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Bridging the Partisan Divide

Posted by Ken Orski on Tuesday, October 11th, 2011

Innovation NewsBriefs
Vol.22, No. 28

Two infrastructure-focused meetings on Capitol Hill — one sponsored by the liberal-leaning (or “center-left” as they prefer to be called) Progressive Policy Institute (PPI), the other by the conservative-leaning Free Congress Foundation — have sent an encouraging signal that, when it comes to investment in transportation, the partisan divide is narrowing.

The PPI conference, which featured remarks by Gene Sperling, Director of the White House National Economic Council, Sen. Mark Warner (D-VA), Rep. Rosa DeLauro (D-CT) and two panels of representatives from the private sector, struck many themes favored by the conservatives. Will Marshall, president of PPI, had good words to say about public/private partnerships. With the government strapped for cash, he said, it’s reasonable to ask where the money to rebuild America will come from. The answer, he continued,  is that we need to look more to the private sector. Although the federal government will have to put up seed capital, its main role should be to leverage private investment in state-of-the-art infrastructure.

Gene Sperling pointed out that short-term recovery-type measures included in Pres. Obama’s latest initiative, the American Jobs Act, are not inconsistent with encouraging a better business environment, the Republicans’ avowed prescription for ending the recession and reducing the deficit. Investment in infrastructure, Sperling said, is the bridge that links the two objectives.

As one speaker remarked, “short-term infrastructure is an oxymoron.” However, everyone seemed to agree that investing in the nation’s infrastructure must not be neglected even if its role in short-term job creation and economic recovery is negligible.

Finding Common Ground

Over on Capitol Hill at the Free Congress Foundation-sponsored meeting, the Foundation’s President, former Virginia Governor Jim Gilmore and two key lawmakers— Rep. John Mica (R-FL), chairman of the House Transportation and Infrastructure Committee and Sen. Jim Inhofe (R-OK), Ranking Member of the Senate Environment and Public Works (EPW) Committee — also sent positive signals. Gov. Gilmore announced the release of a Foundation-sponsored study by Michael Bronzini which makes a case for public and private investment in transportation infrastructure as an aid in economic growth and development.

Rep. Mica confirmed that the House GOP leadership has given him a go-ahead to explore ways to raise additional revenue to maintain current levels of transportation spending (approximately $54 billion/year). Until recently, House Budget rules had required him to hold spending down to levels that could be sustained by Trust Fund tax receipts (approximately $35 billion/year). If additional funds are found and blessed by the House Ways and Means Committee, this action would go a long way toward eliminating a major source of disagreement between the House and the Senate concerning the transportation reauthorization. However, one other major point of contention remains — whether to enact a two-year bill (favored by the Senate) or a six-year bill (proposed by the House.)

In another gesture that is likely to bring the two sides closer together, the Senate EPW Committee, Sen. Inhofe told the audience, has agreed to eliminate the federal mandate to set aside 10 percent of the federal Surface Transportation Program for the so-called “Transportation Enhancements” — pedestrian and bicycle facilities, acquisition of scenic easements, historic preservation, landscaping and scenic beautification, conversion of abandoned railway corridors into trails, establishment of transportation museums, etc. The Senate bill would keep the enhancement funds in the bill but leave it to local discretion to decide if “Enhancements” are the best use of scarce dollars.

Republicans have long advocated the abolition of this mandate. In a September 6 letter to President Obama, House Speaker John Boehner (R-OH) and House Majority Leader Eric Cantor (R-VA) wrote: “While many of the initiatives funded by this mandatory set-aside may be worthy projects, eliminating this required set-aside, would allow states to devote more money to the types of infrastructure programs you are advocating without adding to the deficit. We believe such a reform would be consistent with your statement that we should ‘reform the way transportation money is invested, to eliminate waste [and] to give states more control over the projects that are right for them.’”

Sen. Rand Paul (R-KY) unsuccessfully urged the same course of action during the Senate debate on the extension of the current transportation law, “While bridges and roads sit in disrepair,” he said on the Senate floor, “the federal government spends time and money mandating highway funds for beautification projects. … Ten percent of the surface transportation funds are mandated to be spent on enhancements such as turtle tunnels, squirrel sanctuaries, movie theaters and flower beds. This is Washington insanity at its most evident.”

Eliminating the “Enhancement” mandate will give the two sides one less issue to argue about.

Bipartisan Skepticism on the Infrastructure Bank

The Senate’s deliberate omission of a National Infrastructure Bank (NIB) in its proposed reauthorization bill—despite President Obama’s repeated entreaties to enact the NIB—could be viewed as another gesture that will reduce a potential conflict and disagreement with House Republicans. The latter have been vocal in their opposition to creating what Rep. Mica has called “another federally backed agency designed to pick winners and losers.” GOP critics claim that the bank could easily be turned into a politicized slush fund for White House pet projects and sweetheart deals. With the Solyndra fiasco still reverberating loudly on Capitol Hill, the National Infrastructure Bank finds few GOP supporters. Recent Solyndra email disclosures have only strengthened their opposition to “politicized investing.”

Rep. Mica favors instead state-level infrastructure banks (SIBs) which already are in place in 34 states. SIBs are revolving fund mechanisms that allow states to finance transportation projects through loans and credit enhancements by utilizing their federal-aid highway funds. Unlike some National Infrastructure Bank proposals, only projects with dedicated repayment streams, typically revenue-generating toll facilites, are eligible for support.

Both sides are in agreement that the focus at federal level should be placed on expanding already existing credit assistance tools rather than creating a new federal bureaucracy that would take several years before becoming fully operational. Existing financing tools include  the Transportation Infrastructure Finance and Innovation Act (TIFIA) and possibly the facilities of the Export-Import Bank, as proposed in a September 29 op-ed in the Washington Post.  (A House T&I Committee hearing on the Obama infrastructure bank proposal will be held on Wednesday, October 12 at 10 am. Witnesses include Oklahoma DOT Secretary Gary Ridley; Gabriel Roth, The Independent Institute; Scott Thomasson, PPI;  Ron Utt, The Heritage Foundation; and Geoffrey Yarema, Nossaman LLP)

Overcoming Remaining Differences

Will these small gestures suffice to create an atmosphere of comity in which the parties can amicably resolve the remaining differences and reach an accommodation on a transportation bill? That depends in part on how much give and take there will be concerning the length of the reauthorization. Rep. Mica has been adamant in the past about the need for a long-term bill and on this score he has full support of state DOTs. State transportation officials contend that a two-year bill would not enable them to plan major capital projects and would only further prolong the uncertainty about the program’s future.

But the greater stumbling block remains the inability to find credible sources of additional funding. Despite repeated reassurances by Senate EPW leaders that they are “close” to finding an offset for the $12 billion/year shortfall in their proposed budget that would maintain current spending levels (at least for the next to years), reliable sources tell us that the Senate Finance Committee has not reached an agreement on the offsets. On the House side, finding additional funding that would pass muster with the fiscally conservative Ways and Means Committee appears equally uncertain and problematic at this time.

Supplementing the Highway Trust Fund (HTF) with substantial amounts of general revenue, as has been recommended by the Free Congress Foundation, poses its own problems. As Robert Poole points out in a recent column (PWFinancing, September 2011), the Congressional Budget Act of 1974 requires that at least 90 percent of HTF revenue come from taxes “related to the purpose for which such outlays are or will be made,” i.e. user-tax revenue. A reauthorization bill that added $16-18 billion/year to the Trust Fund from the general revenue (a sum needed to maintain current spending levels) would fail the 90 percent test required by legislation.

Congress has until March 31 to devise a reauthorization bill. It remains to be seen whether  mounting public pressure to “do something about the infrastructure” will generate sufficient momentum to overcome the substantive and political barriers to reaching a bipartisan agreement on the reauthorization. The will seems to be there; now it’s a matter of finding a way.

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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