Concept of higher fuel taxes to pay for infrastructure backed by an atypical Washington trio
February 19, 2013
A once-in-a-generation triumvirate of Washington power players is coalescing behind the idea of increasing federal fuel taxes to pay for badly needed infrastructure improvements.
What this will likely mean for shippers is higher freight rates for shipments. But it might also mean faster and more reliable transit times as trucks travel over smoother, more modern highways and bridges.
In short, infrastructure is no longer a dirty word in Washington.
President Barack Obama and two always-at-each-other’s-throats power brokers representing business and labor—U.S. Chamber of Commerce President and CEO Thomas J. Donohue and AFL-CIO President Richard Trumka—are all backing a “Fix-it-First” infrastructure improvement program.
President Obama’s fiscal year 2012 budget proposal calls for $128 billion on transportation spending. That’s a whopping a 68 percent increase over the projected spending for the current fiscal year. The $128 billion would be the first installment in a six-year, $556 billion plan that would also include $30 billion in spending on a new National Infrastructure Bank and $53 billion on high-speed and intercity rail.
“Our aging infrastructure is badly in need of repair,” the president said during his Feb. 12 State of the Union address to Congress. His “Fix-it-First program would help improve highways and repair some of the 70,000 bridges described as “structurally deficient.” Obama drew a straight line between infrastructure reliability and economic growth.
“Let’s prove there’s no better place to do business than the United States of America, and let’s get this done,” Obama urged Congress.
The very next day, Donohue largely agreed with the president during testimony before the powerful House Committee on Transportation and Infrastructure. Rep. Bill Shuster, R-Pa., the newly installed chairman of the T&I Committee, recently said “all options are on the table” to pay for infrastructure, including raising the federal tax on fuel (currently 18.4 cents on gasoline, 23.4 cents on diesel, unchanged since 1993).
Just to prove it was no fluke, Donohue and AFL-CIO President Richard Trumka—a pair that likely would argue that the current year is 2013—testified before the Senate Committee on Environment and Public Works to say that, yes, they do agree the nation needs to spend more on infrastructure and raising the fuel tax is the best way to pay for that
“The fact that Tom Donohue and I appear before you today does not mean that hell has frozen over or that unicorns are roaming the land,” Trumka said.
Not to be outdone in the quip wars, Donohue observed he and Trumka were “the oddest couple since Felix and Oscar.” Then, turning serious, Donohue said the status quo is not acceptable.
“There needs to be a vigorous dialogue on funding and financing, but first we have to agree on the direction in which we’re going,” Donohue said. “Everyone needs to keep an open mind.”
For at least two years, Donohue has quietly been pushing for an increase in the fuel tax—an unusual stance for the usually tax-adverse Chamber, which represents 3 million U.S. businesses. Lately, when asked about the fuel tax, Donohue has subtly shifted to calling it a user fee—which is actually is.
Donohue was extra cautious about attaching too many labels on the money needed to pay for infrastructure, noting: “We’ve got to avoid cutting off our nose to spite our face.”
Still, Donohue and Trumka faced a Senate panel that largely agreed the nation needs to upgrade its roads, bridges, electrical and water grids. The timing is fortuitous—right after an election, hopefully long enough before the 2014 mid-terms so that voters might forget.
“Election season comes soon enough, and now we have an obligation to set all that aside and work together for our people, for jobs and for our future,” Sen. Barbara Boxer, D-Calif., the Senate committee chairwoman said.
Sen. James Inhofe, R-Okla, the ranking minority member on the committee, somewhat surprisingly agreed on the need for infrastructure spending. He just wanted to how to pay for the $556 billion plan. Donohue and others are calling for a phased-in increase in the fuel tax.
The U.S. Chamber of Commerce’s Let’s Rebuild America initiative produced its first annual Transportation Infrastructure Summit. Participants discussed vital issued related to transportation—including the appropriate role of the federal government, public-private partnerships, U.S. infrastructure and supply chain competitiveness, and how technology is transforming the way infrastructure works.
Before his testimony on the Hill, Donohue told the group that the nation’s infrastructure in “a rapid state of decline” that threatens safety, productivity, and our global competitiveness.
“Our infrastructure system is a tremendous national asset we’ve built up over generations,” Donohue told the committee. “It has fueled economic growth, enhanced our competitiveness, and created a lot of good jobs. If well-maintained, it can continue to deliver outstanding benefits to all Americans.”
Besides, Donohue told the congressmen, it’s a great opportunity to show the nation that Washington still works.
“Transportation is a great opportunity to prove that Democrats and Republicans can work together, that states and the federal government can each play an appropriate role, that business is stepping up to help meet a major national challenge, and that all parties can come together to actually get something done for the good of the nation,” he said.
Toward that ends, the Chamber is backing what Donohue termed “reasonable increases” in fuel taxes that are phased in and indexed to inflation. He told Congress that just made good business sense.
“From a business standpoint, if you need something that’s going to provide a good return, you have to go out and in invest in it and buy it,” Donohue said. “That’s why we’re willing to pay more in gas and diesel taxes for something we know is going to make us more productive and efficient and lower our costs.”
As a former president and CEO of the American Trucking Associations, Donohue is acutely aware of how important roads and bridges are to the $700 billion-a-year trucking industry. While truckers would face higher fuel bills, those costs almost certainly would be passed onto shippers through either higher base freight rates or increased fuel surcharges.
A who’s who of experts is backing Donohue in his call for improving infrastructure. The American Society of Civil Engineers has estimated the United States needs to spend $2.75 trillion to maintain and improve its infrastructure by 2020. That’s about two-thirds more than the $1.66 trillion in expected federal, state and local government funding over that period.
Failing to make those investments would cost $3.1 trillion in lost economic output by 2020 and about 3.5 million lost jobs, the ASCE has estimated.
While no current governors were at the Chamber infrastructure meeting, one former one threw his weight behind the call for higher gas taxes. Former Pennsylvania Gov. Ed Rendell, a Democrat, said it was “inescapable” that the federal fuel tax had to be raised fund highway projects.
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