Infrastructure Spending May be Key to Boosting Economy

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• GWEN IFILL:

  Now part two of the jobs story. What will that money spent on new infrastructure projects buy? And will the government get enough bang for its buck? Our economics correspondent, Paul Solman, has been looking into those questions.

• PAUL SOLMAN:

  The pockmarked roads of New Jersey, one small argument for why America desperately needs a massive infrastructure makeover.

• ROBERT FRANK, economist:

  One-hundred-and-twenty-dollars-a-year damage per year per vehicle.

  The potholes in the roads do more damage to vehicles each year than it would cost to fix them. That's just ridiculous that we don't fix them.

• PAUL SOLMAN:

  But the main reason economist Bob Frank think we should splurge on infrastructure is that government spending is the road to economic recovery and the only way out of the hole we're all in.

• ROBERT FRANK:

  We're looking at an unprecedented collapse in consumer spending. The firms aren't spending.

  There's nobody who wants to buy the stuff they're selling. So, what that means is that there is a huge demand shortfall that we're looking at, maybe half-a-trillion dollars, maybe even more than that.

  If the government doesn't spend massively more in the next year, we're in for a terrible, terrible downturn.

• PRESIDENT ELECT BARACK OBAMA:

  Good morning.

• PAUL SOLMAN:

  Our incoming president would seem to agree.

• BARACK OBAMA:

  But we need action, and action now. That's why I have asked my economic team to develop an economic recovery plan for both Wall Street and Main Street that will help save or create at least 2.5 million jobs.

• PAUL SOLMAN:

  By splurging on, among other things, infrastructure. It last happened in the 1930s, when, among the bridges, dams, tunnels and the like, this terminal at New York's La Guardia Airport was built and adorned.

• ROBERT FRANK:

  Spending projects had clearly positive effects on employment. Many people were employed who wouldn't have been.

  And the main lesson that's come out of the '30s is that, when FDR tried to balance the budget in '36 and '37, that created another recession, and that the true end to the Great Depression was when government demand really spiked upwards from spending during World War II.

  That's what we need now, is a massive infusion of government spending. To the extent it didn't work in the '30s, it was because there wasn't enough of it.