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President Obama Promotes $50 Billion in Transportation Investments, Again Emphasizes Rail

» Plan, yet to be fully laid out, would devote billions to 4,000 miles of new railways, in addition to roads, air traffic, and transit. Congressional approval is unlikely to be easy.

President Obama, at least, is not yet willing to give up on his Administration’s hope to eventually connect 80% of the American population to intercity rail service. After committing $8 billion to such services a year and a half ago during negotiations for the stimulus, the President announced today that he would campaign to devote $50 billion to an improved transportation system, including more spending on high-speed rail, road maintenance, local transit, and better runways. Any such program would require Congressional approval before moving forward.

The Administration’s new proposal seems to be an attempt to accomplish the goals of a new transportation bill without actually passing reauthorization legislation. The previous bill expired in 2009; spending is now being determined year-to-year and being partially sponsored by general income tax revenues, rather than being determined over a six-year period being sponsored entirely by fuel tax revenues, as was until recently the modus operandi.

The federal government currently spends about $50 billion annually on all forms of transportation.

At this time, it is not clear how much enthusiasm the Congress holds for what is being portrayed as a second stimulus, nor how much can actually be built with the money, which would be invested over a period of six years though mostly at the front end. Neither the House nor the Senate, both under Democratic control but threatened in this fall’s elections by increasingly popular anti-spending Republicans, seem particularly thrilled about the idea of voting for a new government program. Few specifics of the proposal have been revealed, other than that the Administration is again promoting its idea for a national infrastructure bank, a program it has had in mind since assuming office in early 2009.

Nor has the President addressed the all-consuming question of how many jobs this program will produce. Despite the fact that there is evidence that investment in public transportation operations is one of the most effective ways to get people back to work, what little has been said about this new spending seems to indicate that it would only go to capital investments. Funding will not be debt-based, the President said, though the exact mechanism to raise the needed dollars has yet to be worked out.

Mr. Obama’s framework, he claimed today, would result in the renovation of 150,000 miles of existing roadways, the construction of 4,000 miles of new railways, and the rehabilitation of 150 miles of runways. Evidently, money is also to be earmarked for the public transit New Starts program, which funds major expansion programs, usually in the form of rail rapid transit. The exact distribution of funds has not been addressed, nor has a decision-making process about worthy projects been established.

The proposal, though certainly a refreshing move from an Administration that over the last few months had threatened a “freeze” on spending, may simply not go far enough to produce effective change, especially for the national high-speed rail program. Even if all the money were spent on fast trains, the majority of money would have to be devoted to just one corridor: the California High-Speed project, which is in need of $20 to $30 billion in federal funds to be completed, depending on the level of private investment pinpointed. As things stand, with the $50 billion to be spread out between all modes in the transportation system, far less will actually be spent on any one mode. This means that smaller, incremental projects are likely to be the biggest beneficiaries here.

Mr. Obama, mimicking what has become standard industry commentary, suggested again that a national infrastructure bank be created to fund transportation projects. It’s a problematic concept from a variety of perspectives, including the fact that unless it is used purely on projects that make money in the long term (generally not rail or transit), it isn’t actually a new funding source, it’s just a different way of distributing existing money.

This second stimulus could be structured to include what the Administration is calling a “long-term framework” for national transportation policy, arguably vital for a country that lacks true goals for the future of its mobility system. Mr. Obama stated his desire to put high-speed rail “on an equal footing” with the rest of the transportation system. The program would also consolidate 100 transportation programs, supposedly with the goal of streamlining operations in the Department of Transportation, a move that was suggested by House Transportation and Infrastructure Chairman James Oberstar (D-MN) more than a year ago.

Instead of relying on a transportation reauthorization bill to accomplish a change in policy, the Congress may have an opportunity to promote similar goals if it moves forward with the passage of this bill. For those promoting alternatives to an automobile-centric transportation network, that may be a good thing, since this program will not rely on an increase in the gas tax to fund new spending, arguably a necessary change if we are to accept the fact that the current user fee model for funding is not only obsolete but inappropriate for today’s needs.

Most importantly, though, despite its optimism Mr. Obama’s proposal is coming at the exactly wrong time from a political perspective. Democrats have been slow to embrace significant spending even on transportation, arguably a matter that is of bipartisan interest. Why will they do so now? And if they do, will they choose to advance the policies the President has suggested are most important to him, like high-speed rail and transit, or will they attempt to placate suburban and rural interests with more highway spending?

Update: As commenter Jim points out, the Administration may be suggesting this proposal as the transportation bill reauthorization itself, which would add a total of $175 billion over the next six years, not just $50 billion. Whether that is true remains to be seen — we have yet to see the actual plan.

40 Comments | Leave a Reply »
  • jim

    The NYT story seemed to imply that what the administration was proposing was to take the Oberstar STAA, revamp it a bit to frontload the spending and find a backloaded source of funding, so that over the six years it’d be deficit-neutral. The $50B is the additional spending in 2011 over and above what would have been spent in the absence of a bill. “Normal” transpo spending is on the order of $54B/yr. The Oberstar bill ran about $175B above that across the six years. Take that $175B and split it $50B in the first year, $25B a year for the remaining five years: that provides the frontloading. They would then need to come up with a revenue source for the shortfall from the gas tax over the six years. Some sort of tax on oil companies would work and could even be phased in.

    You’d then see $50B available for HSR (or rather for all sorts of intercity rail) across the six years, maybe phased $10B, $8B, $8B, $8B, $8B, $8B, some of it earmarked for Amtrak (the NYT story specifically mentioned Amtrak fleet replacement), but enough to cover $12B or $13B for CA HSR, which would be on track for CHSRA’s expectations through 2016. There’d be enough to finish Florida — Miami-Orlando-Tampa — too.

    There had been talk of moving the STAA during a lame duck session, anyway. This seems to move its priority up a bit.

    • Thanks for that point; I’ve added a small update at the end of the article to note what you’ve written.

    • Cutting tax breaks given to oil companies would be the first step … taxing them like other businesses … would come before imposing additional taxes on them.

      Indeed, its likely that it covers a lot of the cost, if not all.

      • Danny

        What tax breaks have oil companies received?

        • According to the International Business Times

          There’s a domestic tax break for manufacturing that oil companies have been allowed to participate in, that would be $14.8b over 10 yrs.

          Oil companies are allowed to immediately write-off intangible costs of oil exploration. Versus the general rules that would apply, that is $10.9b/10yrs.

          There is a flat percentage deduction of gross revenues for property depletion, rather than actual property depletion, which costs $9.6b/10yrs.

          All up, that is $35.4b/10yrs. If the plan is to find $25b/yr for the Infrastructure Bank and close oil company loopholes to frontload an additional $25b in the first year, those three would seem to cover it.

          • Nathanael

            And that’s before you get into the fact that oil companies are paying below-market-price royalties to the federal government on oil from old federal leases. Those royalties *should* come up for renegotiation every five to thirty years (as they all have expiration dates) but Congress has repeatedly extended them without raising the government’s royalty rates.

            At this point, if Congress simply failed to act, they would nearly all come up for renegotiation within five years. These are leases dating back to the 1920s and earlier. Congress continues to simply give away money to the oil companies who were lucky enough to get leases back then.

            There are yet more giveaways to oil companies; Bruce covered the three biggest ones.

          • Danny

            Considering that the total corporate tax revenues across all industries is $225B, I highly doubt that you could increase tax revenues by $25B in the first year, just by changing a few accounting standards and loopholes just for the oil industry.

            I’m not familiar with the oil industry or its tax issues, and I very well could be missing some important bits of information, but a quick check to factcheck.org gave me this:
            http://www.factcheck.org/2008/02/oil-and-gas-company-tax-breaks/

            Which gives me reason to believe that oil and gas companies don’t have it quite as easy as most people think.

          • Nathanael

            Look, Danny, we gave you specific references to specific things, which you can look up in the tax code for yourself if you really want to, and you responded by pointing to a factcheck article which discusses entirely different things.

            The fact is, I actually have family members who used to have oil interests. I know what I’m talking about, and Bruce is absolutely 100% right about all three tax breaks, and the royalty issue is also a big issue. (The other giveaways to oil companies are relatively small or highly specific to individual companies.)

            You can “believe” that oil and gas companies don’t have it as easy as we think, or you can “doubt” that you could increase tax revenues by $25 billion in the first year, but the facts are against you and on our side. Obviously, once the government is collecting the additional $25 billion per year, the additional giveways are smaller (the royalty renegotiations would gain an unknown amount, but probably less than a billion a year).

          • Nathanael

            Aargh, sorry, I think we’re arguing over time scale — $25 billion a year is much too large as I realized looking at it again.

            Rereading the IBT, that’s $3.5 billion per year in the three “big” oil company tax breaks — Bruce was using “over ten years” numbers.

            Royalty renegotiation could increase the income quite significantly. After that there’s not much more in the way of oil-specific giveaways, though.

            The $25 billion would only come from bonding against the revenue for ten years. Sorry about my reading confusion.

            More than $3.5 billion a year is still not small change, especially when currently it’s being spent on making our environmental problems *worse*.

  • Ocean Railroader

    This 50 billion spent now would most likely save 200 billion later if you where to look at from several different points of view. Such as with the I 35 Bridge nightmare in that the bridge when it fell down most likely cost around two billion dollars if you where to add up all the costs in sawsuits and repairs and the loss of the bridge.

    • Danny

      The infrastructure spending in the stimulus package was used for a hell of a lot of new construction, despite the need for maintenance and repair on crumbling infrastructure. What makes you think this spending will be any different?

      • While the Infrastructure Bank is not a bank, its project funding, so rather than each state getting a fixed amount by formula for anything that qualifies, they have to compete for it.

        If they are competing, new interstate highway lane miles will very rarely make the cut, unless they are for eliminating something like a crash black spot.

    • Allen

      “This 50 billion spent now would most likely save 200 billion later if you where to look at from several different points of view. Such as with the I 35 Bridge nightmare in that the bridge when it fell down most likely cost around two billion dollars if you where to add up all the costs in sawsuits and repairs and the loss of the bridge.” -Ocean Railroader

      Ah, the I35W bridge collapse… the defacto reason used for any and all infrastructure spending much like 9/11 and military spending.

      The I35W bridge collapse was mostly due to a design flaw with the original bridge design. The other driving factor was incomplete bridge inspections (ya know, that “oh no, it’s covered in pigeon poo. Guess we’ll just assume it’s still good” stuff they were doing ).

      Neither of those would necessarily be addressed by this proposal. Nor should addressing either of these problems be reliant on this bill.

      Question – Doesn’t $50 billion seem impossibly low for 4,000 miles of new railway? That’d be what? $12 million – $13 million a mile? That would be pretty low cost for building new rail & it would mean that there wouldn’t be any money left over for the renovation of 150,000 miles of existing roadways and the rehabilitation of 150 miles of runways.

      • Ocean Railroader

        I remember hearing on the History Channel that the old I35 bridge was carrying double the traffic volumes it’s orginal builders had planed it to carry.

        I think this 50 Billion dollars should go towards breaking open bottle necks on the US Rail system in that It’s easy to point out two or three major bottle Necks on the NEC that would easly cost six billion dollars to replace such as the old 1890’s double track Gun Powyder River bridge with a new four track railroad birdge. The 1870’s Baltmore Tunnels with a fully up dated four track tunnel system.A new four track wide Washingtion DC Long Bridge across the Patomic River.

        These three projects here would be good ones to carry out you get to add new up dates and replacement to the tracks and you get new construciton at the same time.

      • 電車男

        $12 or $13 million per mile is expensive, not cheap. Building conventional, 110 mph capable track on intercity routes costs a measly $1.5 million per mile. For 4,000 miles, that’s a total cost of $6 billion–worth it, and only a fraction of the total $50 billion (remember that 150,000 miles of highways?). Rail projects in dense urban areas (such as subways and light rail) are far more expensive, though.

  • Anandakos

    Mr. Freemark,

    Thank you for being an open-minded and progressive — yes, I mean that with a small “p” — libertarian. There are some things that individuals can’t do alone, and provide a transportation infrastructure is one of them. We need a certain amount of collective action to produce one.

    Now maybe it makes sense for private firms to run it. There are inefficiencies and vested interest distortians in both public and private operation. But I think we can all agree that private enterprise is not going to build residential streets and urban arterials. There is insufficient demand to produce the revenue to maintain them with tolls.

    So, I think we can all agree that some degree of collective action is necessary.

    However, this $50 billion program of rail and highway renewal has absolutely no chance of passage. Just like the Rails and Highway Bond vote in Puget Sound in 2007 which failed, it has “something for everyone” — to fight.

    The left hates the “environmental destruction” of the highway expansion and renewal part of the plan, and the right hates the “socialism” of the transit and rail part.

    With the current political deadlock in America the only thing that will save us from ourselves is a real mideast war between Iran and Saudi Arabia in which they destroy each other’s petroleum infrastructure.

    When gasoline shoots to $25/gallon people will have to get along and co-operate in order to get to work.

    It’s gruesome for the Saudis and Iranians to suffer the terrors of war because of stupid, stiff-necked American intransigence, but it seems to be the only way out of this impasse.

    • However, beyond the pigeonholing, the Blue Dogs in the House hate the idea of losing and Senator Voinovich wants a legacy and, unlike many possible filibusters, this one wouldn’t kill his chances at lucrative board memberships in retirement.

      That’s why its a Transpo project rather than something else.

    • Ocean Railroader

      I looked a book called Twilight in the Desert about the oil tanks in the middle east are slowly running out of oil and they might only have a half a tank to 20% of their great oil fields left which could really shift things for us and over there.

  • Ben

    Obama proposed a national infrastructure bank in last year’s budget but it was largely the GO(B)P, especially Sen. Kit Bond (R-MO) that was responsible for blocking this bill (http://www.landlinemag.com/todays_news/Daily/2010/July10/071910/072210-01.htm). Similarly, Rep. DeLauro introduced a proposal in the House to create an infrastructure bank. There are 58 Democratic co-sponsors but not a single Republican. As with their blocking tax credits for small businesses, Republicans are just not serious about creating jobs. Better to scare people about a mosque than create jobs and help put people back to work.

  • […] Freemark at The Transport Politic asks how the timing of the infrastructure push will affect its chances in Congress: It is not clear […]

  • Obama Dream

    Does Obama know how much it costs to build HSR? What a day dream!

    • Glen

      HSR will cost about 9months to 1years cost of funding these MiddleEast wars..and last for decades of use! Enough of the “Were so broke” excuses

      • Obama Dream

        I’m not against HSR. However, as Obama said, $50B for 4000 miles HSR, that’s a day dream.
        Do you know how much does it cost to build 1300km Beijing Shanghai HSR in China? It costs about $32B USD. China is also talking to build 566km HSR between Johannesburg and Durban in South Africa, the budget is $30B USD. Labor cost in USA is 10 times as it in China and South Africa, but Obama claims to build 4000 miles HSR with $50B? Isn’t this a day dream?
        What he said is totally impossible, I believe he knows. He is just trying to fool public for the midterm selection.

        • The proposal’s inclusion of 4,000 miles of rail makes no reference to speed. My assumption is that most of these projects would be typical intercity rail, not high-speed rail.

          • OceanRailroader

            If this money can go towards getting rid of some of these bottle necks that are messing our system up then I would rate it good money well spent. Or they could spent it on repairs that if not carried out could set off some big train nightmares or shut downs.

  • The Obama proposal illustrates that Americans still do not understand that Gen Y is switching from cars to trains and that there is no viable future for highways.

  • Danny

    No worries about the timescale issue, I’ve done it more than enough to understand.

    I think the answer to how to fund it comes from the gas tax. And I simply do not believe that it is as politically unfeasible as everyone likes to believe. Direct cost – direct benefit is pretty easy to sell IMO.

    Since it would be distributed between all oil companies, rather than just domestic oil companies (due to corporate income tax jurisdiction), it wouldn’t affect the oil companies as directly as an income tax intended to raise the same amount…which in terms of lobbying is a little bit of a benefit.

    And unlike fixing corporate income tax issues, this would actually reduce oil consumption as it is directly applied to the price of oil…which is something we need.

  • Spokker

    I have found that my support for rail and mass transit has increasingly ostracized me from my peers. It’s really embarrassing to espouse any support for rail in my day to day conversations. Doesn’t stop me from doing it, but I’m definitely feeling this trend that anybody who promotes spending will find themselves on the receiving end of some heavy vitriol.

    • I don’t know who your peer group is, but in my peer group, which consists mostly of liberal Northeasterners from upper-class suburbs, my railfanning is considered to be a form of geekery. It doesn’t really create ostracism – on the contrary, nearly everyone I know listens to Krugman a lot more than to the stimulus skeptics.

      • Nathanael

        Well, Krugman has been right about everything lately. Brad DeLong even made a joke about entering a strange alternate universe circa 2000, one where Krugman was right about everything…

        Economics is painfully counterintuitive, even to most economists, which probably explains why so many people don’t get it….

    • The few times I bring it up I find most people to be indifferent. These are younger people and they say yea it be great to have more options and to not have to drive as much but it isn’t something most people care about. What is your audience exactly?

  • Robert

    Imagine the impact of this new bank which will lend money for construction projects, and Sec. 342 of the Financial Reform Act which establishes the Office of Minority and Women Inclusion and requires anyone doing business with the Government to meet the Racial/Gender quotas defined by that office.

    Talk about moving money from the millionaires and giving back to the people!

  • Ocean Railroader

    I hope this money goes towards Rail projects that are not the centers of massive legal battles or tie ups. It should go to states that are on the ball and who have had the least legal troubles with getting their high speed rail or freight rail improvements on track.

    Such as North Carolina has been moving along very fast with building projects with their 500 million dollars in rail funding and Vriginia has done as much as they can with their 75 million with out massive legal system tie ups. Pennsyvinia could have taken their needed 700 million asked for railroad project and could have worked it out with out any legal tie ups. This great aomunt of money should go to the projects with the fewest legal tie ups there can be and active rail plans.

  • I really doubt this $50 Billion will come to pass. I’m going to guess it will be dead on arrival as a separate bill especially with election season coming up. I think our only hope is to see a transportation bill pass in the lame duck session which has a possibility of happening. Otherwise we are likely to see not much happened next year if the GOP takes over the house. It will be gridlock and progress will be blocked once gain.

  • OceanRailroader

    This might pass if some of GOP might like this bill if the Democrats are willing to let them have some of these major projects in their home states. Such as I think if Vrginia would have had a Democrat take over then most likely Vrginia would have gotton a lot more of the high speed rail funding pie. But I think the Democrats should talk with the GOP and offer them some of these projects in their districts to make them happy and want to come on board this bill.

  • […] system, including more spending on high-speed rail, road maintenance, Continue reading this post » Read more Friday, September 17th, 2010 […]

  • Joe

    Saving lives, eliminating accidents, traffic jams, and road rage. We’re on our way with the dollars being offered, and rail will sail too. Almost like a roller coaster minus the loops

  • Joe

    Another, maintain more distance with all speeds. It’s one that’s going to start the beginning of safe, safer, the safest driving…along with the CFTS. Here in NJ we lost 10 over the weekend for absolutely no reason. Maintain maintaining…why not?

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