Let’s try this again, Washington.
Partisan gridlock in recent years has stymied the needs of shippers and transportation providers, causing the country to lose some of its global economic edge. Now, with an election over and a major test of bipartisan pledges in the form of the so-called fiscal cliff, Congress and the Obama administration have the opportunity to make some bold moves.
“I think it is very easy to be optimistic,” said Joshua Schank, president and CEO of the Eno Center for Transportation, a nonpartisan think tank. “Change can only be good when things are really bad.”
But although bipartisan rhetoric has receded somewhat, the challenge to boost declining funding for infrastructure projects ranging from highways to port dredging is only becoming steeper. Still, Congress and President Obama have opportunities to improve the nation’s freight network and boost trade, even if there isn’t the political will to raise the federal fuel tax.
The best shot of raising the fuel tax, the main engine for highway construction, is including a hike within a deal to avoid the fiscal cliff. The only two times the government has lifted the fuel tax in the last 25 years was as “part of an overall grand bargain on deficit reduction,” said Pete Ruane, president and CEO of the American Road & Transportation Builders Association. The last increase was in 1993.
Rep. John Mica, R-Fla., is much less optimistic about an increase in the fuel tax. The immediate past House Transportation and Infrastructure Committee chairman in mid-December said tax-hike optimists are “smoking the funny weed” if they think there is enough political will to boost highway funding via the pump.
There is also talk of finding additional infrastructure dollars by taxing new domestic energy production, a plan House Republicans originally pitched last year.
Fortunately, federal highway spending is guaranteed through September 2014, as part of the two-year, $105 billion surface transportation bill passed in July. The legislation was a breakthrough for shippers and transportation providers in that it calls for the creation of a national freight network, said Janet Kavinoky, executive director for transportation and infrastructure at the U.S. Chamber of Commerce.
Congress and transportation advocates won’t be waiting until the deadline to try to find a way to raise dwindling Highway Trust Fund revenue. Congress has had to plug the funding gap between HTF revenue and highway construction plans using approximately $40 billion annually from the general fund. But there’s growing push in the Republican-led House against using general funds as a patch and a push to spend only on highways what the HTF provides. Such a shift in funding would be disastrous to the nation’s highway system.
Rep. Bill Shuster, R-Pa., the new chairman of the House T&I Committee, said he’s open to raising the fuel tax and charging highway users by how far they drive. Something must change on the revenue side, because the country needs to spend at least $101 billion annually over the next 20 years to maintain the U.S. highway system, according to the Department of Transportation. It needs to spend another $69 billion each year to improve the system, not just keep it at its current condition.
“We are in a time of fiscal crisis,” said Emil Frankel, director of transportation policy for the Bipartisan Policy Center. “Yes, we need more investment in transportation infrastructure, but we need to make wiser choices in investment of scarce resources.”
If the federal government doesn’t make headway on increasing transportation funding next year, the least it can do is stay out of the states’ way, said Doug Foy, founder and CEO of transportation consultant Serrafix. The federal government should allow states to take on tolling projects when the highway isn’t gaining new capacity but just needs new funding to maintain it, said Foy, Massachusetts’ first secretary of commonwealth development. He pointed to how Rhode Island doesn’t have the money to fix its deteriorating segment of Interstate 95, a key freight route in the Northeast, but can’t use tolling to secure needed maintenance dollars.
“If the road is not tolled, it will not be rebuilt,” he said. “So unless you can actually toll the road, it will fall apart.”
State and local governments are increasingly successful in convincing voters to support tax hikes to fund transportation projects. The state and regional bodies are expected to take on even more of the heavy infrastructure lifting as help from Uncle Sam won’t suffice.
Highways and bridges aren’t the only transportation infrastructure in need. It’s been five years since Congress passed a Water Resources Development Act, a key vehicle for the authorization of port and inland waterway projects. The Senate began work on drafting a new WRDA in late 2012, but the journey toward passage will likely be long. With an earmark ban in place, the Senate and Congress are headed toward a fight over how projects can be authorized.
In terms of funding, port proponents won’t stop appropriators from diverting nearly half the revenue collected annually through the Harbor Maintenance Tax until the federal government plugs the holes the import taxes go to fill. In other words, the restoration of the full dredging power of the Harbor Maintenance Trust Fund rests largely on whether Congress and the Obama administration can get its federal fiscal house in order.
Even if Congress and the Obama administration fail to make needed changes to infrastructure policy this year, the president has many opportunities to improve trade access for U.S. exporters and importers. The top free trade pact on the horizon is the Trans-Pacific Partnership Agreement. There are also more signs that the Obama administration and the European Union will sit down this year and tackle their own free trade pact.
Investing in freight infrastructure and promoting trade are two sure-fire ways Congress and the Obama administration can kick-start the slowing U.S. economy in the short term and sharpen the nation’s economic edge in the long term. The fiscal debt clock isn’t the only thing ticking away.