DOT Finance President

President Obama Proposes Major Funding Increases, Reorganization for Nation’s Transport

» In the president’s proposed Fiscal Year 2012 budget, transportation spending increased significantly even as appropriations for most other programs are reduced. Yet GOP opposition in the House of Representatives, focused on cutting government investment, will pose a major obstacle.

Today, the White House Office of Management and Budget released the President’s proposed FY 2012 budget, announcing a major increase in funding for the nation’s transportation infrastructure, both this year and over the next six.

The President, if his wishes are endorsed by the Congress, would increase federal support for transportation to $128 billion in 2012, compared to $77 billion in 2010. The Administration will begin pushing for a $556 billion six-year transportation bill, almost d0ubling what was approved in SAFETEA-LU, the last — and now expired — piece of transportation legislation. Though the White House has yet to demonstrate where it would find the funding to support these measures, the President has argued that any increased spending be compensated through reduced spending elsewhere or revenue increases.

Funding would apparently come from a “bipartisan financing for the transportation trust fund,” though no such agreement on what that means yet exists.

The budget justifies the $50 billion year-on-year increase by arguing that joblessness remains a significant problem for the nation as a whole. The transportation spending, the Administration has argued, would pave the way towards giving thousands of unemployed people new jobs.

Though the Administration would increase funding for roads construction from $41 billion in the previous budget to $70 billion, that increase is dwarfed in percentage by proposed spending on transit, which would more than double from $8 billion annually currently to $22 billion. Over six years, spending on capital improvements for public transportation would add up to $119 billion. Some reorganization of the Department of Transportation would occur, as 55 overlapping highway grant programs would be morphed into just five, easing accountability and management.

In addition, the White House has endorsed a major increase in spending for its controversial livability program, and a $4.1 billion competitive grant mechanism would be established to fund projects that aid in the construction of such improvements as streetcars, busways, bike paths, and sidewalks.

An infrastructure bank, which would fund meritorious programs through a competitive process, remains on the president’s agenda after having proposed it two years in a row without much of a response from the Congress. This “I-Bank,” as the Administration is now referring to it, would receive $30 billion in start-up funds to begin providing grants. At the same time, $32 billion in funds for a state-based competitive grant program would be distributed by the DOT. The aims that each of these programs would be supporting have yet to be put forth by anyone in the Administration.

The release of the budget comes a week after the White House revealed that it would be pushing a 6-year, $53 billion plan to expand the nation’s high-speed rail network. The 2012 budget would include $8 billion for the proposal and merge existing Amtrak subsidies into the intercity rail program. This implies that the national rail carrier will have to begin competing with other groups, including private corporations, to offer services on corridors which the Federal Railroad Administration or states are upgrading.

The Administration’s chief priorities for this year will be in capital construction projects. President Obama made explicit today his feeling that “infrastructure is what we need to win the future.” And indeed, the FY 2012 budget would represent one of the most ambitious steps forward in financing for transportation in decades — and it reinforces the Administration’s demonstrated support for alternative modes of transportation, including pedestrian, bicycling, transit, and intercity rail modes. In this budget, President Obama is making clear that even in the face of austerity, he is interested in improving the nation’s transport systems.

The President’s budget, however, is only a suggestion: It is up to the Congress to ultimately determine how revenues are collected and how spending is distributed. In that context, the House Republican caucus’ adamant opposition to increased spending on infrastructure will make passing anything remotely familiar to Mr. Obama’s proposal extremely difficult. The House GOP is already planning to strip funding from high-speed rail and other transportation projects in FY 2011. With the right-wing party convinced that it has a winning electoral position in its opposition to transit, and especially high-speed rail, can Democrats force through an FY 2012 budget and a transportation bill that prioritizes them?

Perhaps even more complicated is the fact that House Transportation and Infrastructure Chairman John Mica (R-FL) and Senate Environment and Public Works Committee Chairwoman Barbara Boxer (D-CA) say that they have already begun work on a transportation reauthorization bill. Meanwhile, Senate Committee on Commerce, Science, and Transportation Chairman Jay Rockefeller (D-WV) introduced last week a bill that would “establish a clear set of goals and objectives for the Department of Transportation.” Is there any evidence that these Congressional proposals look anything like what the president has suggested?

These questions remain without answers. The future for American transportation investment remains murky.

21 replies on “President Obama Proposes Major Funding Increases, Reorganization for Nation’s Transport”

I only wish this had been higher on the agenda last year instead things like the DOA cap-and-trade or expending so much time and political capital on healthcare reform.

In my view, burning most of the President’s political energy and popularity to ensure children can stay under their parents health insurance until they’re 26 wasn’t a good choice. My guess is that Obama and the Democrats thought they would get through health care reform very quickly and without much opposition.

Unless you look forward to personally going broke paying for your parents’ health care (not to mention that of yourself or your immediate family) someday, I wouldn’t be so cavalier about the signifiance and importance of the President’s health care priorities during the last Congress.

I agree that his priorities were right but the result was disappointing. Too many of the democrats weren’t on the same page. Hindsight being 20/20 it is IMO clear that the result was not worth the opportunity cost of the other issues that could have been tackled. Dems probably could have found more common ground amongst themselves on transportation.

I really feel he should have done this 52 billion high speed rail program right off the bat last year or at least send out another 8 billion instead of the tiny 2.5 billion he sent out last year. Now with this said and the tea bags around which have have thrown Amtrak and high speed rail into the wrong spot light I feel our high speed rail system is going to die.

Oceal Railroader wrote,

“… which have have thrown Amtrak and high speed rail into the wrong spot light I feel our high speed rail system is going to die”

Fear not. The President’s $9 Billion/year for HSR, $22B/year for Transit, $70B/year for Highways was an opening gambit. He not only positioned himself in the middle, Obama solidified his chops with the big airlines and transportation construction companies like Parsons. Having already saved the American auto industry, his only transportation enemy is the oil companies — and their ranking with most voters will sink further as gasoline prices rise.

House Republicans zeroing out HSR and cutting Transit merely signaled to their rural voting base that they are going to fight for THEIR favorite keeps (Highways and Aviation).

Of course, a big-wig Senate Democrat like Jay Rockefeller didn’t want to sit on the sidelines, so he’s push for his own version of transportation infrastructure, ahead of Barbara Boxer negotiating with her Senate & House Republican colleagues for a more realistic (i.e. not better, just acceptable to Congress) Transportation package.

Both parties and both houses of Congress know that big progressive states pay the most in federal taxes, get the least in federal returns and carry a lot of votes in the upcoming election. The also know Demos and Repubs governors and mayors of both parties want HSR and Transit funding. Republicans can’t cut Transit without accepting a larger percentage cut to Highways – TO THEIR HOME STATES, no less. And the President won’t sign a reauthorization transportation bill that doesn’t establish HSR funding as a significant budget line item and a somewhat higher Rapid Transit budget. The latter two items are Obama’s indirect way of redirecting more federal funds back to the progressive states.

Demos and Repubs know they have to meet somewhere in the middle. That is what Mica and Boxer are negotiating, what Obama expects and how political sausage-making is done in Washington.

A lot of good transportation project funding will be left on the cutting room floor. The worst cut will likely be the National Infrastructure Bank. At the end of the day, don’t be surprised if Obama gets $5B/year for HSR, $12B/year for Transit and nearly everything he requests for Aviation. The biggest transportation budget questions are how much of the $70B/year for Highways will be passed and for what mix of maintenance & expansion projects.

The best possibility going forward might be to get rid of most federal transportation funding, leaving gas tax revenues at the state level for states to spend on their own projects. This would please the Republicans by decreasing federal government involvement and spending. However, since dense, urban states pay far more in gas (and other) taxes than they currently get back from the federal government, it would also amount to a very large shift in funding away from rural projects (almost entirely freeways) and towards urban ones (including a lot of transit).
While many state DOTs are rather backward at the moment, convincing them to support transit and livability in a dense, liberal state is going to be a lot easier than convincing the Republican-controlled House. The closer connection between revenue and spending at state level would also make gas tax increases more feasible, which could provide even more funding as well as encourage people to shift from cars to transit. The need to work through interstate compacts might slow the progress of interstate high speed rail projects, but the benefits for urban transit and for the defunding of rural freeways would be well worth it.

I think this is generally a good idea. There is some problems however with it even for urban transit. What about metropolitan areas that spread across multiple states? I mean if one state supports urban transit and another doesn’t I could see this being a particular problem. It also is not good for the construction of high speed rail or the maintenance of the interstate highway system. Overall it would help take some power away from the over represented rural farm states.

That may well work in a state like New Jersey, or even New York, but out West it’s going to be a harder sell. The Pacific NW in particular has urban areas (Seattle and PDX) that desperately need significant transit funding, but State Legislatures that are far more hostile due to many members from primarily rural districts who see no value in transit. Intercity rail yes, particularly in Washington. Mass transit not so much.

And the Federal DOT gets the vapors if anyone suggests that a toll road get Federal funds in any way shape or form. The web of toll roads across the Northeast and Midwest burns a lot of gas that has had Federal taxes paid on it…

Like Ohio. GM paid for lobbyists to amend the state constitution, in 1958 or so, with the result that Ohio ranks below New Mexico in per capita state funding for transit.

The President’s plan is one-half of a good proposal. Without a clearly identified source of funding (which doesn’t have to start to be collected immediately), it’s a tad incomplete.

A clearly identified source of funding would be “taxes”. We don’t have clearly identified sources of funding for the Pentagon, yet the Pentagon gets funded every year….

It’s at least a worthy conceptual exercise, but it’s all but impossible to do this year.

Right now, in the immediate moment, it’s more important to put a decisive stop to the most dangerous wingnut crap the GOP is cooking up. The threat to shut down government for destructive ideological purposes is bad enough, but even discussion of a bill to allow states to go bankrupt is a threat to the nation itself.

Congress didn’t force states to forswear deficit spending. That was an act passed by all but one state on an individual basis. The GOP fantasy is to destroy labor unions by wiping out state obligations to pension funds. Then, the only two retirement options for the vast majority will be 401(k)s and Social Security–until that too is privatized. The problem with this notion is that a business can write off investment losses, but an individual can’t. Losing 30% of your investment portfolio (as happened to my mother a few years ago, in an 8-week window) is not a risk the average American can afford.

But the pension issue is a side note. If states are allowed to file for bankruptcy, then any subordiate jurisdiction–city, school district, transit agency, utility district, health district–loses the ability to issue bonds. This comes in two ways; first, the muni bond market is trashed by even one state’s declaration of insolvency, and second, the state is the authority which recognizes its own internal divisions. First comes the destruction of the bond market, both bond issuance and the money already invested. Then comes a full-blown depression, and the very real possibility of a technical default by a Federal government. If we’re all lucky enough that there’s only a deep scare and not a worldwide financial collapse, there’s still that minor question of how to immunize a state’s subordinate units against the state’s bankruptcy. The likelihood is that this would force the Federal government to take radical action, possibly including unilateral redefinition of the sovereignty of all states. A state filing for bankruptcy would essentially have to forfeit its sovereignty to the Feds, so a financial default becomes reversion to territory status. The Feds would be left to confirm the ability of thousands of local governments to raise revenue to pay back bonds, so the Feds would assume oversight for local fiscal capacity and responsibility that was never envisaged in the Constitution.

In New Jersey, our friend Chris Christie is refusing to contribute the state’s share to the state pension fund. According to some calculations, New Jersey’s unfunded obligations run as high as $104 billion over the next 30 years or so. In truth, though, it’s not impossible for New Jersey to cough up $3 billion in new revenue. One long-discussed way to ease this cost is to consolidate the hundreds of municipalities and school districts: compare Essex or Bergen County to suburban DC (Virginia or Maryland side), where counties provide the great bulk of services.

In Ohio, we have a state where Medicaid accounts for every bit of spending increase for the last several years. Leave Medicaid spending out of the $52-ish billion biennial budget, and the draft budget coming next month is supposed to cut $8 billion or more from the remaining $32 billion. That’s one dollar in four. Talk is getting thicker about the state finding a way to get control of the public pension funds. Unlike some other states, Ohio public employees pay into the pension fund. There is no way a tax increase is passing in Ohio.

Yes, this is a detour away from transportation policy, but it’s a detour into the way that our largest-scale investments are made. This President is stuck dealing with an aggressive minority, and a GOP opposition so fixated on demonizing Obama that they are at least leaning toward the most irresponsible legislation this country has ever seen. The current House makes the Greek government look like a model of responsibility.

How can any state hope to float a California-style bond issue for any major rail project, when a small faction is hell-bent on a vision of “fiscal accountability” which revolves around permanent, off-budget wars and permaent tax breaks for the rich? Our private sector is magnificently absent from discussion of upgrading our national transportation network, yet we’re supposed to bow at the altar of some demented Ayn Rand fantasy that will ruin our country. What hope is there for a US which refuses to marshal its resources, as China does? Why even mention the Chinese willingness to drive a rail line straight through private property–we didn’t blink at doing it in the 50s and 60s with the Interstate Highway System. We’re not condemned to third-world status, but we’re dangerously close to imposing it on ourselves.

This administration has to focus on stopping this self-destructive impulse. Now. We can develop concepts for the future, so that we can move fast when the legislative climate is more stable. As it is, the teabaggers are going to have a year or two of scaring the bejesus out of the American people and the global economy, after which I hope we’re all ready to take the big boy/girl pill and pay the taxes we owe, cut the loopholes we really can’t afford, and start investing in ourselves and our future.

A good solution to find the money for it in the budget, cut defense spending by about $500-$800 Billion or so, and send it to pay down the deficit and transportation programs. Be quite interesting to see the reaction to that proposal

Anyone think Obama should go on a tour of new Chinese infrastructure projects including HSR? Maybe get some press on his “Sputnik-moment-need-for-US-investment”? Most Americans have no concept of what HSR is and how good infrastructure will support our economy. And how far we are behind the rest of the world.

I think this shows impressive leadership from Obama. He is clearly trying to drive the country’s transportation policy in a new direction. I think he is a wise negotiator by asking for significant changes. He probably won’t get what he is asking for but he has increased the spread. For example, by asking for $8 billion for HSR, he might get $4 billion in the final compromise. It is quite a shame he didn’t mention any funding sources but hey that’s politics.

I get the impression that Obama has focused too much of his energies on high speed rail and not enough on mass transit. Face it, mass transit is a much higher priority in the US, because mass transit benefits far more people than high speed rail, and mass transit helps reduce traffic congestion in big cities while high speed rail does little to address traffic congestion. The LA area for instance is absolutely crippled by chronic traffic problems and needs a huge amount of mass transit funding, also the problem is particularly acute there because the LA area, like the Bay Area or NY-NJ-CT, doesn’t really have anywhere to sprawl anymore (allowing any more sprawl in Inland Empire is madness, and the commute from LA/OC to IE is hell), meaning that basically all growth in the future has to be high density, meaning that traffic is only going to get worse.

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