One of the consequences of the federal spending sequester now in place is that $4 billion is being cut this year from transportation and infrastructure programs, according to House Transportation and Infrastructure Committee ranking member Rep. Nick Rahall, D-W.Va., including $1 billion from programs administered by the Department of Transportation.
In a long menu of “dumb cuts,” this ranks among the dumbest. It comes at a time when the American Road and Transportation Builders Association reports that last year highway and bridge awards were down 3 percent from 2011, when inflation is taken into account. “This tells us that nearly half the states are pulling back on their programs,” says ARTBA’s Chief Economist Dr. Alison Premo Black, even as demand on our aging transportation, water and other public systems is increasing.
It also comes at a time when unemployment in the construction industry hovers near 16 percent and hovers around 8 percent overall. (Gallup on Tuesday released a weekly unemployment estimate that has unemployment trending upward to 8.1 percent.) So why are we now cutting spending that would give good jobs to millions of workers and address the bedrock needs of a growing economy?
Conservatives in Congress would have you believe we can’t afford it. But for the past couple of years, progressives in Congress have been showing how we can. If Congress and the White House could muster the will, we could launch a $1 trillion multiyear transportation plan, and that’s just for starters.
The justification is simple: A report to be released later this month by the American Society of Civil Engineers will calculate an “investment gap” of $846 billion just in surface transportation between now and 2020. Add in such items as airports, seaports, water and sewer, and the electrical grid, and the investment gap widens to above $1 trillion. That report will also say if we don’t close that investment gap, we will lose three times that amount in reduced gross national product – and more than 3 million jobs.
This should be unthinkable. Instead, a combination of tax reforms and changes, along with a plan to deploy private sector dollars currently being parked on the sidelines, should be put in place immediately to get badly needed projects funded and unemployed people back onto payrolls.
Start with a Congressional Progressive Caucus proposal to spend $556 billion on highways and public transportation over six years. Last year Congress strained to pass a two-year bill totaling about $118 billion. This Progressive Caucus proposal would challenge Congress to increase its federal commitment by more than 60 percent. It would also force Congress to address perhaps the main issue preventing it from moving forward with an adequate transportation jobs program: its refusal to either increase the federal gasoline tax that covers most transportation funding, which hasn’t changed since 1993, or replace it with a levy that would generate sufficient revenue, especially as hybrids, high-mileage and alternative fuel vehicles become increasingly prevalent on the roads.
Congress could use this as a reason to end fossil fuel subsidies and tax breaks, adding $15 billion to the Treasury over the next five years, or try to revive the idea of levying some form of carbon tax, which would yield billions more. Congress could also decide, in a reflection of what some states are doing, to either supplement or even replace the current federal gasoline tax with a fuel sales tax. If such a tax were levied at the wholesale level, it is possible that gasoline wholesalers or merchants would absorb a percentage of the tax rather than passing it all along to consumers.
Many major projects can be funded through an infrastructure bank. This fund would use federal dollars to support loans and loan guarantees for private entities willing to invest their capital in transportation projects. In late February Sens. Jay Rockefeller, D-W.Va., and Frank Lautenberg, D-N.J., reintroduced an infrastructure bank bill that had died in the Senate last year. That bill is modest – it calls for $5 billion a year in funding, which the sponsors say would support three times that in private funds.
But a House Progressive Caucus infrastructure bank proposal is more audacious, and closer to meeting the need. It proposes a bank robustly funded enough to support more than $600 billion in private investment over a period of several years. That is a fraction of the corporate dollars – some estimate in excess of $5 trillion – now sitting on the sidelines waiting for the economic recovery to pick up steam. Why would we not challenge businesses and Wall Street to put some of this money to work improving the public assets they need for their own future success?
This plan would be part of a larger full employment plan that could cost in excess of $3 trillion. (Last week, the Economic Policy Institute’s Andrew Fieldhouse recommended that instead of a federal sequester, policymakers should enact as much as $2.2 trillion in economic stimulus spending over the next three years.) That is a daunting figure, but making that commitment now, while interest rates are about as low as they will ever be and while unemployment is stubbornly high, is the only right choice. If we are putting people to work now on building the things we need for a thriving and broadly prosperous 21st-century economy, we will have a much easier time addressing our long-term fiscal concerns. The longer we accept the austerity constraints of congressional conservatives and the “fix the debt” crowd, the harder it will be to actually fix any debt, especially the debt that really matters right now: the jobs deficit.