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Obama’s call for increased infrastucture needs more clarification, say experts

The President's proposal for lowering corporate tax rates in exchange for increased infrastructure investment leaves more questions than answers
By Jeff Berman, Group News Editor
August 01, 2013

During a speech at the Amazon.com Chattanooga Fulfillment Center this week focused on jobs for the middle class, President Obama called for reforming the country’s corporate tax code and subsequently re-allocating the funds from transitioning from a simpler tax system for significant investment in creating middle-class jobs.

One area in which the President strongly believes that this investment can be put to good use is infrastructure investment, which is ostensibly chronically underfunded to put it lightly.

“We’ve got about $2 trillion of deferred maintenance here in this country,” Obama said. “So let’s put more construction workers back on the job doing the work America needs done.  These are vital projects that Amazon needs, businesses all across the country need, like widening Route 27 here in Chattanooga—deepening the Jacksonville Port that I visited last week.  These are projects vital to our national pride.”

The President added that Congress should pass his “Fix-It-First” plan to put people to work immediately on the country’s most urgent repairs, like the 100,000 bridges that he kidded are old enough to qualify for Medicare and could create good middle-class jobs.

As previously reported, The Fix-It-First plan is part of the President’s infrastructure plan, entitled a “Rebuild America Partnership” that will attract private capital to build the infrastructure U.S. businesses need most. This policy, according to the White House, calls for an investment of $50 billion towards U.S. transportation infrastructure, with $40 billion targeted to the most urgent upgrades and fixing highways, bridges, transit systems, and airports that need repair.

While specifics on where exactly the required capital for increased infrastructure investment might come from remain to be seen, there is not a shortage of opinions on its feasibility all the same.

“It is hard to say exactly what the White House is saying here,” said Leslie Blakey, executive director of Washington, D.C.-based Coalitions for America’s Gateways and Corridors. “I am just now sure how the call for the quid pro quo for lowering corporate tax rates is building more infrastructure. How do they connect?”

Blakey said there could be two possibilities at work here. One being that the White House does in fact have more of a detailed plan which will be laid out over time, and the other could be that it is putting a flag in the ground in support of some existing plans for infrastructure funding, including a bill from Rep. John Delaney (D-MD) that Blakey said is receiving a lot of bipartisan support.

The bill, entitled, The Partnership to Build America Act, creates a $50 billion dollar infrastructure fund that can be leveraged to $750 billion, according to Delaney’s office. This fund will be capitalized by the sale of 50-year bonds that are not guaranteed by the Federal government and pay 1 percent interest rate and to encourage U.S. corporations to purchase these bonds, they will be allowed to repatriate a certain dollar amount – determined by auction - in overseas earnings tax-free for every $1 they invest in the bonds, it said. And the fund will then provide loans or loan guarantees to states and municipalities to finance transportation, energy, communications, water, and education infrastructure projects.

Mike Regan, president of Chicago-based TranzAct Technologies and head of the advocacy committee for the National Shippers Strategic Transportation Council (NASSTRAC), was far more critical in his assessment of Obama’s comments this week.

“The President is grasping at straws with this,” he said. “The plan he put forward has no shot at passing. The concept of tying of lower tax rates tied to a higher infrastructure spending plan is consistent with the theme that he is clueless when it comes to how to pay for infrastructure. We need a long-term, 4-to-6-year highway bill and need to figure out how to pay for it. But the thing is people want roads and bridges and are not willing to pay for them, so if you are not going to talk about variable tolling, a vehicle mileage tax, or an increase in the gasoline tax, it is absurd. And until we have a fact-based discussion centered around a realistic plan we are not likely to go anywhere with this.”

What’s more, when the current highway bill, MAP-21, expires in September 2014, Regan said it is likely to meet the same fate of myriad extensions—or continuing resolutions—to keep funding at current levels in lieu of a new, long-term bill.

About the Author

Jeff Berman headshot
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).


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