Jan. 9 (Bloomberg) -- Congress’s partisan divide over tax increases is jeopardizing action on a long-term highway bill backed by industry groups, raising the risk that the U.S. will run out of money to pay for projects next year.
Groups led by the U.S. Chamber of Commerce, the biggest business lobby, want to prevent a repeat of 2012, when proposals to fund roads, bridges and mass transit for six years sputtered over bipartisan opposition to raising the U.S. gasoline tax. A compromise measure that used general tax revenue to keep highway construction going expires Sept. 30, and Congress’s research arm has said lawmakers can no longer delay broader action.
“Based on the performance of the Senate over the last three years, a six-year highway bill is a pretty big expectation,” Senator Roy Blunt, a Missouri Republican, said in an interview. “These discussions are important to have, but I don’t have any real faith at this point that they lead in a direction that produces a long-term result on highways.”
While the legislation’s supporters and business groups point to the House’s passage of an $8.2 billion water projects bill last year as a breakthrough on infrastructure spending, that measure didn’t require a large tax increase.
Senator Carl Levin, a Michigan Democrat, said the same Republican opposition to tax increases that has dashed a drive for a broad deficit-reduction package shows no sign of abating.
“I think it would be difficult given the Republican view of revenue, any kind of revenue,” Levin said of the six-year measure that industries covet. “It would be very, very hard.”
In July, the nonpartisan Congressional Budget Office projected that the U.S. Highway Trust Fund, which pays for road and bridge projects, will be insolvent by 2015 unless Congress raises the gasoline tax, bails out the fund again with general tax dollars, or eliminates most highway spending. The balance in the highway portion of the fund as of the end of November was $9.22 billion, down 23.7 percent from a year earlier, according to the Federal Highway Administration.
The gasoline tax has stayed at 18.4 cents a gallon since 1993 and isn’t indexed to inflation. Revenue from the levy has declined since 2007 through a combination of a lagging economy, fewer miles driven and more efficient cars.
The tax’s purchasing power has declined almost 40 percent over the past two decades, according to the American Association of State Highway and Transportation Officials. Alternative tax proposals, including one based on miles driven, have garnered little support beyond local experiments.
The U.S. Chamber and other groups that usually support Republicans have endorsed a bill introduced in December by Representative Earl Blumenauer, an Oregon Democrat and member of the Congressional Progressive Caucus, that would boost the gasoline tax by 15 cents a gallon over three years.
Former Transportation Secretary Ray LaHood yesterday called for raising the tax by 10 cents a gallon and indexing it to inflation. Noting that the last increase under President Bill Clinton helped reduce the federal deficit, he told reporters in Washington, “If that’s a way to get conservative Republicans behind it, so be it.”
Some Republican lawmakers, particularly in the House, want to move all responsibility for road projects to the states. Representative Scott Garrett, a New Jersey Republican who voted against the current highway bill, said that tax increases needed to bolster federal infrastructure also clash with election-year politics.
“I don’t think either side of the aisle wants to say that going into an election year that the last bipartisan piece of legislation that I passed was a tax increase on my constituents and those who can least afford it,” Garrett said.
Business groups say a longer-term measure could boost the slow-growing economy while benefiting construction companies like Caterpillar Inc. They say the short duration of the current law has created uncertainty for companies involved in long-term projects, and also for the state and local officials who decide the terms of contracts.
Chamber President Tom Donohue yesterday said the organization will aggressively back “pro-business” candidates in Republican primaries this spring against candidates who oppose its agenda, including a long-term infrastructure bill.
Business groups last year confronted Tea Party Republicans who questioned the constitutionality of federal spending on water projects, pointing out that George Washington in 1783 extolled the benefits of boosting commercial waterways. The $8.2 billion bill passed the House on a 417-3 vote.
They also made some inroads two years ago in the highway bill debate, said Sean O’Neill, a highway and transportation lobbyist with Associated General Contractors in Arlington, Va. His group won support from some Republicans on the House transportation panel who initially opposed a federal role in highway projects, including Representatives James Lankford of Oklahoma and Steve Southerland of Florida.
“We’ve been focused and continue to focus on members who have come in since 2010, and educated them on the need to have a strong federal role in our transportation sector,” O’Neill said.
Representative Bill Shuster, a Pennsylvania Republican who’s chairman of the House transportation committee, sees the water bill as a model for highway legislation and will engage governors, companies, unions and others in his effort, said Jim Billimoria, his spokesman.
“It will be a wide breadth of organizations that help to spell out what they would like the bill to look like,” Billimoria said.
Shuster is being challenged in this year’s Republican primary by a Tea Party-backed candidate who has criticized his support for infrastructure spending.
Unlike the water bill, which probably will see final passage by March, the highway legislation has what transportation analyst Joshua Schank calls a “fatal flaw:” the need for a tax increase of some kind.
“They may have the appetite, but that doesn’t mean that they have the ability,” said Schank, president and chief executive officer of the nonpartisan Eno Center for Transportation in Washington.
Senator Barbara Boxer, a California Democrat and chairman of the Environment and Public Works Committee, proposed in September replacing the gasoline tax with a levy paid on oil at refineries. She has said such a tax, which has been floated by research groups including Rand Corp. and the Carnegie Endowment for International Peace, could generate enough revenue to fund highways and mass transit for six years.
Boxer is in talks with Senator David Vitter of Louisiana, the top Republican on the panel, to move a joint highway bill. Vitter is open to some kind of revenue increase, although the two haven’t agreed on the method, said Luke Bolar, a Vitter spokesman.
Janet Kavinoky, executive director of transportation and infrastructure at the U.S. Chamber, said her group doesn’t see a viable alternative to raising the gasoline tax. Companies belonging to the National Association of Manufacturers are open to alternatives, said Rosaria Palmieri, a top lobbyist for the trade group.
Business groups are talking about including changes in highway programs, such as faster turnaround times on contracts, that can appeal to lawmakers who want less spending and regulation, Kavinoky said.
“We’ve got to be able to make the argument through laying out policy reforms and showing the benefits of transportation that you can believe in a smaller federal role and budget discipline, but you can do that while you’re still promoting maintaining federal investment in infrastructure,” she said.
President Barack Obama, who didn’t offer a proposal in 2012 for how to pay for increased roads spending, could shape the debate if he steps in more aggressively, Palmieri said.
“There’s a big unknown in the debate: What role will the president play?” Palmieri said.
To contact the reporter on this story: Laura Litvan in Washington at email@example.com
To contact the editor responsible for this story: Bernard Kohn at firstname.lastname@example.org