The Obama administration signaled Tuesday it will start curtailing funds to state highway programs on Aug. 1 unless Congress moves swiftly to reauthorize funding for the federal highway and transit program.
The announcement by Transportation Secretary Anthony Foxx, in letters to state transportation officials, was a faint echo of Treasury Department warnings last year of scaled-back spending and even a default on U.S. borrowing unless lawmakers agreed to raise the federal debt ceiling. While today’s situation is a far cry from past debt ceiling and other fiscal crises, the economy clearly would suffer if Congress lets the highway trust fund run dry later this month.
Foxx cautioned in May that the net impact of such a highway funding calamity would be the loss of 700,000 jobs on as many as 112,000 highway construction projects and 5,600 transit projects.
“It would be like Congress threatening to lay off the entire population of Denver, or Seattle or Boston,” President Obama said yesterday, urging Republican and Democratic lawmakers to end the impasse over highway spending. “That’s a lot of people. It would be a bad idea. Right now there are more than 100,000 active projects across the country. Soon, states may have to choose what projects to continue and what to put the brakes on.”
Obama used the aging Francis Scott Key Bridge connecting Washington, D.C., and suburban Virginia as a dramatic backdrop for his speech. His latest idea for underwriting the cost of future highway and infrastructure construction is a tax code revision that would tap into the overseas profits of multi-national corporations.
“It’s not crazy,” he said. “It’s not socialism. It’s not the imperial presidency. No laws are broken. We’re just building roads and bridges the way we have for the last…I don’t know… fifty, a hundred years.”
Obama added, “But so far House Republicans have refused to act on this idea. Republican obstruction is not just some abstract political stunt. It has real and direct consequences for middle-class families all across the country.”
The heated rhetoric suggest negotiations over a new highway program are getting swept up in a larger feud between Obama and House Republicans over the president’s efforts to circumvent Congress through executive orders. House Speaker John Boehner (R-OH) recently vowed to take the president to court for violating the Constitution.
With no hope of comprehensive highway legislation this summer, lawmakers are trying to find a stopgap measure to keep highway funds flowing through the midterm elections.
But that effort to raise billions is proving difficult to achieve.
Senate Democrats have proposed ways to raise additional tax revenue without boosting rates, while Republicans want major offsetting cuts in spending. Their core idea to save money is to end the practice of Americans’ ability to simultaneously claim Social Security disability payments while also receiving unemployment insurance.
In the past, the government has shifted money from general fund to the highway trust fund to plug budget holes, but that isn’t being discussed this time[MH1] .
Foxx told reporters yesterday morning that the trust fund’s balance will drop below $4 billion by early August, and thereafter the agency will only make payments to states as gas and diesel taxes come into the fund. “I’ve been talking about this cliff for six months, and it’s here,” he said, according to The Dallas Morning News. “I don’t think the general public, Congress or anyone really understands how serious it is.”
State officials will be on the hook for hundreds of millions or even billions of dollars they have already paid to contractors, with the expectation of being quickly reimbursed by the federal highway program.
Many groups, including the U.S. Chamber of Commerce and the AFL-CIO, have backed the idea of simply raising the current 18.4 cent-per-gallon federal gas tax. A bipartisan proposal by Sens. Chris Murphy (D-CT) and Bob Corker (R-TN) would boost that tax by 12 cents over the next two years to replenish the trust fund. The idea, however, has little support this tough election year.
In his letters to state officials, Foxx outlined procedures for managing the revenue shortfalls. “The Department will continue to take every possible measure to fully reimburse your state for as long as we can,” Foxx wrote. “However, as we approach insolvency, the Department will be forced to limit payments to manage the reduced levels of cash available in the Trust Fund.”
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