would be commercially profitable, that is, whether enough buyers, of their own free will, would be willing pay to use the end result at prices that would return a profit.  Instead, altogether different criteria come into play.  Congressmen and Senators in whose district the project is to be located will look only at how many votes they will get by creating jobs and spending Federal money in their home districts. 

Thus, from the outset, efficiency is a negative criterion in a government project.  Remember that the Employment Act of 1946 committed the government to maintaining full employment.  From the politicians? viewpoint, it is better to employ excessive numbers of people, at higher costs, to enhance the image of helping the people.  There is the added benefit that Federal projects employ members of labor unions, and those unions are BIG contributors to liberal-socialist political campaigns. 

We can also be certain that, to the extent that the Federal government undertakes ventures normally handled by private business, the result will always be inflation.  Government projects inherently and inevitably are more costly and wasteful than those of private business, simply because private business has limited resources that must be employed effectively if the private business is to survive.  The Federal government has a bottomless well of funding via credit injected into the banking system by the Federal Reserve.  The definition of inflation is increasing the supply of money more than the available output of useful goods and services.

There is, of course, almost no possibility of ever terminating a Federal project, even if it is a total failure.  An example of the genre was unearthed by the Hoover Commission in the 1950s.  Former President Herbert Hoover headed a Federal commission seeking ways to reduce government costs and to improve efficiency.  Outside of Boston (where else?), they discovered a small textile plant that had been set up by the Federal government during the Civil War, when certain textile products, formerly shipped from Southern plants, were needed for the war effort.  In the 1950s almost 100 years later, 136 employees still worked in the very same plant, producing textile products that either were no longer needed, or were produced at costs significantly higher than in larger, more efficient mills.  Massachusetts?s Senatorial delegates blew a gasket.  No way was the government to shut down this plant and throw their constituents out of work!  They even vetoed a plan to shut it down gradually as workers retired.

Boston’‘s Big Dig is just a continuation of the same phenomenon.  No one will ever take a cold-eyed look at it and ask whether it makes sense to continue pouring billions of dollars into a seriously flawed project.  It’s doubtful that anyone in the student-anarchy atmosphere of the 1960s seriously considered whether cheaper and more assured alternatives would have been preferable.  The prospect of creating parks atop the underground highway, across downtown Boston, was dazzling to environmentalists.  The impetus of President Johnson’s Great Society, then getting a full head of steam, made it seem that liberal-socialist planners knew the answer to every problem.  And those answers were never what ordinary citizens and private business people recommended.

Reconsidering the Big Dig, or stopping it early, when difficulties began to multiply, was out of the question.  Laid-off Federal employees might not vote for the politicians in the next election, and the rest of the people in the district would complain about losing Federal money coming into their local economy.

Government funding, with purely political motives driving spending, guarantees an ever-growing number of useless projects that remain alive solely to provide additional avenues for vote-getting Federal spending.  In contrast, the ever-present possibility of failure, coupled with the hard-eyed scrutiny of lenders and investors, make the private business sector inherently more efficient and more productive. 

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