Venable LLP attorneys Burnley and Wagner provide overview on transportation infrastructure outlook

While there is a lot of movement and attention focused on the future prospects for the path forward for the United States’ transportation infrastructure prospects, much needs to happen before the ultimate goal of a new long-term, fully funded authorization gains traction in Congress. And the White House is taking equally-measured bold and focused steps, in the form of its recently proposed $2.3 trillion American Jobs Act, which has, in a sense, served as a jumping-off point, of sorts, for what may be coming next.

To get a better sense of these developments, Logistics Management Group News Editor Jeff Berman recently spoke with two attorneys at Washington, D.C.-based Venable LLP—James H. Burnley IV, former U.S. Secretary of Transportation and one of the nation’s foremost authorities on transportation law and policy, and Fred Wagner, former chief counsel of the U.S. Federal Highway Administration (FHWA). Burnley and Wagner provided Berman with their respective takes on the current state of all-things U.S. transportation infrastructure-related, from both a policy and a supply chain perspective. Their conversation follows below.  

LM: What is your take on the true prospects for the White House’s proposed infrastructure plan?

Jim Burnley: The only thing that I am certain will pass is an extension of the existing Highway Trust Fund (HTF) programs for highways and transit. I do not see a pathway to pass anything like the package, or a portion of the package, that President Biden has proposed. I say that because everyone is in favor of spending more money on transportation infrastructure, among other things. But I don’t see how the pay-for’s come together. Biden has drawn a bright line and said he will not raise taxes on anybody who makes less than $400,000 per year, which was then clarified to mean individuals.

Republicans in the House and Senate are not interested in repealing the 2017 tax cuts. There are 27 or 28 Democrats, mostly from New York and New Jersey, whom proudly proclaim they will not vote for any tax package unless the so-called SALT (state and local tax) deductions are repealed. Capping those was a big part of the 2017 tax package so that further complicates it. You know what the margin in the Senate is, but what is often overlooked is how tough it is going to be to pass anything really controversial in the House. The math for that changes gradually, as people resign and pass away every year, too. As of now, there are 430 members of the House. Of those 430 seats, Democrats today have 218, which means if they lose three votes, they cannot pass the matter on the floor…if they get down to 215, they lose.  We are in an environment where there is just so little maneuvering room…that I don’t see how the pay-for’s come together. And that is why I say the only thing I am certain about is the HTF funds getting extended.

Fred Wagner: The political reality here is exactly what Jim described. I think the other variable that goes into the calculus is whether, or if, the White House reconciliation moves ahead, and, if so, to what. Now on the table, in addition to the infrastructure plan, is the American Families Plan, which deals with other financial and fiscal proposals. Strategically, I think the month of May will be the month where the White House decides yes or no, either likelihood of getting sufficient support, which could colorfully be called bipartisan, and then the pressure goes back to the Republicans to see if they are going to draw a line in the sand to say they are not doing that. It is still in entrenched opposition and will be decided in May, because we are starting to see legislative proposals being written. Speaker Pelosi has talked about something being done by July 4, and I have heard there are markups in major committees, so all of that is going to start coming together on paper and then the decision is going to have to be made by majority leaders, the speaker, and the administration, in terms of how we are going to proceed to see if there is a path to reconciliation or not.

LM: If things were to move forward on a surface transportation front alone, what would be the way to approach funding it, given the current, and ongoing, imbalance in the HTF?

Burnley: The only good news in a way that is different and new is that a lot of Republicans and a handful of Democrats are talking about the need to move to a Vehicle Miles Traveled (VMT) tax or some variation on that. So, we have, for the first time, in some corners of Congress, recognition that particularly as our policies push people into primarily electric vehicles that are not fueled by petroleum products that you are going to have a trust fund that is financed by dedicated user taxes. That is the end of the good news right now. There is no majority on the horizon that I can see to pass the necessary legislation this year to start moving towards a VMT, nor is there a majority on the horizon to increase fuel taxes. President Biden, again, said he will not raise taxes on anyone making less than $400,000 per year, and both the VMT and fuel tax, by definition, hit everyone who buys fuel or uses the roads. I don’t know how you connect those dots this year. President Biden has not left himself any wiggle room on this, including his recent speech to Congress. The grim reality, as I see it right now, is that the most likely scenario is an extension of the existing programs will continue deficit financing out of the Treasury accounts for another couple of years. That could be an 18-month extension, from September 30, 2020 into early 2023. There will be a great deal of maneuvering, and an enormous amount of rhetoric, as Fred said, with hearings and markups, perhaps in both houses. But then what do you do once you have finished that process? The Democrats will try their very best to figure out a reconciliation strategy, but with its very narrow control of both houses, and Sen. Manchin questioning aspects of the Biden tax package and the SALT issue, it is very difficult to make the math work right now.          

Wagner: With the previous surface transportation authorization, MAP-21, there had been legislative issues floating back and forth in the spring of 2012, and nobody really knew anything about it. But then right after Memorial Day a bill had passed. It happened that rapidly. You never know when the stars are going to align. With all of the things that have been put on the table recently, like Family Leave, pre-K education, expansion of Medicare, healthcare, and others, there is still more consensus over the infrastructure world than others. The Republicans’ calculus has to be “we know what we are against, but what are we going to be for?” And the second part is, does it matter? The White House and Democrats are saying we would be glad to go into the mid-term cycle having passed the rescue plan with an economy that is going to rebound, and a pandemic that is on the downswing. The Republicans are banking on that not mattering, as its constituency is more focused on open seats and the people running for those seats.

Even if there is an extension of the FAST Act, there is no question that the Administration’s priorities are electrification and projects that have perceived beneficial impacts of climate and equity concerns. There is no question that all of that is going to advance, even if it advances more slowly than if the President’s full $2.3 trillion plan does. They can use the RAISE grants (formerly known as TIGER and BUILD, respectively) and expand some of the definitions for the existing formula to allow eligibility for electrification of infrastructure. There could also be a whole bunch of support for research and development and also partnering with DOE for things that will end up helping transition the shipping sector and so forth. That will happen more slowly but will still happen, because the philosophical commitment to that from this Administration is that strong.    

LM: Earlier this year, the American Society of Civil Engineers issued a C- grade for the condition of U.S. infrastructure, which actually was an improvement over its previous D+ in 2017. How does that match up with what truly needs to be done to improve this situation? It is almost like not seeing the elephant in the corner of the room, it seems.

Burnley: The elephant is not being ignored. It is more that there is a lot of rhetoric around the elephant. The question relates to outcomes, and that is where we get stuck over and over again. I can also imagine a scenario where things are unsuccessful this summer and Congress does not decide to kick it past the mid-terms and decide, to the contrary, to kick it into the winter of 2022, because the White House and the Congressional Democratic leadership calculates that it wants to take another run at surface transportation infrastructure and perhaps other pieces of the package if they don’t pass the reconciliation. It puts Republicans on the defensive.  I can imagine a scenario where they decide, for political purposes, to put Republicans on the defensive and take another run if they don’t get done this year. Both parties out of fear, more than any other motivation, might be able to compromise. But we are a long way from next winter.

Wagner: The margin in the House and Senate is so slim that, to me, if the choice is only to do an extension past the mid-terms versus take another run in the short-term, then they will try to take another run at things because all it takes is Diane Feinstein retiring or somebody else. It is that tight and politically there is a fear of trying to avoid the fate of interfering with their priorities also trying to do something sooner than later. I think the odds are stronger that there is an extension in the short-term to keep the pressure on. It really all depends on the pandemic. If things continue to improve and thing reopen and schools start in the fall and the economy continues to grow, there are going to be a lot of political headwinds that may allow the White House and Democrats to push harder against Republican opposition. As for the ASCE grade, I don’t how it came up with an improved infrastructure grade for the U.S. In the past, it has been fixing, maintenance, and the whole pothole scenario. You want things to be working and, in transit, it is a state of good repair. For highways, it is smooth roads without a lot of construction and interference. The thing that is driving the new infrastructure proposal is more than that. It is truly a different vision of what our transportation infrastructure program should look like. They literally want to shift the way in which we think about our systems and our mobility. It is not just about the state of repairs; we have to do those things, but this is a more aggressive vision and a different vision of what our system looks like. The good news for the White House is that the private sector is buying into it and is buying into things like electric vehicles. That is seen in announcements coming out all the time now about companies doing things like eliminating gas-powered cars or improving battery packaging technology, and others. There is some political pressure from the marketplace and the White House about this, and that cannot be discounted.

Burnley: To throw some cold water on that, I recently read that 20% of people in California that have bought EVs have returned to internal combustion engine vehicles, and the reason is charging. For a lot of these vehicles, you can plug them into your existing 120V AC system and after 24 hours you might have enough juice to go 30 miles. If you charge your car at home, you need at least a 240V or a 480V, which is more expensive to put in. We don’t yet have any national network of charging stations. As Fred said, many companies are rapidly moving in that direction, certainly automotive manufacturers are. The administration has proposed massive expenditures for building out a charging infrastructure. But until that happens, you don’t have a perfect scenario for the EVs.

In the trucking industry, in one sense, it is easier to do that, because the sector can make the capital investment. In LTL, for example, it is going point-to-point. If you are doing long-haul over-the-road trucking, that is a whole different ballgame, and you have to be able to charge your tractor somewhere. If you are doing a full-day run, you need to know there is a place you can charge your truck somewhere after dropping a trailer. There are going to be fits and starts and misfires, and, yes, the direction seems to be changing rapidly, but the outcomes are going to take some time and a lot of money.

LM: How do you view the current status of transportation infrastructure on a state-by-state level?

Wagner: The state coffers are overflowing.

Burnley: Because Washington rained money on them.

Wagner: California, Maryland, and New York and other states have budget surpluses. It is a surprising and underreported development. For years, the talk has been there is all this money for the HTF, but it does not matter because the states are broke and cannot make the 10% or 20% match. Now, in a lot of these states where the infrastructure might be particularly needed and supported are finding themselves in a position where they can spend money faster. I don’t know how that will precisely play out, especially in some of the bigger industrial states with large cities, you may see some of that same kind of investment proceeding on the state level.  

Burnley: You need to keep in mind that this funding is not forever, it is more for the next 12-to-14 months. Also, if the Republicans retake both houses next year, then these White House policies will play out on all surface transportation issues in a different way. The political realities of the Biden Administration could be different in a lot of ways.