The Feds help Michigan borrow $2 billion more to build more highways

Saying, “This is so excellent,” and hollering “Whoooo!“, our Governor enthusiastically accepted the $2 billion in federal aid that comes along with being the most economically fucked state in the union. Governor Granholm publicly accepted the news from Vice President Joe Biden in Kalamazoo this afternoon, where they were gathered to celebrate – according to CBS News – “the groundbreaking of a $43.9-milllion project to widen an interchange on I-94.”

That’s right, America. We’re not just fixing highways here in Michigan, we’re WIDENING them. We’re adding more lanes. You see, we know a secret. We know that mass transit isn’t in America’s future. The future is cars! Lots and lots of fucking cars!

Other, less well run states, less visionary states, if confronted by the same circumstances that we now are, may have taken the rising oil prices and the almost complete failure of the American automotive industry as portents of things to come, but we apparently know something that they don’t. And that’s why we’ve decided to double down on our automotive bet… Fuck rail – more highways is the answer! Good work, Michigan!

Anyway, back to the $2 billion announced today. It comes from a portion of the federal stimulus program known as the Recovery Zone Bond initiative, and it’s not really a handout per se. As I understand it, it’s more like the Feds are helping us to borrow money. Through this initiative, the federal government is authorized to allow the American counties and cities suffering from the highest unemployment rates to sell up to $25 billion in bonds. According to an article in Forbes, the Michigan allotment comes in two pieces. We can issue $773.05 million in bonds for what they’re calling “development,” and another $1.26 billion for “facility” projects. (Michigan has to issue the bonds before January 2011 to take advantage of the offer.) Here’s a clip from the Forbes article:

…Speaking in Michigan at the groundbreaking for the 2,000th transportation project backed by the stimulus act, U.S. Vice President Joe Biden said Michigan counties are three of the top ten recipients of the bond allocations.

U.S. Treasury Secretary Timothy Geithner said Michigan would receive the largest amount of money per capita through the program, and it will need the sizable investment to recover from the recent bankruptcy filings of auto giants GM and Chrysler.

Michigan’s Detroit currently tops all metropolitan areas with populations of 1 million or greater with its jobless rate of 13.6 percent.

Michigan has the highest unemployment rate of all U.S. states at 12.9 percent…

I’d like to share our Governor’s enthusiasm, but I don’t see how it’s really that great to have the Feds tell us that we can borrow more. If it were a handout from the Feds, that would be one thing. But this is something different altogether. This is the government coming in and giving us permission to go more into debt. Pardon me if I don’t yell “Whoooo!”

And here, from the Detroit Free Press, is a little more in the way of background about how these Recovery Zone Bonds will work.

…Biden said the U.S. Department of Treasury will help back $2 billion in bonds that cities and counties would sell to pay for infrastructure improvements or commercial developments, such as factories or warehouses. The federal government would pay 45% of the interest cost for the bonds.

The bonds – called recovery zone bonds – have other financial incentives to make them more attractive to investors…

So, if the feds are paying 45% of the interest, I guess that means that we, the tax payers of Michigan, are paying the other 55%.

For those of you having trouble following along, here’s what I think this all boils down to… The federal government has given our state the ability to go farther into debt to build more highways. Sounds like a winner, doesn’t it?

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19 Comments

  1. nammeroo
    Posted June 12, 2009 at 10:28 pm | Permalink

    Sounds like a great way to finish Water Street! With only $100 Million, the city could build everything our former planning and development team dreamed up. Do you think that the VP would pass us that much ‘under the table’? Really, that’s hardly more than a rounding error in the whole stimulus bill anyway….

    I’m sure that the city is good for it!

  2. Brackinald Achery
    Posted June 13, 2009 at 7:11 am | Permalink

    We’ll never pay it back and you know it.

  3. dp in exile
    Posted June 13, 2009 at 8:37 am | Permalink

    This is so utterly crazy I can’t even think of a satirical comment about the systemic failure of the American two party system and the supreme ineptitude of the Democrat Party leadership.

    Wait… I just thought of one… prepping Homer Simpson voice…
    mmmmm…. Change.

    Well, I guess this is the same administration that is brow beating freshmen Dems to vote for the new war supplement. These “progressive” Dems were elected to the House in large part to end the wars of choice in Iraq and Afghanistan.

    http://www.huffingtonpost.com/2009/06/12/white-house-browbeats-dem_n_214870.html

    mmmmmmm…. Hope.

    Not even a year into this new administration and we already need to run up to the local box store to purchase a new flavor of Glade Plug-in. Sweet.

  4. Posted June 13, 2009 at 10:58 am | Permalink

    I can see the logic behind going into short term debt in order to build necessary infrastructure. I get that. It creates jobs, and it gives us the basic infrastructure we need to be competitive and contributing members of the union. What bothers me, though, is that we’re prioritizing highways over rail. And it infuriates that we’re “widening” the highways that we have. That’s asinine.

  5. amused1
    Posted June 13, 2009 at 12:26 pm | Permalink

    Mark, I agree that the focus really needs to shift to public transit. I’ve said it many times before. But there are other considerations that may be in play here.

    Public transit isn’t going to appear over night. In the meantime, people will continue to use their cars. If there are areas of our existing highway system that need attention we should address them. If for no other reason than for the sake of safety. If, while repairing them, we find that widening the highway will make the existing system more efficient, and the price difference isn’t huge, then why waste an opportunity to potentially cut down on cars needlessly burning fuel due to traffic backups? jmho

  6. Mike want longr name
    Posted June 13, 2009 at 1:39 pm | Permalink

    Mark,

    So it’s a good idea for an already bankrupt government to take on more debt in the middle of a recession in order to create jobs? Why do we want jobs? Jobs are a hassle, you have to get out of bed in the morning, spend all day answering to some jerk. We’d all love it if our jobs were outsourced, just so long as our paychecks kept coming. We absolutely need to stop thinking about jobs as an economic good in and of themselves. Every crisis that we have to deal with, whether global warming or terrorism, requires sacrifice. The people working in the jobs dealing with the crisis, and all other resources used in the “war” of choice, are people that can’t be working at some other job, producing something of value to society. If we have to deal with global warming, then that’s that, but we would certainly be better off if it weren’t an issue at all, and the people dealing with that could instead be dealing with getting us food or shoes or ipods or whatever.

    http://en.wikipedia.org/wiki/Parable_of_the_broken_window

    We also need to open our eyes to the real nature of credit. As useful as the veil of money and prices is for economic calculation, it does distract people from the true nature of an economy. Brackache is right that MIGOV will never pay this money back (in any meaningful sense of the term) but that’s beside the point. Even though Chrysler paid back it’s loans from it’s first bailout back in the day, the damage was still done. When MIGOV gets these loans and starts to build roads, it will buy machinery and materials, thus bidding up the price higher than they would otherwise be. “Economists” who hope for a rise in new homebuilding (as if we didn’t have enough houses already, jackasses) out of one side of the mouth, and call for public works projects that use the same resources, are completely incoherent. Every time government bids up the prices of resources used by the private sector, it makes it harder for some struggling business to keep running. In the middle of a recession.

    BTW, the website field, at least, needs to be substantially longer, unless we all start using lame tinyurls.

  7. Curt Waugh
    Posted June 13, 2009 at 2:14 pm | Permalink

    amused1, while folks jump in their car and have no traffic jams, they’ll never chafe and desire a better way. This fake auto overcapacity has no long-term value whatsoever. Polishing this turd is not the way forward. We don’t need better vacuum tubes, we need integrated circuits. Time to embrace the future.

  8. amused1
    Posted June 13, 2009 at 2:58 pm | Permalink

    Curt, sorry I missed your reply. I was out back polishing up my buggy. ;^)

    Yes, I can accept your idea of capacity delays helping to encourage a desire for a better way to commute, to a degree. My gut says that people in the position of having commutes through heavy traffic areas find ways of coping, be they audio books, talking on cell phones or adjusting their departure times to avoid some of the mess. I suspect that neither their first nor maybe even second thought is to give up their cars and find another way to travel. JMO And even if it is on their minds, for the foreseeable future they don’t have a lot of options. So, during the transition (again, transition) why not make car travel more fuel efficient?

    Factors such as the cost of fuel, insurance, parking, required yearly emissions and safety inspections for autos (like many other states have), tolls (like many other states have) are just as likely, perhaps more likely, to sway people to demand better alternative modes of transportation.

    Another way of looking at it is that it’s okay to leave them hungry, but you shouldn’t let your chickens die of malnutrition before the eggs have hatched. (I so wanted to get chickens in here somehow. It’s been too long since they’ve made an appearance on this blog.)

  9. Curt Waugh
    Posted June 14, 2009 at 8:18 am | Permalink

    Damn you and your pointy eared, green blooded chicken logic.

  10. amused1
    Posted June 14, 2009 at 9:27 am | Permalink

    I suddenly have this massive urge to lift one eyebrow.

  11. Posted June 14, 2009 at 1:58 pm | Permalink

    As long as I’m making the rounds today, apologizing, I thought that I should stop by this thread and say I’m sorry…. I’m sorry that I made it sound like all infrastructure repairs were bad. Clearly roads and bridges need work. I didn’t mean for it to sound as though I was against all highway work. What specifically sent me off the deep end was the mention of highway widening. At any rate, I do realize that our crumbing infrastructure needs work. I’d just like to see a more balanced approach, with a greater percentage going toward mass transit… And I’d prefer federal giveaways to bonds that require we that we pay them back.

  12. Posted June 15, 2009 at 8:07 am | Permalink

    amused1 –

    If, while repairing them, we find that widening the highway will make the existing system more efficient, and the price difference isn’t huge, then why waste an opportunity to potentially cut down on cars needlessly burning fuel due to traffic backups?

    A fair assertion, but not backed by data. For the full story on traffic backups, I’d recommend Anthony Downs’ Still Stuck in Traffic, which is a pretty comprehensive and empirically-backed examination of various “solutions” to traffic congestion. (Relevant bit: widening roads works for a few years, but the excess capacity induces demand that quickly leads to the road being just as congested as it used to be.)

    I don’t know much about the specific project – but “widening an interchange” is a little more complex/expensive than just adding through travel lanes. But, for reference, the cost of widening a freeway is in the range of $2.4m-$6.9m per lane mile. For reference, it looks like the annual capital budget of Kalamazoo Metro Transit is about $9m, so this interchange project could cover about 5 years worth of transit capital improvements for the Kalamazoo area – transit improvements, incidentally, being among the few things Downs shows to be effective in actually reducing road congestion.

    Finally, look to Seattle’s experience in late 2007, where the public resoundingly voted down a transportation bond for the reason of “too much road spending, not enough transit spending”. (Generalizing, sure, but that’s what every single newspaper’s editorial board was saying.) While the measure was under consideration, a number of sources debunked the idea of highway congestion relief reducing greenhouse emissions. See, for example, the Sightline Institute’s piece, resulting in a prediction that each lane mile of highway expansion yielded, over 50 years, a net increase of 116,000-186,000 tons of CO2 emissions, even assuming that emissions per mile drop to 1/3 of current over that time. Or, in other words, “not as much as a coal-fired power plant, but worth being concerned about. ”

    So, to sum up, yep, you’ve nailed the typical traffic engineer’s thinking – as long as we’ve got the contractors out there anyways, might as well have them widen the road, right? More road = less congestion, assuming everything else remains constant. Unfortunately, nothing else is constant, so the traffic engineer’s short-term gains end up consumed in the long-run, much to the consternation of transportation planners who watch this cycle happen over and over again…

  13. West Cross
    Posted June 15, 2009 at 8:45 am | Permalink

    If the plan is to spend money on highways instead of rail, how about doing repairs instead of improvements? Anyone been on US-23 north of Ann Arbor lately. Incredibly bad. They did put up a “Rough Road” sign though, so I guess that helps. I think some local churches will also say a prayer for you for a modest donation.

  14. amused1
    Posted June 15, 2009 at 9:06 am | Permalink

    Murph, thanks, as always, for the great info. I glanced at the link but won’t be able to dig into it until later. Yes, I can see how more access could lead to more usage, but my optimistic side envisions better options becoming available before the tipping point is reached. Maybe I need to check the prescription on my rose colored glasses. 8^)

  15. nammeroo
    Posted June 15, 2009 at 12:45 pm | Permalink

    If you’re talking about US-23 north of I-96, there was a paving problem (bad asphalt) that I think is scheduled to be fixed by the contractor. It does make for a rough ride headed northbound, though….

  16. Posted June 15, 2009 at 5:17 pm | Permalink

    Murph,

    You might find this book interesting. “The Privatization of Roads and Highways,” by Walter Block, economist from Loyola University, New Orleans. None of that wussy privatization, either.

  17. Posted June 15, 2009 at 8:31 pm | Permalink

    Thanks, Murph, I’ll see if I can’t move that up to the front page.

  18. Posted June 15, 2009 at 10:01 pm | Permalink

    Well, if they are talking about widening that stretch around Jackson, I’m all for it. That area’s known to be a safety hazard.

  19. Posted June 15, 2009 at 10:04 pm | Permalink

    Apparently, it is the stretch that I was thinking of. That area is miserable to drive through, especially when it’s full of trucks. I’m relieved that they are finally giving it some attention since I can’t count the number of times I almost ended up underneath a semi over there.

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  1. By Widening highways does not save fuel on June 15, 2009 at 9:44 pm

    […] the weekend I posted a mini rant here on the subject of highway widening. To make a short story even shorter, I was pissed that […]

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