Green Shoots From Orange Cones

“You can’t fix our economy until you fix our construction industry.” So says Stephen Sandherr, CEO of the Associated General Contractors of America. The words are self-serving, of course. It’s Sandherr’s job to promote the health of his industry above all others.

But Sandherr and AGC have a point when it comes to construction. Construction spending accounts for 8 percent of gross domestic product and generates 10 percent of all manufacturing shipments. When construction is down, the economy suffers, and vice versa.

This year construction has cratered. Investments in U.S. construction projects are projected to fall by nearly $200 million this year. Unemployment among construction workers is 16.5 percent, nearly twice the national average. Construction employment has declined in all but 13 of the nation’s 336 largest metropolitan areas.

Next year doesn’t look much better, according to Doug Pruitt, chairman and CEO of Sundt Construction in Tempe, Arizona. “It could actually get worse,” he said.

On Wednesday, AGC unveiled a blueprint to boost construction spending. Some of the proposals call for increased public investment in transportation and other infrastructure—investments that will address critical public needs as well as putting construction crews back to work.

Others call for extending and creating tax incentives that would encourage business investment and economic growth. Government can spend billions of dollars on public projects, but a healthy private sector is needed to create demand for new office buildings, shopping centers, and other commercial projects.

“We can’t force private development until there is a demand for occupying that space,” said AGC chief economist Ken Simonson.

The transportation projects funded by the economic-stimulus bill saved about 100,000 construction jobs, Sandherr said, so be grateful for all those orange cones cluttering up our streets.

Contractors are a little frustrated, however, about delays in other stimulus-funded infrastructure work, such as water projects and military construction.

Beyond the stimulus, they want prompt action from Congress on a new and expanded transportation bill, and they’re calling for a doubling of the federal gasoline tax from 18 cents to 36 cents to fund more highway projects. Sandherr recognizes that doubling the gas tax “is a tough political lift.” But it would cost the average family only $30 extra per year—a small price to pay to relieve traffic congestion, he said.

If Congress were willing to even contemplate such an increase in gas taxes, however, it wouldn’t have punted on passing a new transportation bill. The old bill was set to expire Wednesday, but Congress will give itself at least another three months to work through all the issues involved in setting federal transportation policy for the next six years.

Some of AGC’s other tax proposals—such as extending the Bush administration’s tax cuts for high-income Americans—won’t go anywhere in Congress. But they’re optimistic Congress will extend some of the tax breaks that were included in the economic-stimulus bill, such as tax incentives for renewable-energy projects and the ability to carry back losses for up to five years instead of just two.

If they’re successful, 2010 could be a rebuilding year.