Obama stimulus plan critical for N.C.
Posted January 7, 2009 5:45 p.m. EST
Updated March 9, 2009 5:12 p.m. EDT
Raleigh, N.C. — President-elect Obama's $775 billion stimulus package currently in Congress could help the state Department of Transportation fund more projects and help ease a domino effect that could be disastrous on the state's economy.
"Without the stimulus, we're not going to see any sort of normalcy for the next couple of years," Mark Foster, the DOT's chief financial officer, said Wednesday.
The DOT has already postponed 75 percent of all projects – 100 percent of ones it considers to be major, Foster said. It has also laid off temporary workers to help make up for a projected budget shortfall of $320 million.
"We are ensuring that we continue projects, but we have cut back our lets almost 75 percent to ensure we don't hit that cash floor or go below it," Foster said.
As a result, businesses that rely on the DOT's business are already feeling the effect.
Although Democrats on Capitol Hill said Wednesday it is crucial they pass the national bailout by mid-February, some a plan could be weeks or months away.
If it's not approved within the next month or so, Berry Jenkins, with the Carolina Association of General Contractors, says the consequences could be disastrous.
"That's going to put a lot of companies out of business. They just can't survive that long," said Berry Jenkins with the Carolina Association of General Contractors.
Contractors, subcontractors, material suppliers and equipment dealers – the more obvious businesses associated with road construction – are the ones already affected, Jenkins said.
Less obvious businesses, such as banks, law firms, accountants and retail stores, are months, if not weeks away, from feeling the impact.
"The contractor is having to borrow money from a financial institution to finance the project, finance their operations," Jenkins said. "They obviously have accounting firms that manage their accounting process, and obviously, lawyers have to deal with the contracts to execute."
The stimulus plan, initially expected this month, would create and maintain jobs, Foster said, and that's good news for the economy. Every dollar the DOT spends has a multiplier effect, he said, with benefits up to $12.
"History will prove, just like in the Great Depression, that one of the best investments ever made was in infrastructure," he said. "It gets the country moving again. We're looking for the same thing today."
Economists have advised Obama for a $1 trillion or more economic jump-start, but the president-elect said at a news conference Wednesday that concerns of the rising national deficit prompted him to go for the lesser $775 billion package over the next two years.
The nonpartisan Congressional Budget Office has estimated the deficit for the 2009 budget year to be roughly $1.19 trillion. Last year's deficit was $355 billion.
Obama said he would have to juggle competing interests of economic stimulus and deficit control but that restoring general business health must come first.
"We have an economic situation that is dire, and we're going to have to jump start this economy with my economic recovery plan, creating 3 million jobs," Obama said.
"That's going to cost some money. And in the short term, we will actually see, potentially, additions to the deficit."