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Can Infrastructure Projects Ease Coming Recession?


$300 billion already proposed; more undoubtedly to come.

A train will get you from the Shanghai airport to the city's downtown in less than 8 minutes. The distance is 20 miles and the train -- get this -- reaches a top speed of 287 mph. If you fly into JFK in New York, you have to take the AirTrain before you even reach the subway. And from the subway to Wall Street? Allow at least 24 hours for the trip.

America's infrastructure is crumbling - and not just in New York, which arguably has the most comprehensive subway system in the country, even though it noticeably lags behind its global peers. The US train system is patchy and antiquated. Amtrak operates at a loss. Highways and bridges are in sorry shape: Just a few months ago, I paid my quarter to drive over the Ohio River on a wobbly toll bridge from Chester, West Virginia to East Liverpool, Ohio. I just closed my eyes and prayed.

And I was driving.

Both presidential candidates have discussed rebuilding our infrastructure, though only Barack Obama has made it a central focus of his campaign. But Congress may, in fact, act before either Obama or McCain takes office. On Monday, House Democrats were contemplating a new stimulus package -- as much as $300 billion -- to reignite economic growth by creating public jobs and investing in infrastructure. A good portion of the money would go to cash-strapped municipalities and state governments for roads and bridges and other public expenditures.

Consider it a new WPA - the bulwark against the Great Depression and, just maybe, can help stave off another one.

On Monday, House Speaker Nancy Pelosi (of California – home, not coincidentally, to a number of engineering and construction giants, including Bechtel and URS Corporation (URS)) hosted a 2-hour economic summit with economists.

"There was a good deal of sentiment among economists for something really big," Alice M. Rivlin, a Senior Fellow at the Brookings Institution and a former member of the Federal Reserve Board who attended the meeting, told the Washington Post. "People are really worried that we could be slipping into a deep recession."

Several infrastructure companies would benefit from this works project. Their stocks, however, have been battered beyond belief, since several hedge funds were forced to liquidate large positions last week. (Except that these companies are flush with cash and well-positioned to survive a recession.)

Jacobs Engineering (JEC) is a big player in municipal infrastructure. But as city budgets have been cratered by property-tax losses following mortgage defaults, Jacobs's fortunes have suffered. This new WPA would revive Jacobs.

The California-based company, founded in 1957, builds roads, highways, bridges and other public transportation systems. A provider of technical, professional and construction services, Jacobs has more than 56,000 employees worldwide. The company is sitting on more than $500 million in cash, with little debt. And on Tuesday morning, it received a new contract from the City of Dallas for a water utilities project.

This stimulus package would be nearly twice as big as the first one President Bush signed in February. That one was like the mail-in rebate you got with your flat-screen TV. This one seems like a grander vision altogether.
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