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Archive for the ‘Infrastructure’ tag

World of Concrete conventioneers unconvinced on stimulus plans

Engineering News-Record’s correspondents at World of Concrete in Las Vegas have been gleaning folks’ opinions on the prospects for the federal stimulus package. My favorite quote:

Reviews were mixed on the show floor. James Hughes, executive vice president of Little Ferry, N.J.-based exhibitor Doka USA, said “the jury’s still out” on the stimulus issue. “Everyone’s hoping.” But in one of the outdoor booths, Ahern Rentals President Don Ahern said the company is not pinning its hopes on stimulus. Despite a global credit crisis, the Las Vegas-based manufacturer of Xtreme telehandlers is plowing ahead with expansion plans in 2009. “The stimulus package is a joke. I have zero faith in our government,” said Ahern. “We are going to have to stimulate ourselves. Every businessman will have to get it done.”

Hmm, I bet Ahern still flies into airports regulated by the FAA, but his final point bears repeating: all this talk of government bailouts has everybody sitting on their hands playing wait-and-see when they need to be redoubling their efforts to find new markets, find new customers, build better stuff.

Opportunities, much like Cat’s stock, are much cheaper in a down market.

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Tom Mangan posted at 12:05 pm February 11th, 2009 |

Senate passes stimulus package

Now the trick is reconciling the House and Senate versions, Washington Post reports. Obama thoughtfully reserves the best quotes for himself:

“When the town is burning, we don’t check party labels,” Obama said. “Everyone needs to grab a hose!”

Mitch McConnell, the Republican senator from Kentucky, summarized what must’ve been on a lot of people’s minds, even those of us who don’t listen to Rush and company:

In debate before today’s Senate vote, Republican leader Mitch McConnell (Ky.) sought to distance the legislation from Obama, who is riding a wave of post-inauguration popularity. He said Republicans had expected Obama to be the author of the stimulus plan. Instead, “it ended up being written by some of the longest-serving Democrats in the House of Representatives, and it showed,” McConnell said.

The outlines of the plan I’ve seen seem primarily larded up with Democratic pet projects. Perhaps the GOP objections have been overblown for partisan purposes (imagine that) — the money will get spent; it’s not like it’s being fire-hosed into space — but I need to see more evidence that borrowing all this money gets the gears of the economy moving again.

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Tom Mangan posted at 10:41 am February 10th, 2009 |

Market doesn’t like latest bank bailout rescue plan

Traders slammed the Dow this morning, apparently disappointed that a Messiah did not spring from the head of Timothy Geithner and declare that good times are just around the corner. Actually, the indexes bounced to the same place in their trading range last week where sell-offs have ensued every time since last September. Strength getting sold in the midst of a bear market? Who’da thunk?

Actually this AP story reveals what really happened: the Treasury secretary said nothing new — implying uncertainty over the strength of the financial industry endures — and one key economic indicator tanked, giving everybody a ripe excuse to cash last week’s profits.

A government report that wholesalers cut back on their inventories in December by the largest amount in 16 years also weighed on the market. The reduction means wholesalers ordered fewer new goods, leading to reduced production and potentially more job layoffs.

The Commerce Department said wholesale inventories plunged by 1.4 percent, nearly double analysts’ expectations of 0.8 percent. It also was the fourth straight monthly decline.

Unfortunately, headline risk doesn’t go away till the news starts getting better.

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Tom Mangan posted at 10:07 am February 10th, 2009 |

Obama coming to Caterpillar on Thursday

A Wall Street Journal blog post says the prez is coming to Peoria on Thursday:

Obama will hold a live televised press conference tonight at the White House, and travel to Fort Myers, Fla., on Tuesday for another townhall meeting. Spokesman Robert Gibbs said today that Obama will add a stop on Thursday to Peoria, Ill., to visit Caterpillar Inc.

Turns out the Peoria Journal Star is on the story.

Great quote from Obama insider David Axelrod at Huffington Post:

One thing that we learned over two years,” Axelrod added, “is that there’s a whole different conversation in Washington than there is out here. If I had listened to the conversation in Washington during the campaign for president, I would have jumped off a building about a year and a half ago.”

I seem to recall that very same conversation saying Obama had no earthly chance to become president. So maybe he’s on to something.

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Tom Mangan posted at 10:59 am February 9th, 2009 |

More on “free trade” vs. “protectionism”

The BBC wades into the debate over “Buy America” provisions in the U.S. economic-stimulus legislation. This is my favorite quote on the issue to date:

Protectionism is the crack cocaine of economics. It provides an immediate high that leads to economic death. — Richard Fisher, Dallas Federal Reserve president

Interesting link: “Reckless stupidity of Buy American.”

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Tom Mangan posted at 11:32 am February 4th, 2009 |

Washington Post: 8 questions on the stimulus package

A nice Washington Post overview that starts with the most obvious question: do we really need a stimulus package? Answer: a qualified yes, though taking on long-term debt for a short-term problem can hurt economic growth down the road. Also:

Where would the jobs be?

5. The Obama administration says that the vast majority — as much as 90 percent of the jobs — would be created in the private sector. The jobs would be heavily weighted to construction and manufacturing, which together would account for almost one-third of the new or saved jobs, according to the administration’s analysis. Both of those sectors have been hit hard by the economic downturn, with the construction industry shedding more than 600,000 jobs in 2008 and the nation losing nearly 800,000 manufacturing jobs in the same time period. The administration estimates that more than 600,000 of the jobs saved or created under the stimulus plan would be in retail and 500,000 would be in leisure and hospitality industries.

African Americans, Hispanics and workers with lower levels of education, who have suffered most during the downturn, would see the most substantial benefits. The Obama administration estimates that more than 40 percent of the new jobs would go to women.

Ah, jobs for women and minorities, no wonder the Republicans hate it so much (sorry, couldn’t resist).

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Tom Mangan posted at 6:53 am February 2nd, 2009 |

Caterpillar at center of opposition to “Buy American” language in stimulus bill

Democrats passed the federal stimulus bill yesterday without a single Republican vote. Caterpillar, meanwhile, is trying to talk Congress out of protectionist language designed to prevent U.S. infrastructure dollars from flowing overseas. From today’s Washington Post:

“There is no company that is going to benefit more from the stimulus package than Caterpillar, but I am telling you that by embracing Buy American you are undermining our ability to export U.S. produced products overseas,” said Bill Lane, government affairs director for Caterpillar in Washington. More than half of Caterpillar’s sales — including big-ticket items like construction cranes and land movers — are sold overseas.

“Any student of history will tell you that one of the most significant mistakes of the 1930s is when the U.S. embraced protectionism,” Lane said. “It had a cascading effect that ground world trade almost to a halt, and turned a one-year recession into the Great Depression.”

Just an example from my own experience. I drive a 2006 Honda Element that was built in Ohio by American workers. This car has no nationality, nor do most of the other products bought and sold on this planet. People understandably want trade to produce all winners and no losers, but they might as well try to mint one-sided coins. OK, rant over, back to the headlines.

The New York Times has an informative assessment of how fast the stimulus package, in its current form, can start doing some good. The tax breaks and direct cash aid for extended unemployment and food stamps programs will start helping right away. The aid to states facing crushing deficits will prevent massive layoffs. But what about the infrastructure provisions?

The greatest prospect of delay in spending is on infrastructure. The bill provides $30 billion for highway construction and tens of billions more for other transportation projects, water projects, park renovation, military construction, local housing projects and more.

A Congressional Budget Office analysis found that only 64 percent of the bill’s spending would be completed within 19 months, and spending on construction projects was among the slowest.

If the economic recovery is slow, that timing could work out perfectly, giving the economy a jolt just when faster-acting components are wearing off. But if there is a quicker-than-expected rebound, many of those projects could start just in time to compete with renewed private spending.

Political junkies should keep an eye on what comes next in the Senate. House Republicans who voted against the package obviously expect it to fail badly enough that they can bash Democrats with it in the 2010 elections. The Senate doesn’t have enough Democrats to block a filibuster by Senate Republicans, but the Senate is where the grown-ups live in the U.S. Congress, so they will presumably put the nation’s welfare first (while putting the nation on welfare, essentially) while covering their own hides from responsibility for making the recession worse.

We don’t even want to think about what the markets will do if the stimulus package fails.

I sympathize with the sentiment that reckless debt-chasing got us into this mess and seems unlikely to get us out of it. The critics are all saying “you can’t borrow your way to prosperity,” which sounds sexy but is plainly false. Everybody who took out a mortgage and retired rent-free or bought a car on a loan to get to work and back borrowed his way to prosperity. Any loan you can afford to pay off is not a problem.

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Tom Mangan posted at 9:00 am January 29th, 2009 |

Will states use stimulus funds to close their budget deficits?

Dan Walters, a columnist with the Sacramento Bee, wrote that California, which will be $40 billion in the hole over the next 18 months, might be able to make up some of the difference with federal stimulus dollars.

California’s share of direct spending in the package has been calculated at $21-plus billion, and Jed Kolko, an economist for the Public Policy Institute of California, told an economic seminar in Sacramento Monday that about $14 billion of that could underwrite state education, medical care and other spending programs over the next two years.

What’s this got to do with the fate of giant yellow earthmovers? Well, if California can spend two-thirds of its stimulus bonanza on spending that was going to happen anyway, doesn’t that water down the stimulus effect quite a bit?

I heard the other day that the state of Texas, which usually runs a pretty tight ship, has an $8 billion deficit on its hands. With state budgets drowning in red ink from coast to coast, I can’t help wondering how many are going to be tempted to use Obama’s billions to clean up their balance sheets rather than launch a bunch of big construction projects.

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Tom Mangan posted at 11:35 pm January 27th, 2009 |

What’s next with the U.S. stimulus plan?

We know the U.S. stimulus plan won’t realistically help Caterpillar or the construction industry for several quarters, but what’s happening inside the Beltway today can set the tone for the entire Obama administration. Right now the Republicans have gotten religion on fiscal discipline after eight years of living it up. They still have only one answer to all that ails the nation: cutting taxes.

This article in the San Francisco Chronicle offers a nice overview of the horse-trading over the stimulus package.

Obama’s efforts to reach out to the opposition party are unlike anything witnessed in the last administration or even those before it. He is trekking to Capitol Hill again today for Republican-only meetings in the House and Senate. He has already incorporated large tax cuts in the stimulus to lure GOP support. Obama is looking for two things: at least partial Republican ownership of a risky, costly policy experiment, and avoidance of the kind of partisan rupture that nearly killed a much smaller and less critical effort by President Bill Clinton in 1993.

“We don’t have any pride of ownership,” said White House press secretary Robert Gibbs.

Republicans face risks of their own. While attacking what they call pork and overspending, they do not want responsibility for killing what is now the government’s last, best hope to reverse or at least slow an alarming worldwide economic decline.

So far, Obama’s living up to his promise of a “reach across the aisle” presidency. The final result will be pug-ugly no matter what, but Obama has a canny knack for getting what he wants despite long odds. As much as the Democrats want to say “screw the GOP, we beat ’em fair and square,” they need to be able to avoid culpability in the next election if all goes wrong. Getting the GOP to go along is like insurance (though the GOP could make the cynical calculation to stand aside, let things go to hell and blame it all on the Democrats in 2010. Let’s hope they behave more like grownups.)

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Tom Mangan posted at 8:51 am January 27th, 2009 |

Bleak outlook for construction and heavy equipment reports that industrial firms are writing off 2009 and hoping for better days next year.

“I think any kind of turnaround is going to be slow,” says Rich Carlson, vice president of Minnesota-based Carlson Tractor and Equipment Co. His company had a poor 2008, and 2009 is not looking so good, either. “I think the hope is that it doesn’t get any worse,” he adds.

Gerry Couch, president of King of Prussia, Pa.-based Modern Equipment Sales and Rental, is supportive of the proposed stimulus package but has questions about how it will be implemented. “I do believe [the stimulus] will make a difference, but not in 2009,” he says.

Meanwhile, Bloomberg foresees an ugly Monday when Caterpillar reports its earnings. Between the lines you can read a suggestion that Cat’s GDP forecast from the third quarter was a bit optimistic.

Caterpillar Chief Executive Officer Jim Owens, who holds a Ph.D in economics from North Carolina State University, suggested he may update the company’s economic forecast next week that he gave in October. Owens gave a tentative estimate of less than 2.5 percent gross domestic product growth for 2009, according to the company’s third-quarter earnings release.

“The first two quarters are going to be rough,” said Bill Batcheller, who helps manage $650 million in assets, including Deere and Caterpillar shares, at Butler Wick & Co. in Youngstown, Ohio.

“Still, if Caterpillar sticks with the 2.5 percent estimate they gave for GDP growth, that implies they expect a really strong second half,” Batcheller said.

It’s going to be fun Monday: either Cat surprises to the upside and squashes all the short sellers, or surprises to the downside and squashes everybody else. Or a third option: Cat successfully manages Wall Street’s expectations better than those poor blighters at CNH, whose stock got blasted by over a third yesterday, and not much happens and we keep muddling along. The latter will be the least sexy of the bunch, but might be preferable to the whiplash collars the other results induce.

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Tom Mangan posted at 10:02 am January 23rd, 2009 |