Here’s a nice look from Mark Doms at the Department of Commerce at what’s been happening with private sector construction spending:
Note that these are year-on-year changes, not levels. We built less in 2007 than we built in 2008, then we built even less in 2009, then we built even less in 2010. By 2011 it inched up a tiny bit. So what happened with public sector construction during this time? Well:
Instead of surging in 2008 and 2009 like it should have, spending on public sector projects decelerated. But it’s hard to orchestrate a huge surge on short notice so perhaps that’s forgiveable. But by 2010 and 2011 when there should have been plenty of time to begin executing projects mapped out in 2009, spending was tumbling.
What we basically should have done was create a giant slush funds for construction projects. The global investment community lost faith in U.S. mortgage-backed securities and wanted to plow money into super low-yield U.S. treasury bonds. We should have let them do so, and then used the capital raised to create construction slush funds for mayors and governors to tap. Plenty of states and cities would have ended squandering the money on white elephant nonsense, but all things considered it makes sense for state and local elected officials to at least try to spend money in sensible ways. But more to the point, waste is a relative concept. Most people don’t know how to operate a crane properly. To have a skilled worker and his specialized machinery employed on a low-value project is wasteful in the sense that they could have been employed instead on a high-value project. But the lowest-value project of all is for the worker to be watching The Price Is Right and feeling depressed while the crane sits around idle. When private construction spending is plummeting, the rules of thumb about what constitutes a wasteful use of resources look different.
Unfortunately, even before austerity-mania took hold, the recession coincided with the outbreak of a bizarre level of outrage about bridges to nowhere that involved a total loss of perspective.