Sunday, August 7, 2011

Ken Orski looks at the status of transportation (and therefore HSR) funding in Washington

We've taken it upon ourselves to run Ken Orski's newsletters whenever they appear in our inbox.

Ken is the most astute observer of the politics of Transportation in Washington. The Republicans have developed, in their negotiation strategies with the Democrats, a technique of "black-mail" or "chicken."  They keep demanding cuts and no revenue increases, and when those are agreed to, they up the ante. And, they don't back down until the very last minute, so that in order to not close down government functions (like the FAA), the Democrats end up agreeing. It's part of the government down-sizing strategy of the conservative Republicans, or "starve the beast" as Grover Norquist puts it. 

What that means for the highly divergent Transportation budget re-authorization drafts from the Senate and the House promise to be highly contentious disagreements beginning when the Congress reconvenes in mid-September. As Orski points out, they are very far apart.

Let's say right here that we are unhappy with both approaches.  First, the Democratic approach from Boxer in the Senate.

They call it everything but a stimulus package, which it obviously is intended to be.  It's about jobs and economic recovery; not about what makes sense for transportation in the US, and they do say it's primarily about jobs/recovery.  Their transportation approach costs more than anticipated revenues because it is perceived as short term stimulus; and that's why they want only a two-year authorization, not a six-year.  I'm sorry, fellow Democrats; that's not a game I want to play. I do believe in stimulus and jobs; but not this way.

The Republican approach slashes the good with the bad.  Contrary to their intentions, there should be infrastructure reconstruction, including assurance of the survival of urban and regional public mass transit (which Republicans don't believe in.) If you follow their logic to its logical conclusion, the Republicans would do away with all taxes and with all government (privatizing all its functions).  That, of course, permits the rich to survive in comfort, but the rest of us would be trapped in anarchy.  And that's un-American.

Anyhow, September/October will become decisive months for us in Washington. 

Meanwhile I have yet to see anything substantive we can hang our hats on in California. Actually, it's more bad news than any good, since our own Peninsula colleagues are busy stabbing us in the rear with their sneaky cockamamie Caltrain corridor schemes. And, I can hardly bear to watch the impending wreckage in the Central Valley. 

Vol. 22, No. 22
August 7, 2012

Will Negotiations on the Transportation Bill End Up in a Stalemate?

"I don’t see any momentum for more compromise after this deal than there was before. Maybe less." Mark Halperin on MSNBC.
"I’m going to use every lever possible...whatever it takes to get long-term authorization." Rep. John Mica, Chairman of the House Transportation and Infrastructure Committee (quoted in WSJ, August 6)


The current standoff between Senate Democrats and House Republicans over a short-term FAA funding bill foreshadows the possibility of a similar impasse in the upcoming negotiations on the surface transportation re-authorization bill. That is the sober assessment offered by seasoned Washington observers on both sides of the political divide.

The FAA Showdown
At the basis of the FAA showdown was Senate refusal to accept a House-passed temporary FAA funding extension that also would cut $16.5 million in air service subsidies to 13 rural communities. (Both the House and Senate had passed long-term funding bills for FAA earlier this year but negotiations on resolving differences and reaching an agreement have stalled over labor provisions).

Sen. John D. Rockefeller, chairman of the Senate Commerce Committee that has jurisdiction over FAA, objected to the inclusion of the subsidy cut off and insisted on a "clean" bill. The resulting impasse dragged on for more than two weeks while Congress was in session. When both parties failed to reach a compromise and left Washington for a month-long vacation, the White House was obliged to step in, in order to avert a suspension of airport construction projects and furloughs of 4000 FAA employees. Under pressure from the President, the Senate and House leaders agreed to put off their dispute until September. But the impasse and mutual recriminations continue.

"The stalemate over FAA funding offers a foretaste of what awaits us in September when Congress gets down to discussing the transportation bill," one Washington political analyst told us. "Only the stakes will be much higher and the consequences of a deadlock much more serious."

Opposing House and Senate Postures
Indeed, the House and the Senate are poles apart in their position on the nature and funding of the re-authorization bill. The House bill, unveiled by Chairman John Mica (R-FL) on July 7, would extend the transportation program for six years and has a price tag of $230 billion or an average of $38.3 billion/year. That is roughly the amount of tax revenue expected to be earned by the Highway Trust Fund over the six year period of the proposed bill (FY 2012-2017) as projected by the Congressional Budget Office ($201.6 billion in the Highway Account and $30.9 billion in the Transit Account). In setting this level of funding, the House Transportation committee followed the House Budget Rules that instructed the committee to hold spending to levels that are supported by Trust Fund tax receipts.

The Senate bill on the other hand, whose outline was released by the Senate Environment and Public Works (EPW) Committee on July 20, would extend the program only for two years (FY 2012-13) at a price tag of $109 billion or an average of $54.5 billion/year. Since the Highway Trust Fund is expected to receive not more than $75 billion over the next two years, the Committee proposed to partially fund the shortfall by drawing down the entire unspent Trust Fund balance expected to be left over at the end of FY 2011 ($14.8 billion in the Highway Account and $6.9 billion in the Transit Account according to CBO projections.). That still left an unfunded shortfall of $12 billion. 

Finance Committee Chairman Max Baucus (D-MT), bound by a pledge to finance the bill "in a way that does not increase the deficit," has been exploring various offset options but so far has been unable to come up with a solution that would satisfy his fellow Republican committee members.
As one Washington analyst observed, "a two-year Senate bill that keeps spending at current inflated levels and has an unresolved $12 billion shortfall, and a six-year House bill that reduces spending to no more than current revenues are so fundamentally different that it is hard to imagine they could be reconciled in a conference committee."

The Philosophic Divide
Moreover, the gulf that divides the two parties is not confined to just the technical parameters of the bills. Democrats and Republicans differ fundamentally on what should the proper federal role in transportation be. The Highway Trust Fund, Mica wrote in a letter to the US Chamber of Commerce, has evolved into a slush fund with less than 65 percent of its receipts dedicated to legitimate purposes (which in Mica’s view are highway-related programs), and with much of the remaining money funneled into federally-mandated programs that are of no federal interest and have only a peripheral relation to transportation. These mandates have depleted the Highway Trust Fund to the point of bankruptcy. Their continued support, Mica wrote, is "unproductive and misguided at best."

Republicans in Congress, along with many conservatives at large, view the new climate of fiscal restraint as an opportunity to return the federal-aid program to its original roots. Greater spending discipline, they contend, will refocus the federal mission on projects of national significance, concentrate resources on legitimate federal objectives, restore the highway program’s lost sense of purpose and give states and localities more voice and responsibility in determining their transportation future.

The Senate view, as articulated by Sen. Barbara Boxer (D-CA) chairman of the EPW Committee, is more expansive. The Senator considers the bill as a vehicle "to help create jobs, jump-start our economy and build the foundation for long-term prosperity." A cut in current transportation spending, Boxer warned, would result in 630,000 transportation jobs being lost. To the Senator and her fellow Democrats on the committee, the federal-aid transportation program is, first and foremost, a tool of job creation and economic recovery.

But spending money on "shovel-ready" transportation projects, House Republicans argue, has had no demonstrable effect on lowering unemployment, and the $109 billion bill is but a thinly disguised short-term economic stimulus measure. The Senate bill will only "extend the spending binge of the stimulus era without offering a chance to plan for long-range investments," one House GOP aide told us.

Nor will an infrastructure bank touted by Pres. Obama provide the desired immediate economic stimulus, in the opinion of a financial analyst who has followed the Infrastructure Bank debate closely. The elaborate governance structure of the Bank as proposed by the Obama Administration, with its layers of bureaucratic conditions and requirements, offers little hope of speedy approval of job-creating infrastructure projects. On that score, at least, the two bills are in agreement.

Even in the Senate, Sen. Boxer’s bill is likely to receive less than overwhelming support. One sign of a partisan divide is a bill, the State Transportation Flexibility Act (S. 1446), introduced by Sen. Tom Coburn (R-OK) and co-sponsored by 13 other GOP senators. The bill would allow states to opt out of the Federal-aid transportation program and let individual states collect and spend gas tax revenue on transportation priorities of their own choosing, free of federal mandates and restrictions. Although the measure is thought to have little chance of enactment, its backing by many influential GOP senators suggests that the Boxer bill is not necessarily assured of a 60 vote majority.

A Look Forward to September

Let us assume, however, that both the Senate and House bill summaries will be turned into formal and detailed legislative drafts by early September. Let us further assume that both pieces of draft legislation will obtain approval of their respective authorizing committees (three committees in the case of the Senate: EPW, Banking and Commerce), and that the bills will be passed by both houses of Congress (with a 60-vote majority in the Senate).

Let us suspend our disbelief that Congress can accomplish all these tasks in the first two weeks of the fall session (which begins on September 6), despite other pressing business such as passing FY 2012 appropriations, and despite the distraction of the second phase of the congressional debt reduction negotiations. The next step would be to convene a House-Senate conference to reconcile the differences in the two bills and produce a compromise legislation.

What shape will the compromise bill assume? Which side will find itself in a stronger negotiating position? In light of the ongoing deadlock on the FAA funding bill, is it reasonable to assume that the House and Senate will settle their differences in the remaining 10 days before the current law is set to expire on September 30? Or will the negotiations drag on indecisively into October (or November), necessitating another extension of the existing law? How long an extension will be necessary and at what level will it be funded? Or should we give up the hope altogether of seeing a multi-year reauthorization enacted before 2013?

The month of September will offer the answers.


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