Bloomberg News

Congress Heads Into Transportation Debate Without Obama Proposal

February 15, 2012

(For more on the budget, see BUDG <GO>.)

Feb. 14 (Bloomberg) -- President Barack Obama’s call to almost double transportation spending over the next six years may have little influence on Congress as it starts debating how much money to allot to U.S. infrastructure.

The Senate brought highway, bridge and mass-transit legislation to the floor last week and the House is scheduled to start discussing a bill tomorrow. Both chambers are examining proposals for funding from non-transportation sources, including forcing federal employees pay more toward their pensions, changing the way inherited individual retirement accounts are taxed and using revenue from expanded oil and gas drilling.

Obama’s plan seeks to spur job creation by stepping up infrastructure spending and redirecting funds previously used for military operations in Iraq and Afghanistan. House and Senate lawmakers are already looking at proposals that lock in spending near current levels, and won’t take Obama’s into consideration, Patrick Hughes, an analyst with investment advisers Height Analytics LLC, said in a phone interview.

“We would assign very little relevance to the president’s proposal,” said Hughes, who is based in Washington. “Congress is in the midst of debating and voting on an infrastructure plan that would trump what the president has put forward.”

Half of the money previously spent on wars could be used for infrastructure and the remainder to pay down the federal deficit, Obama has said without providing figures.

‘Pure Posturing’

The Senate is proposing a two-year bill with $109 billion in funding. The $260 billion House bill is for five years. That compares with current legislation that allocated about $286 billion over six years and has operated on a series of extensions at about the same spending level since 2009.

The White House budget released yesterday proposes spending $476 billion over six years on surface transportation, with an immediate $50 billion of spending this year.

“This is pure posturing,” Norman Anderson, chief executive officer of Washington-based CG/LA Infrastructure LLC, a consulting company.

Financing the Highway Trust Fund, which pays for U.S. road and public-transportation projects using money raised by an 18.4 cent-a-gallon vehicle-fuel tax, has been the main sticking point in passing a new bill. The tax was last increased in 1993. Without additional income, the fund may be insolvent as soon as October, the Congressional Budget Office said last month.

The House begins debate tomorrow on its highway bill, which seeks to fund highway projects in part by ending guaranteed funding for mass transit.

Transit Proposal Opposition

House Speaker John Boehner, an Ohio Republican, may face a revolt from party members whose districts have high concentrations of public-transportation users, said Joshua Schank, CEO of the Eno Center for Transportation, a transportation policy research and advocacy group based in Washington.

House Democrats including Jerrold Nadler of New York and Earl Blumenauer of Oregon also oppose that plan. Public- transportation advocates, business groups such as the U.S. Chamber of Commerce, the largest business lobby, and state and local government officials have also spoken out against the plan.

American Express, Macy’s

The Partnership for New York City, a group of CEOs of companies that do business in New York including American Express Co., Macy’s Inc., Aetna Inc., wrote to House leaders yesterday that the bill “would result in irreparable damage to the transportation infrastructure of New York and America’s other great cities.”

Daniel Doctoroff, president of Bloomberg LP, also signed the letter.

Transportation Secretary Ray LaHood said the transit funding changes are among the biggest obstacles to getting the bill passed.

The Senate hasn’t firmed up funding for its bill. Senate Finance Chairman Max Baucus, a Montana Democrat who had proposed using changes in some IRA rules to help pay for the bill, backed away from the plan after protests from Republicans.

The changes that Baucus proposed last week would raise $4.6 billion for the Treasury over the next decade by requiring beneficiaries to pay taxes within five years instead of spreading them over their lifetimes, according to the Finance Committee.

While Baucus later backed away from the effort, the plan remains in the bill and an alternative funding source hasn’t been announced.

Breaking with the practice of taking user fees to pay for infrastructure projects is going to be a stumbling block, Eno’s Schank said.

That makes the proposals “suspect and people will fight over them,” he said. “The main problem is going to be the money.”

The House bill is H.R. 7. The Senate bill is S. 1813.

--Editors: Andrea Snyder, Jim Rubin

To contact the reporter on this story: Carol Wolf in Washington at cwolf@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net -0- Feb/13/2012 22:21 GMT


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