President Obama's jobs plan proposes spending on infrastructure. What will Congress do?

This post was written by Christopher L. Rissetto, and Robert Helland.

Earlier this month, President Obama proposed a $447 billion package of tax cuts and new spending to help the economy. In a joint session to Congress, the President laid out the terms of his proposal, which includes over $100 million for upgrading highways; mass transit; rail, both freight and intercity; aviation; schools; and local neighborhoods - both by direct expenditure as well as through financing. Since then, the President has hit the road to build support.

Coming at a time when Congress is considering at least $1.2 -$1.5 trillion in cuts to the federal debt, it would seem that any proposal for additional infrastructure spending would seem – at the risk of understatement - difficult to pass. However, unemployment continues to remains high. In addition, there is a pent up demand at the state and local level for funds, given Congress’ failure to date to re-authorize the multi-year transportation program known as SAFETEA-LU and the fact that the nation’s infrastructure continues to earn low grades from groups such as the American Society of Civil Engineers. As a result, it is worthwhile to take a look at the President’s infrastructure proposal to see which elements might have a chance in Congress.

Over $100 billion for infrastructure investment. The President proposes to spend

  •  $50 billion for highways, transit, rail and aviation projects;
  • • $25 billion for school infrastructure, including such projects as greening and efficiency upgrades and new science and computer labs;
  • $15 billion for rehabilitating vacant and foreclosed homes and businesses;
  • $5 billion for modernizing community colleges, including tribal colleges.
  • $10 billion to create a “National Infrastructure Bank”. The President also wants $10 billion for the establishment of a National Infrastructure Bank to “invest in a broad range of projects of national and regional significance” (www.whitehouse.gov).

The President proposes, Congress disposes. As we noted, new infrastructure spending - during a time when the focus is on the nation’s debt - may seem a stretch. And politics plays a factor – no surprise here – when Congress considers any legislation. However, there has been some movement in Congress on the need to spend more, especially on transportation projects, which have a dedicated source of funding in the fuel tax. For example, both Congressman John Mica (R-FL-7) and Senator Boxer (D-CA), chairs of the respective congressional committees, have offered separate proposals to re-authorize SAFETEA-LU, which derives most of its funding from the 18.4 cent tax paid at the pump. In addition, Congress is currently considering a 6 month “clean” extension of SAFETEA-LU – independent of re-authorization efforts – that would continue to fund highway and mass transit programs at current level. H.R. 2887, the Surface and Air Transportation Programs Extension Act of 2011, passed this week in the House of Representatives by voice vote and is expected to face a similar vote in the Senate.

But if the appetite for more infrastructure spending is limited, there are a number of financing proposals in Congress similar to the President’s call for an infrastructure bank, including: S. 652, the Build Act, sponsored by Senator Kerry (D-MA); and S. 1300, the Lincoln Legacy Infrastructure Development Act, sponsored by Senator Mark Kirk (R-IL). Each would provide $100 million in seed money for grants and low interest loans for transportation projects. In fact, the Kerry bill was the basis for the President’s proposal.

While we know that House Transportation and Infrastructure Chairman Mica has expressed his opposition to the President’s Infrastructure Bank proposal, the actions of these other members of Congress and the President show that, in a challenging economic environment, infrastructure financing remains an option for policy makers looking to promote economic activity in general as well as create jobs.
 

 

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