Innovation NewsBriefs
Vol. 24, No. 2
Last week, infrastructure was in the news again. President Obama, in his State of the Union address, proposed a $50 billion infrastructure initiative, $40 billion of which would be devoted to a “fix-it-first” program targeted at urgent improvements such as “structurally deficient” bridges. The following day, the House Committee on Transportation and Infrastructure held a hearing on “The Federal Role in America’s Infrastructure,” focusing on the importance of infrastructure for the U.S. economy and the federal role in its preservation and expansion. The same day, the U.S. Chamber held a “Transportation Infrastructure Summit,” a day-long gathering “to explore transportation infrastructure challenges and promising solutions” with prominent industry representatives.
What kind of impact these advocacy efforts will have on public opinion and on congressional attitudes and decisions remains to be seen. They come at a time of severe budget pressures and intense Republican efforts to curb excessive discretionary spending. To be successful, the pro- infrastructure campaign must persuade fiscally conservative lawmakers that there are urgent reasons for increased spending on public works. Further, infrastructure advocates must convince the nation’s skeptical taxpayers— who see no visible signs of “crumbling infrastructure”— that the country will need $2.7 trillion in new infrastructure investments by 2020 and suffer a $1.1trillion “spending gap” (latest ASCE estimates). Lastly, the advocacy campaign must overcome the cynical impression among many people that pressures to raise fuel taxes are nothing more than special interest pleadings of groups that stand to profit from increased infrastructure revenue. In sum, as one transportation advocate at a recent conference observed, “there is an enormous disconnect between us and the American public” — a disconnect that will not be easy to overcome.
The President’s State of the Union Proposal
POLITICO called the President’s infrastructure proposal “deja vu all over again.” And indeed, the President’s $50 billion proposal, which is not backed by any revenue stream, is essentially a retread of the Administration’s near- identical FY 2012 and FY 2013 budget requests, both of which Congress had denied on the grounds that they lacked a funding source.
Just as in the two previous instances, House Republicans declared the latest infrastructure initiative “dead on arrival.” House Speaker John Boehner took the President to task for proposing a huge new federal program without indicating where the money to pay for it would come from. The President’s assurance that his new initiative “won’t add one dime to the deficit” was met with bipartisan skepticism bordering on incredulity. So was a statement in the White House release that accompanied the State of the Union address, that a long term increase in transportation funding (of which the $50 billion would presumably be a “down payment”) will be financed “by reductions in spending due to ending the wars.” (“The President’s Plan for a Strong Middle Class and Strong America,” February 12, 2013) One congressional lawmaker called this proposed “peace dividend” “without any merit and not connected to reality.”
Even the usually uncritical and gullible liberal press found Obama’s proposal lacking credibility and hard to take seriously. “It makes you wonder, ” wrote one commentator , ” why the Administration keeps coming up with the same proposals over and over again and expects different results. Didn’t Einstein once say …?”
Congressional Hearing
Meanwhile, witnesses at the House hearing— all vocal advocates of increased federal infrastructure spending— cited familiar arguments and statistics why the federal government’s role and investment in the nation’s infrastructure is “vital, indispensable and urgently needed.” Former Pennsylvania Governor Edward Rendell, testifying on behalf of the Building America’s Future coalition (of which he is a co-chairman), recommended creating a commission to produce a long-term national infrastructure plan, establishing a National Infrastructure Bank to assist in financing projects of national significance, lifting federal restrictions on tolling and passing a long-term transportation bill.
U.S. Chamber of Commerce President Thomas Donohue made a strong plea to increase the federal gas tax (“a moderate increase in the gas tax over a number of years and indexed to inflation”) and to “pump as much as $250 billion in private capital into public-private partnerships.” Gov. Rendell agreed that a hike in the federal gasoline tax in the short term was “inescapable.”
In advocating gas tax increases, both witnesses were seemingly unpersuaded by the fact that opposition to higher fuel taxes is intense and widespread— and not just in Congress and the White House but also among the general public. Rep. John Mica (R-FL), former chairman of the House Transportation and Infrastructure Committee, suggested that in advocating a gas tax increase Donohue was “out of touch” with his membership. Indeed, we heard few voices at the Chamber of Commerce Summit supporting Donohue’s plea.
No one at the congressional hearing cared to recall that just weeks earlier the transportation sector received an injection of $13 billion in fresh funds as part of the $50 billion hurricane Sandy relief bill. Nor did the discussion at the hearing pick up on the message popular among the governors these days, (notably Virginia Governor Bob McDonnell) that the road system is a common good that benefits everyone, and hence its upkeep should be not just the road users’ but every taxpayer’s responsibility.
Unlike in the state capitals, where the governors are getting creative in searching for alternative sources of revenue, in Washington there is no serious exploration of fiscal alternatives. With MAP-21 dollars assured for a period of two years, transportation reform is likely to take a back seat in the 113th Congress.
Needed: A More Thoughtful Approach — An Editorial Point of View
No one disputes the infrastructure advocates’ claim that some of America’s transportation facilities are reaching the limit of their useful life and need replacing. Nor does any one disagree about the need to expand infrastructure to meet the needs of a growing population. But fiscal conservatives among these advocates (and we count ourselves among them) contend that this does not rise to the level of a national crisis requiring a $2 trillion federally-funded crash program. The condition of infrastructure varies widely from state to state as numerous studies by the transportation research group TRIP have shown. Most states maintain their transportation assets in excellent condition, and only a few need extensive transportation modernization. This argues for a targeted and adequately-documented project-by-project approach to upgrading aging infrastructure, rather than for a massive new federal program of public works. “The nation simply cannot afford blindly to throw money at the problem,” in the words of one congressional Republican. “The days of out-of-control spending are over.”
Implications for the Next Transportation Authorization
Thus, even if the 113th Congress in its waning days finds the time to renew the transportation program before its expiration in October 2014, we should not expect the next federal surface transportation bill to be a massive multi-year measure funded with hundreds of billions of dollars devoted to infrastructure. More likely, the next transportation authorization will take the form of yet another short-term bill funded at current spending levels. Those levels (an average of $52 billion/year in FY 2013-14), should be generous enough, according to a senior state DOT official, to allow most states to maintain and preserve their transportation infrastructure in a state of good repair.
A permanent transition to short-term transportation bills would do away with the specter of the Highway Trust Fund repeatedly running out of money, a senior government fiscal analyst told us. Short-term bills such as MAP-21 could continue to be funded out of the Trust Fund with the existing tax revenue stream and would only need modest levels of support from the general fund. A six-year bill, on the other hand, would require an injection of $84 billion in general revenue just to maintain current (FY 2013-14) spending levels (assuming six-year HTF revenues of $228 billion and six-year outlays of $312 billion). It’s a sum of money that even the Democrats consider excessive and irresponsible.
“It’s a different world we live in today,” a veteran lobbyist observed. Long-term authorizations and their contract authority made sense “when we were in the building mode” he told us, — planning large, multi-year public works projects requiring multi-year funding commitments. But those days are largely over. Today, maintenance, preservation and reconstruction constitute the bulk of state DOT programs, and these needs can be handled on an annual or bi-annual basis. In other words, long-term authorizations may have outlived their purpose.
To the extent that ambitious multi-year megaprojects still figure on the drawing boards of state DOTs (and there are some— see below) they can—indeed they will—be financed through public-private partnerships, tolling and credit instruments such as TIFIA and state infrastructure banks. This includes such major public works as the I-495 Beltway Hot lanes project in Virginia, New York’s Tappan Zee Bridge replacement, the San Francisco Bay Bridge Eastern Span replacement, the I-5 bridge across Columbia River between Oregon and Washington, and two Ohio River bridges in Louisville, a joint undertaking of the Indiana and Kentucky DOTs.
A transition from funding to financing of major transportation projects was also the prevailing opinion of the assembled financial practitioners and analysts at the October 2012 conference on Public-Private Partnerships convened by the American Road and Transportation Builders Association (ARTBA). The most feasible way to build future transportation megaprojects, they concluded, will be through project financing and public-private partnerships. Funding them on a pay-as-you-go basis with gas tax revenues through the congressional authorization and appropriations process may no longer be either affordable or practical.
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C. Kenneth Orski is a public policy consultant and former principal of the Urban Mobility Corporation. He has worked professionally in the field of transportation for over 30 years, in both the public and private sector. He is editor and publisher of Innovation NewsBriefs, now in its 22nd year of publication.
Tags: C. Kenneth Orski, FIx-It-First, President Obama, State of the Union Address
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