Here’s the best-case scenario for federal funding of highway and transit projects: Before it leaves town for Memorial Day, Congress will approve its 33rd short-term extension over the past six years for surface transportation programs.
Worst-case scenario? Congress won’t pass anything, and come June 1, the U.S. Department of Transportation won’t even be able to spend what little money it has left.
“It is that serious,” Transportation SecretaryAnthony Foxx told business and labor leaders gathered in Washington, D.C., for the kickoff of Infrastructure Week.
The problem is that the 18.4-cent federal gasoline tax, the primary source of federal funding for highway and transit projects, brings in billions of dollars less than what’s needed. Congress could fill this gap by increasing the gasoline tax, but it lacks the political will to do so. Why?
“Grover Norquist,” replied former Pennsylvania Gov. Ed Rendell, a Democrat who co-chairs the infrastructure advocacy group Building America’s Future. “He’s paralyzed this town.”
Many members of Congress fear they’ll face retribution in the next election if they violate a pledge not to raise taxes secured by Norquist’s Americans for Tax Reform.
So why do business groups like the U.S. Chamber of Commerce want Congress to raise taxes in this case? They think the costs of not increasing U.S. investment in highway and transit projects are higher than the cost of raising the gasoline tax. Here are four ways American businesses are being hurt by inadequate spending on surface transportation.
It raises the cost of doing business
Traffic jams result in lost productivity for workers and disrupt supply chains for businesses. Billions of dollars in fuel is wasted as engines idle. Various studies put the tab for traffic congestion at more than $120 billion a year.
That money “buys us nothing,” said AFL-CIO President Richard Trumka.
“Raising the fuel tax would cost less, and we’d get something for it.”
Plus, companies such as Siemans, which has more than 70 manufacturing plants in the U.S., need to know what the transportation infrastructure in a given area is going to look like years out because new facilities take four to six years to plan and build, said Siemens USA President and CEO Eric Spiegel.
Projects that would boost local economies are on hold
Foxx noted that six states have put off $2 billion worth of transportation projects because of uncertainty over federal funding.
There’s “an even deeper level of pulling back” that’s not as apparent, said Foxx, a former mayor of Charlotte, N.C. Local officials around the country are delaying multiyear projects that would cost tens of millions of dollars just for the first phase of planning and environmental reviews.
“Let me tell you, those big transformative projects, they’re not being done,” Foxx said. Uncertainty about federal funding is “crippling our system.”
That’s leading to lost opportunities for economic development, especially along transit lines, Spiegel said. Anywhere rail is built, “you’ll see huge investments along the line,” he said.
It hurts America’s global competitiveness
The U.S. now ranks 28th in the world when it comes to the quality of its infrastructure, Vice President Joe Biden told the Infrastructure Week gathering.
That hurts America’s desirability as a place to do business, and dilutes our advantages of cheap electricity, clear laws, and a strong work force, said Tamara Lundgren, CEO of Schnitzer Steel in Portland, Ore., and chairman of the U.S. Chamber of Commerce.
Other nations around the world are improving their transportation infrastructure as the U.S. limps along.
“China isn’t thinking about how to patch the next pothole,” Lundgren said. “They’re thinking about how to build the next supply chain.”
“They are pulling every lever to make it happen,” she said.
Chinese infrastructure investments, such as creating more efficient transportation routes to Europe, serve two goals: stimulating the Chinese economy and making Chinese companies more competitive, she said.
Good jobs aren’t being created
Spending more money on construction projects would benefit businesses like HTNB Holdings Ltd., a company that provides planning, design, program management and construction management services for infrastructure projects. But HTNB President Paul Yarossi said lots of workers would benefit as well, because construction-related jobs “cut through the entire cross-section of the work force,” from unskilled labor to advanced degree engineers.
Plus, there’s also potential for upward mobility in construction. A worker can go in unskilled, learn a trade and then become a middle-class consumer, he said.
And the U.S. economy needs more consumers who consume, he added.
by Kent Hoover, Louisville Business Journal