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A Post-Election Outlook for Transportation

Posted by Ken Orski on Tuesday, December 18th, 2012

Innovation NewsBriefs
Vol. 23, No. 32

With President Obama’s reelection and his oft-stated commitment to investing in infrastructure, there is reason for the transportation community to be upbeat and hopeful as we approach the end of the year.  At a post-election analysis of federal transportation policy convened by the Bipartisan Policy Center and the Eno Center for Transportation on November 30, a panel of transportation insiders already began to discuss the issues that need to be considered in shaping the next surface transportation authorization. And the need to repair and rebuild damaged infrastructure in the aftermath of Hurricane Sandy has energized  infrastructure advocates and prompted former governor Ed Rendell, co-chairman of the Building America’s Future Coalition, to call for a commission to develop a long term strategic infrastructure investment plan. “We are spending far too little as a country on our infrastructure and our infrastructure is going to hell in a hand basket,” Rendell said.

But this advocacy and hopeful speculation need to be tempered by fiscal and political realities. The country’s budget situation, the quest for deficit reduction and future debt limit negotiations will inevitably constrain the ability to push for ambitious new program initiatives including higher spending for  transportation.

As a Washington Post analysis put it, “Obama is likely to find himself more on defense during his second four years in the Oval Office, choosing what programs to spare from cuts rather than which ones to create or expand. … White House aides are signalling that any new money from taxes would be used almost entirely for deficit reduction—not for ambitious new spending programs or government expansion” (“Obama’s second-term agenda will be shadowed by budget woes,” The Washington Post, December 8).

Early signs of  the fiscal constraints already can be discerned. The President’s new $50 billion infrastructure proposal, like its predecessor, has been declared dead-on-arrival in Congress.  His disaster relief request has met with caution by House Republicans. A senior GOP aide was quoted as saying that the amount would be “far smaller” than the $60 billion the Administration is seeking (of which $12 billion is to go for repairs to damaged transportation facilities). GOP skepticism is based in part on the findings of the Congressional Budget Office that much of the requested amount wouldn’t be spent for four or five years.  The fact that the Administration did not propose any ways to pay for the relief  and that the bill is bloated with non-emergency items has strengthened Republican resolve to examine the request critically.   

As the discussion at the BPC-Eno meeting suggested, it’s not just the future levels of funding that remain uncertain;  some fundamental policy issues also remain unresolved. For example, is an increase in the gasoline tax truly off the table? Should it be? Or should we start thinking of paying for the use of roads like we pay for other utilities as one panelist suggested? What is the future of the vehicle-mile-travel (VMT) fee? Are we going to see increased attention and flexibility given to tolling? Will the transportation community pay more than lip service to performance measurement as mandated by the new transportation law, MAP-21?  Is TIFIA and “innovative financing” a substitute for federal funding?  Have we seen the end of “executive earmarks” such as the TIGER program? To what extent can states and local government replace federal transportation assistance? Are we going to see the federal government “gradually disqualifying itself from an assertive federal role?” (more simply put, “are we going to see more devolution?”).  It was a spirited but largely inconclusive discussion,  suggesting that the debate about transportation policy is far from over.   

As for future legislation, even if Congress finds the time to renew the transportation program by October 2014 when the current law expires, few observers expect the next surface transportation bill to be a massive multi-year measure funded with hundreds of billions of dollars.  More likely, the next transportation authorization will take the form of another short-term bill funded at current spending levels. Those levels ($74 billion in FY 2012) are generous enough, a senior state DOT official told us, to allow most states to maintain transportation infrastructure in a state of good repair, but they will leave little money for major new construction. The Highway Trust Fund no longer can provide capital for capacity expansion.
A permanent transition to short-term bills would do away with the specter of the Highway Trust Fund 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 need only modest levels of support from the general fund—especially if states were willing to step in with increased contributions of their own. A six-year bill, on the other hand,  would require an injection of nearly $90 billion in general revenue to maintain current (FY 2013) spending levels—a sum that even Democrats consider fiscally and politically infeasible.

“It’s a different  world we live in today,”  a veteran lobbyist told us.  Long-term authorizations made sense “when we were in the building mode” he said, — planning large, multi-year construction projects requiring multi-year funding commitments. But these days are over. Today, maintenance and reconstruction constitute the bulk of  state DOT programs, and these 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 large multi-year infrastructure projects still figure on the drawing boards of state DOTs, they can be financed  through public-private partnerships, tolling and credit instruments such as TIFIA and state infrastructure banks.

As one panelist at the BPC-Eno meeting observed, “there is an enormous disconnect between us and the American public” in assessing the urgency and magnitude of  needed federal assistance. Informal conversations on the sidelines of the conference with members of the audience  tended to confirm the panelist’s observation. “State DOTs don’t seem to be lacking in funds… I see orange construction barrels everywhere I go,” one participant told us. Another participant observed,  “Talking about a gas tax increase when Obama has pledged not to increase taxes on the middle class is heights of wishful thinking.” A third one commented,  ” If there is an ‘infrastructure crisis’ it’s not perceived by the general public.” To be sure, he added, there will be a continuing  need to replace aging transportation facilities. But this does not rise to the level of a national crisis as some infrastructure alarmists would have us believe. Rather, rehabilitation and modernization of aging infrastructure can be dealt with on a state-by-state basis as part of a normal replacement cycle.     

If perceptions such as these are common among the population at large (as they seem to be), transportation advocates who urge significant  increases in federal spending will find a serious challenge on their hands. They must not only convince a skeptical public who see no visible signs of “crumbling infrastructure” that there are urgent reasons for higher levels of federal spending. They also must overcome the popular impression that the calls to raise fuel taxes and expand the transportation program are self-serving and come mostly from “special interests” that stand to profit from increased federal spending.

This will be a tough burden of proof  to overcome— especially in a climate of prospective tax increases, mounting deficits,  a $16 trillion national debt and continued GOP pressure to curb excessive federal spending.  

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.

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