With concern about economic competition from China very much on his mind, President Obama this week renewed his call for major new investments in U.S. infrastructure to keep pace with rival countries and keep the economic recovery on track.
“It makes no sense that we have a first class economy with a second class infrastructure,” Obama said on Wednesday during a speech to the Business Roundtable in Washington.
After failing to win congressional support for his proposal for pumping $302 billion of federal funds into highway and mass transit projects, Obama appeared pessimistic that the new Republican Congress will be willing to support a major increase in tax revenues to finance a long-term undertaking.
WHY THIS MATTERS
Congress and the White House continue to talk past each other about the need for major new investments in the nation’s infrastructure system to keep the economic recovery going – although this is an ideal time to borrow with interest rates still at bargain basement levels. It may take another bridge collapse or another brutal, pothole marked winter to bring lawmakers and the administration to their senses.
Last July, Congress narrowly averted the bankruptcy of the federal Highway Trust Fund – the major source of gasoline tax revenue that goes for new highway, bridge and mass transit projects. The House and Senate agreed to replenish the fund with about $10 billion over the coming year primarily through a series of budget and accounting gimmicks. Without that action, the administration had warned, as many as 779,000 jobs in the construction and related industries would have been lost.
Congress also put off until next spring deciding what to do long term to bolster the highway program. They could raise the 18-cents-per gallon federal gas tax for the first time in twenty years or rewrite the federal tax code to find new sources of financing of infrastructure.
“In fairness to members of Congress, votes on the gas tax are really tough,” Obama said. “Gas prices are one of those things that really bug people. When they go up, they're greatly attuned to them. When they do down, they don't go down enough. And so, historically, I think there's been great hesitance.”
Source: Think Progress
Obama said he would discuss the need for higher taxes for infrastructure when he meets with Senate Republican Leader Mitch McConnell of Kentucky, the soon-to-be Majority Leader, and House Speaker John Boehner (R-OH). Yet he conceded that finding a compromise on a comprehensive plan was unlikely anytime soon.
“The question is going to be, ‘Is there a formula long term for us to get a dedicated revenue source for funding the infrastructure that we need that is not so politically frightening to members of Congress that it's reliable?’” he said.
Ray LaHood, Obama’s former Transportation Secretary and a one-time Republican member of Congress, thinks the short answer is -- No.
“Unfortunately I think it’s not so much on anybody’s radar who is in a position of leadership,” LaHood said in an interview. And that includes McConnell, Boehner, incoming House Ways and Means Committee Chair Paul Ryan of Wisconsin and other congressional GOP leaders who already have spelled out their legislative agendas for the coming year.
“So I’m not hopeful at the moment that Congress is going to deal with this…. I think it’s going to be very difficult for them to get around to tax reform, because there is no consensus on what they can do between the House and Senate and maybe even on the Ways and Means Committee,” LaHood said.
If LaHood is right, the new Congress -- just like the outgoing one -- will continue to stumble along with a patchwork approach that will provide just enough money for the states to continue existing projects, while forcing the curtailment or shelving of other projects on the drawing board. If the country goes through another terrible winter like last year, then the massive cost of filling potholes and restoring damaged bridges could blow huge holes in state budgets.
The American Society of Civil Engineers pegs the U.S. infrastructure-spending gap at $125 billion a year just to maintain and repair highways and bridges.
The civil engineers group in a report card gave the nation’s infrastructure a grade of D+, noting a tremendous backlog and a “pressing need for modernization.”
After years of massive highway construction, Congress and state governments allowed their capital budgets to wither during the past decade, as they struggled to cope with the recession and budget deficits.
As a result, the U.S. plummeted from 7th to 18th overall in the quality of its roads, according to the most recent World Economic Forum. That puts the U.S. behind countries including Poland, Estonia, Hungary, Spain and Greece – and even further behind China.
“The one thing I will say is that if they need to build some stuff, they can build it. And over time, that wears away our advantage competitively,” the president said.
“Now, you've got an authoritarian government that isn't necessarily accountable. I understand we're not going to do that. But if they're able to build their ports, their airports, their smart grid, their air traffic control systems, their broadband systems with that rapidity and they're highly superior to ours -- over time, that's going to be a problem for us.”
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