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Turbulent Transports: When Stimulus Dollars Head Overseas

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Public investment in mass transit is needed, but foreign companies benefit most.

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Editor's Note: This is one part of a three-part series on the transportation sector. Read more on infrastructure here and on railroads here.


"Made in America" isn't a phrase one hears much these days. While manufacturing activity has declined in the United States during the recession, as well as around the globe, the decline here is long-term and intractable. Overseas, it simply reflects the current downturn.

By late last year, 37% of all manufactured goods sold in America were imported. That was more than double the percentage in 1991 and nearly four times the level in 1978, according to Commerce Department data.

This tale isn't new -- we're quaintly known as a service economy now -- but it's essential in considering the breadth (or lack thereof) of our economic recovery. Nearly $150 billion of the $787 billion stimulus package signed into law last February was designated to infrastructure projects. And the newest proposal to spur job growth announced by President Obama yesterday will likely funnel even more government dollars into the transportation infrastructure sector.

However, most American companies, apart from the steel industry, don't make the components necessary for these recovery projects.

Mass transit is a perfect example. The stimulus package allotted $8.4 billion to upgrade and expand mass-transit systems, in part through the purchase of new subway and light rail cars. On top of this, in 2008, 23 states passed mass-transit initiatives worth about $75 billion, according to Jonathan M. Feldman, an American economist at Stockholm University, whose research focuses on mass transit.

However, no American manufacturer makes subway cars, although three foreign companies assemble them at plants in the US, largely from components made overseas. The situation is similar for green technology like wind turbines and solar panels, which are mostly imported. What this means is that many of the benefits of public works projects are significantly captured overseas.

The time is ripe for mass transit, with economic and political measures aligning with growing public support -- it relies heavily on manufacturing, has the potential to create jobs, and is one of the least polluting forms of travel. A new rail line recently opened in Minnesota's Twin Cities and major systems are being built or considered in such cities as Denver, Dallas, Los Angeles, and Salt Lake City. The Metropolitan Transit Authority (MTA), the largest transit agency, which oversees New York City and Long Island, approved a capital program for 2005 to 2009 worth $23.7 billion.
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