How Congress Will Keep America Employed: Road Work

Senators in both parties said they are close to an agreement to authorize U.S. highway and mass transit projects for as many as six years, seeking to prevent funds from running out during the mid-year construction season.

Senate Environment and Public Works Committee Chairman Barbara Boxer said transportation-policy lawmakers on her panel agree the measure should provide the same amount of money annually as in the current two-year, $105 billion bill expiring in September, plus inflation.

The bill won’t address the critical issue of how to pay for projects. Boxer said she hopes an agreement on financing can be worked out within a few months.

“We are very united and very focused on delivering a bill and getting this process going to avoid having a real crisis,” she said at a press conference today.

The U.S. Highway Trust Fund, which pays for projects out of gasoline and diesel-fuel taxes, may not be able to meet its obligations by July, according to recent testimony by Peter Rogoff, an acting undersecretary at the U.S. Department of Transportation. He told the House Transportation and Infrastructure panel that the department may have to slow or withhold reimbursements to states for work already done.

A six-year proposal made in 2012 crumbled amid disputes over how to pay for it. Congress settled on the two-year measure that used general tax revenue to keep construction going. Business groups say a longer-term measure could boost the economy while benefiting construction companies like Caterpillar Inc. (CAT)

Gasoline Tax

The U.S. Federal Highway Administration estimated in 2007 that every $1 billion in federal spending, plus a 20 percent state share, on highway construction supported 34,779 jobs, including 11,921 construction jobs. The agency hasn’t updated that estimate since.

While the U.S. Chamber of Commerce, the largest business lobbying group, has united with labor unions to lobby for an increase in the gasoline tax, lawmakers in both chambers say that can’t pass the House. Boxer says her idea for a levy on oil at refineries isn’t catching on.

President Barack Obama and House Ways and Means Committee Chairman Dave Camp, a Michigan Republican, have proposed using one-time tax changes to pay for transportation projects, though it’s not clear that a repatriation proposal has enough support. A new levy based on miles driven has been discussed only as a long-term possibility.

Senator David Vitter of Louisiana, the top Republican on Boxer’s panel, said Congress probably can’t agree on new user fees to pay for highways this year. Lawmakers might agree to break off a piece of broad tax-change proposals to raise new money, such as implementing a temporary levy on companies’ overseas earnings, he said.

Temporary Patch

“We’re looking at repatriation and other aspects of tax reform in the meantime,” Vitter said.

At the same time, tax-policy leaders in Congress are discussing a short-term infusion into the trust fund to prevent a slowdown in road work and job losses.

Camp said a temporary boost is “on the radar” and he’s starting talks with other panel members on how to pay for it. Senate Finance Committee Chairman Ron Wyden, an Oregon Democrat, said an immediate step may be needed as debate over a long-term highway bill continues.

Senate Budget Committee Chairman Patty Murray on April 9 compared the prospect of a highway fund insolvency to last year’s 16-day partial U.S. government shutdown. A stoppage of construction work poses a threat to the U.S. economy, she said.

‘Bailout’ Idea

“Construction is at its peak in the summer months,” the Washington Democrat said, calling on both parties to come together on a long-term measure. “But without funding, states might have no choice but to stop construction and leave workers without a job. This would hurt communities with needless delays on the very improvements that would help businesses and spur economic growth.”

That could delay projects, hurt state and municipal government finances and slow sales for equipment makers and construction companies. The fund has been running out of money as people drive less and use more fuel-efficient vehicles. The gasoline tax that is its biggest funding source hasn’t been raised since 1993 and isn’t indexed to inflation.

Boxer said she doesn’t think a temporary solution will be needed.

“We are moving fast in order to avoid any kind of patch,” she said. “We don’t think a patch is good governance.”

Build America

Neither Wyden nor Camp said they have specific proposals. Congress has approved several infusions of general tax revenue into the trust fund before. While House Speaker John Boehner recently rejected that idea as a “bailout,” Camp indicated the approach hasn’t been ruled out.

“That’s been done in the past, but we haven’t made a decision yet,” Camp said.

Wyden said yesterday that he hasn’t decided on what approach to take for a long-term measure. The most likely ideas include a gasoline-tax increase and restoring the Build America Bonds program created under Obama’s 2009 economic stimulus measure, he said.

That program sold more than $180 billion worth of taxable securities to pay for state and local public-works projects before lapsing in 2010. Congress refused to extend the program after some Republican lawmakers criticized the level of subsidies provided by the Treasury to cover a portion of the interest bills.

In 2011, when Obama proposed bringing them back at a rate that would cost the Treasury no more than tax-exempt bonds, Republican Senator Orrin Hatch of Utah said that would encourage “irresponsible spending” by states.

Wyden said the program far exceeded its original goal of raising $5 billion, suggesting it could be revived.

“I think there’s clearly a market for bringing private-sector funds off the sidelines and back into infrastructure,” Wyden said. “I’m going to talk to finance committee members before I lock into any position.”

To contact the reporter on this story: Laura Litvan in Washington at llitvan@bloomberg.net

To contact the editors responsible for this story: Bernard Kohn at bkohn2@bloomberg.net Romaine Bostick

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