Another Stimulus Bill or a Down Payment on a Bold New Infrastructure Plan?

By / 9.8.2010

Marking the beginning of an intensive pre-election campaign, President Obama unveiled what he called “a bold new vision to renew and expand America’s investment in transportation infrastructure” — a plan that combines a $50 billion up-front “down payment” on a long-term commitment to improve the nation’s roads, railways and airports, with proposed reform of the federal transportation program. The reforms, as summarized in a White House fact sheet released on September 6 and titled a “Plan to Renew and Expand America’s Roads, Railways and Runways,” mark a break with the past in several respects.

The plan would: (1) abolish modal “silos” by combining roads, transit, railways, airport development and the air traffic control system (NextGen) in a single consolidated transportation infrastructure investment plan; (2) integrate high-speed rail (HSR) into the surface transportation program thus ensuring a sustained commitment to a national HSR program over the next six years; (3) establish an Infrastructure Bank to fund investments of national and regional significance; (4) streamline the surface transportation program by consolidating the many different programs and use analytical measures of performance to identify and prioritize investments of critical importance to the nation’s economy.

As was to be expected, the announcement was greeted with a mixture of praise and skepticism. “A bold course to rebuild America’s infrastructure” said a press release from the Build America’s Future coalition which has been highly influential in shaping the administration’s proposal. Similarly, the Transportation for America (T4 America) coalition applauded the President’s initiative as promising to end “earmark-driven, unaccountable spending of the past.” Not surprisingly,  the proposal also elicited the endorsement of Rep. James Oberstar (D-MN) as “consistent” with his committee’s principles. Mr. Oberstar was reportedly consulted by the Administration in the development of the proposal.  However, many industry associations have remained silent, suggesting that they are ambivalent concerning the proposal.

And barely minutes after the White House released details of the plan, congressional Republicans pronounced the idea “dead on arrival.” Both Senate Republican leader Mitch McConnell (R-KY) and House Republican leader John Boehner dismissed Obama’s announcement as motivated by a desire to score political points. “A last-minute cobbled-together stimulus bill with more than $50 billion in new tax hikes will not reverse the complete lack of confidence Americans have in the Democrats ability to help this economy” commented McConnell. “More of the same failed ‘stimulus’ spending,” echoed Boehner.

Perhaps the strongest and most significant reaction came from Rep. John Mica (R-FL), ranking member of the House Transportation and Infrastructure Committee and the Committee’s future chairman should his party win control of the House in November. “I will not support another tax-and-spend proposal while billions of transportation and infrastructure funds sit idle” Mica said in a September 7 news release. “While proposing to spend more on infrastructure in another stimulus effort may sound like the Administration is doing something about jobs, in fact only 32 percent of the infrastructure funding approved 18 months ago in the first stimulus has been spent. Projects continue to be bogged down by bureaucracy and red tape,” he continued.  Mica’s views are bound to influence heavily uncommitted members of his committee as well as his colleagues in the the House at large.

Plenty of Unanswered Questions

The announcement has raised a host of questions, suggesting that the plan was put together hastily and without much forethought. For example, precisely how will the $50 billion be allocated among “roads, railways and runways” and how and by whom will these decisions be made? Moreover, while the sum of $50 billion sounds like big money, when it is spread out among different modes it will have a marginal impact and produce little change. The highway sector alone could absorb the entire amount and then some, according to an AASHTO press release issued in response to the President’s announcement (”States Stand Ready to Respond…with $80 Billion in Ready-to-Go Projects.”)

Also unclear is how the $50 billion “down payment” using general revenue is to be offset and how will the rest of the six-year program be funded without driving up the deficit? Should we assume that the initial $50 billion will be followed by similar general fund contributions in the out-years? The announcement states that the Administration will work with Congress “to fully pay for the plan” but is vague as to the source of funds other than mentioning the possibility of cutting existing subsidies to the oil and gas industries. Also left unanswered was the source of funding for the proposed Infrastructure Bank. Would it be funded out of the initial $50 billion or through an independent authorization?

Finally, is this primarily a political gesture or a launching of a genuine long-term infrastructure investment strategy? There have been conflicting signals. One Administration official stressed in a conference call with reporters that the infrastructure investment plan “is not a stimulus, an immediate jobs plan” but rather a front-loaded six-year investment strategy. But he was contradicted by the President himself who said in his Labor Day speech in Milwaukee that “This [plan] will not only create jobs immediately (emphasis added), it’s also going to make our economy hum over the long haul.”

A last intriguing question: if the $50 billion is indeed a down payment on a six-year investment strategy, can we assume that the Administration is planning to consolidate “roads, railways and runways” in a single multi-modal infrastructure program? (that would explain the ambivalence of the transportation industry.)

Legislative Prospects

The prospects of rapid congressional action on such an ambitious proposal are uncertain. Resistance among Republicans and certain Democrats to any additional government spending is growing stronger as the election approaches, in the face of the growing federal deficit and disappointing results from the original stimulus plan.

Administration officials declined to make predictions about the timing for the approval of the upfront investment or the full six-year plan. “Full authorization plans take quite a while and we’re mindful of that” commented one senior administration official. As Jeff Davis, editor of Transportation Weekly, points out, all previous Administrations have submitted full legislative proposals (which typically run into several hundred of pages) before Congress took up the reauthorization legislation. This would suggest that action on the long-term plan will be deferred to the new Congress, with the authorizing committees possibly having Republican majorities and headed by Republican chairmen.

And that could mean a brand new ball game.

This item is cross-posted at InfrastructureUSA

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