With U.S. at crossroads, U.S. Chamber backing increase in fuel tax to rebuild crumbling infrastructure

John D. Schulz, Contributing Editor -- Logistics Management, 1/9/2008

WASHINGTON—The nation’s crumbling infrastructure needs an influx of spending that should include the first increase in the federal fuel tax in 15 years, the nation’s top business lobbyist said.

While generally opposing tax increases of all kinds, U.S. Chamber of Commerce President and CEO Thomas J. Donohue is calling for Congress to consider hiking the fuel tax, which he conveniently called a “user fee” that sorely needs to be adjusted for inflation.

“We have to take another look at the user fees we’re collecting for transportation,” he said  at the Chamber’s annual “State of American Business” outlook earlier this week. “They’re not a tax in the traditional sense. If you put more money into the system, you improve productivity by reducing bottlenecks. You reduce pollution. You save lives. If we can figure out a way to focus user fees on the nation’s infrastructure, you might be surprised how supportive the Chamber would be.”

The business community will soon get its chance. In 2009, the Highway Trust Fund bill is up for reauthorization. The Chamber is opening to open a debate on increasing fuel taxes – currently 23.4 cents per gallon on diesel, and 18.3 cents on gasoline—in a bid to help close a gap on infrastructure investment. The American Road and Transportation Builders Association has estimated the country needs to spend $1.35 trillion to upgrade roads and bridges. Approximately one-third of major U.S. roads and one-fourth of bridges are in poor or mediocre condition.

“We have to stop earmarking money to non-transportation funding,” said Bruce Josten, U.S. Chamber executive vice president for government affairs,

“We need to get on with it. We have to stop talking about it while the rest of the world passes us.”

“Others might not be interested in transportation and infrastructure but that’s part of my background,” said Donohue, former head of the American Trucking Associations. Transport suffers from its low profile on U.S. priorities, he said.

 “If Social Security ran out of money on Friday, there would be a solution by Sunday,” he said. “If you run into a brick wall on port of rail capacity, it doesn’t get fixed overnight.”

Ed Hamberger, president of the Association of American Railroads, said railcar loadings fell 2.3 percent last year but declined to call the current condition a recession. It was still the second-busiest year ever on railroads, trailing only 2006.

Total freight will increase by 92 percent by 2035, according to a new report soon to be released by the Department of Transportation. “We need to have the capacity to move that or else the economy will stall,” Hamberger said. The tab for that infrastructure improvement is $135 billion in rail capacity alone, he said.

“I’m hoping we can get transportation and infrastructure into the national dialogue,” Hamberger said.

It seems the only time transportation gets attention is through disasters, such as last summer’s I-35 bridge collapse in Minneapolis.

“We have a physical infrastructure that is rapidly running out of capacity to efficiently move people, freight, fuel, power and information,” Donohue said. “The costs of this negligence can be measured not only in pollution, lost productivity and jobs—but in the loss of innocent lives. That is unacceptable.”

The U.S. aviation system, stressed under the current passenger and freight load, is predicated to have to handle 1 billion passengers in just seven years.

“Our ports, inland waterways and railroads also need serious attention and new capital,” Donohue said. “Something must be done—now.”

Donohue called the nation’s infrastructure “the table” on which the entire economy operates. That includes roads, bridges, ports, airports and non-transportation-related issues such as broadband capacity and nuclear energy plants.

“You need all those things, which are very boring,” Donohue said. “Nobody wants to face up to the fundamental realities.”

Donohue said the nation needs three things to upgrade the nation’s infrastructure and bring attention to the problem: spend “billions” of dollars on infrastructure; prohibit diversion from transportation trust funds for non-transport purposes; and consider a hike in the federal fuel tax.

“We haven’t had an increase in the federal fuel tax in 15 years,” he said. “We’re putting a lot of wear and tear on the roads. Do we have a fuel user fee increase? This is not like regular tax policy. This is buying a road and buying a port.”

Admitting that infrastructure “is not too sexy on the campaign trail, but whoever gets into office is going to have to deal with this with the American people,” Donohue said.

In addition to the user fee, the Chamber is backing private equity even if that means investment by foreign entities.

“If we allow Europeans to invest in our roads and bridges,” Donohue reminded, “they can’t take them home.”

Always a fan of globalization, Donohue reminded that the U.S. is the world’s largest exporting country. Nearly one-third of U.S. jobs and economic activity is tied to global trade.

“To back off globalization would be to cut off Americans from participating in the global economy, where 95 percent of customers live outside the United States,” he said.

America is at a “crossroads,” Donohue said. “Our future is clouded by Washington’s failure to seriously address the core competitive challenges that will drive growth, opportunity and prosperity in the 21^st century.”

While acknowledging there is a risk of a recession this year, Donohue predicted the economy would grow slowly this year and perhaps gain “a little steam” in the second half.

“In other words, we will dodge the bullet,” Donohue said.

Donohue said that while the country works through the current economic weakness, it is “critical” that policymakers make decisions that spur growth and make the economy stronger and more competitive.

While eschewing to back any presidential candidate, the Chamber prefers to be a forced in the policy debates in the election.

“Change is now the big buzz word and, of course, we need it in many areas,” Donohue said. “The change America needs must rekindle growth and reaffirm our leadership in the global economy. We can’t solve our problems or pay for solutions without a strong and competitive economy.”

As always, the Chamber is opposing any attempt to raise taxes. The exception appears to be fuel taxes, which have backing in some quarters in order to improve the national infrastructure.

“We’re going to oppose the massive tax increases that are being discussed in Congress, the states and on the campaign trail—tax increases that would drive our economy right into a recession.”

Counting on Washington for solutions to provide complete financial solution, Donohue said, “is a false promise and a bad bargain. In the end, Americans would find themselves neither prosperous nor secure.”

Being a realist, Donohue said there would be “some work” done in Washington despite this being a presidential election year when traditionally little gets done in Congress.

One of the things that probably will get passed is reauthorization for the Federal Aviation Administration and the Airport and Airway Trust Fund. The Chamber is backing increased funding and modernization of the aviation system to move people and freight.

“Whoever the two final candidates are for the presidency are going to face the same four or five issues—the economy, nation’s well-being, energy, infrastructure, health care and union issues,” Donohue said.

“Everybody has the same agenda when you finally get into office,” he added. “Here are four or five critical issues that need the government’s attention. We would like to hear where they stand on those issues. Our role is to stimulate that debate and try to determine what they would do.

“We’re not interested in parties,” Donohue said. “We’re interested in results.”