February 4, 2015 1:32 PM
The President’s FY 2016 Budget
On Monday, the White House released its DOA FY 2016 budget. Like President Obama’s previous budgets, this one has no chance of going anywhere, with the latest iteration primarily lending itself to lame congressional Republican “Groundhog Day” jokes. The White House is expected to release its updated DOA highway bill, a “GROW AMERICA Act 2.0,” sometime in the coming weeks. Until then, we won’t know in detail the policies the White House hopes to see on surface transportation.
However, we know it will take the form of a six-year, $478 billion reauthorization that will rely on a $238 billion bailout of the Highway Trust Fund to be funded by a tax on foreign corporate earnings. The White House plan would also make the TIGER grant program permanent, “dramatically” (their word) increase transit spending, and attempt to turn the Highway Trust Fund into a general transportation slush fund in order to boost politically correct spending on high-cost/low-value passenger rail projects.
But there appears to be some good in there too. To the president’s credit, he is a strong supporter of private infrastructure investment and plans to expand the role of Private Activity Bonds (PABs). As he mentioned in his State of the Union address, President Obama wants to create a Qualified Public Infrastructure Bond (QPIB) program to support more public-private partnerships in airports, transit, solid waste disposal, sewer and water, and other types of surface transportation that aren’t currently permitted under the existing PAB framework.
While not mentioned, we hope President Obama’s GROW AMERICA Act 2.0 also includes a provision that would end the current federal prohibition on states tolling their Interstate segments for reconstruction purposes. Last year’s GROW AMERICA Act included such a provision. This is something Congress should seriously consider as they scramble to come up with new irresponsible strategies for bailing out the ailing Highway Trust Fund. Instead of a federal highway handout, they should give the states a hand up by empowering them to fund and finance more of their own infrastructure.
February 3, 2015 4:13 PM
Over the decades I’ve spent in this Heart of Darkness (a.k.a., the bowels of American politics), I’ve learned two lessons that have encouraged the steady politicization of the American economy:
- When the right time comes, I’ll take a principled stand (sadly, too often, once you’re no longer in office); and
- Of course, we know the “right” answer is often to liberalize current rules, but that would be politically naïve, so our goal should be to avert even worse rules (but, of course, sacrificing principle rarely assuages those favoring more government control).
And both lessons seem to have been forgotten in the Republican rush to avert the threatened action by FCC Chairman Tom Wheeler to transform the Internet into a federally regulated utility. Senator Thune, Representative Upton, and Representative Walden have proposed a “compromise” bill that would strip the FCC of its purported authority to reinterpret the Communications Act to consider the Internet as a “public” utility.
Unfortunately, their language concedes perhaps the most dangerous part of such a reclassification: removing the freedom of network owners to price their services. Well, actually not quite: the Republicans would remove providers’ ability to price in ways that some view as “discriminatory.” They explicitly mention pricing policies that might result in “throttling” (like congestion-managed toll lanes?), unreasonable “network management” (as decided by whom?), and “paid prioritization” (like that used for just-in-time transportation services by most transport companies?).
But proponents argue if FCC is left alone, its rules might even be worse. And, indeed, they probably will be—but FCC action would be administrative, reversible by a future administration or via inevitable legal challenge. If Congress—led by erstwhile opponents of net neutrality—accedes to forcing the Internet into quasi-utility status, the losses could be permanent.
Those contemplating this action should reflect on the consequences of similar regulation on an earlier network—the railroads. This was America’s first national network, knitting together then small town and rural America into the national economy. Railroads dramatically lowered transportation costs—changing the economy and resulting in growth in some regions, contraction in others.
December 1, 2014 2:56 PM
Over the weekend, The Washington Post published a fascinating article about the rise and fall of United Streetcar, an Oregon-based manufacturer that owes its very existence to the worst kind of Washington politics.
Back in 2005, Rep. Peter DeFazio (D-Ore.) managed to secure an earmark requiring that a Portland rail transit project funded in part with federal funds procure U.S.-manufactured streetcars. This was the brainchild of another Oregon transit booster, Rep. Earl Blumenauer (D), who was a champion of the imploding “Portland model” of urban redevelopment and transportation planning when he sat on the city council. When former pork-barrel Rep. Ray LaHood (R-Ill.) was tapped to be President Obama’s first secretary of transportation as the token Cabinet Republican, the Oregon delegation knew it had found the perfect accomplice in the most unqualified DOT chief in history.
What happened was the same mix of cronyism and incompetence that has followed the Obama administration’s efforts to promote fuzzy-sounding objectives such as “alternative energy” in the case of Solyndra, and “livability” in the case of United Streetcar. From the Post:
A day or two after the new president nominated LaHood as secretary of the Department of Transportation in late 2008, the former Republican congressman from Illinois got a call from Blumenauer inviting him to his office.
“Portland was more than just automobiles. It was cycling, it was streetcars, it was walking paths,” LaHood said. “Earl really convinced me DOT really needed to do more than build roads and bridges. We, in a sense, followed Earl’s lead.”
Then Washington started taking actions that looked promising for streetcar backers broadly — and United Streetcar in particular.
LaHood’s department changed internal rules that had been thwarting streetcar projects during the George W. Bush administration. Those rules used travel time as a key criteria for certain federal dollars.
But with $48 billion in transportation projects as part of the economic stimulus, “we didn’t have to pick and choose,” LaHood said.
The Obama administration seized on United Streetcar’s story. In April 2011, administration officials promoted the firm on the White House Web site with a glowing Department of Transportation-produced marketing video.
“President Obama has challenged Americans to dream big and build big. United Streetcar has risen to that challenge, and they’re doing it all with American parts, labor, and ingenuity,” LaHood wrote in the accompanying blog post.
The administration was in the midst of ratcheting up the pressure on local officials to adhere to “Buy America” rules for federally funded projects. Those rules meant that more than 60 percent of the value of a streetcar’s components had to be from the United States, and they had to be assembled in the country.
Despite all the special privileges it received from its backers in government, United Streetcar built only 16 vehicles for three customers and it currently has no new orders. Traditional supporters of high-cost/low-value rail transit have even become skeptical of streetcar hucksterism. The progressive Washington Post editorial board recently called on the District of Columbia to halt the expansion of its planned streetcar network while neighboring Democratic Party stronghold Arlington County, Va., just canceled its streetcar projects.
November 5, 2014 12:31 PM
Yesterday, voters across the country had the opportunity to vote on a number of transportation ballot measures. Three of these involved spending for new rail transit projects, and all three were rejected.
In Austin, Texas, 57 percent of voters rejected Proposition 1, which would have funded a $1.4 billion, 9.5-mile light rail line, in addition to $400 million in road intersection improvements. Randal O’Toole of the Cato Institute produced a devastating review of the so-called “Project Connect.” Project Connect was so nonsensical that the light rail boondoggle was even opposed by numerous transit advocates.
In Seattle, Washington, voters rejected Citizen Petition 1 by over 80 percent, which called for creating a $5 car-tab tax that would be used to spend $2 million annually on a “Century Transportation Authority,” which would have served as a government-sponsored monorail booster.
Finally, in Pinellas County, Florida, a proposed $2.2 billion Greenlight Pinellas transit package, which included a $1.6 billion, 24-mile light rail line that would have connected St. Petersburg to Clearwater by increasing the sales tax from 7 to 8 percent, was rejected by 62 percent of voters. Despite every major government, corporate, and media entity in the Tampa Bay region loudly supporting Greenlight Pinellas, voters recognized the high-cost, low-value proposition posed to them and acted accordingly.
September 16, 2014 3:31 PM
The U.S. Senate Committee on Commerce, Science, and Transportation has scheduled a markup for tomorrow afternoon of the Surface Transportation Board (STB) Reauthorization Act (S.2777). If enacted, the bill (specifically, Section 14) would threaten much needed investment in railroad infrastructure and reverse three decades of progress on railroad regulation.
Senate Commerce chair Sen. Jay Rockefeller (D-W.V.), irresponsibly joined by Sen. John Thune (R-S.D.), has for years sought to reverse the partial deregulation enacted by Congress over 30 years ago. Since 1980, when the Staggers Act was enacted, average real freight rates have fallen by nearly 50 percent, railroad employee productivity and safety have dramatically improved, and the industry is now healthy and reinvesting more than $20 billion of its own funds every year.
But hydraulic fracturing revolution has led crude oil shipments to skyrocket in recent years—since 2005, originated carloads of crude oil on major railroads have increased by more than 6,500%. With continued steady growth in intermodal movements, new capacity investments are needed to ensure America’s freight rail system remains the envy of the world. Unlike road and air carriers, the railroad industry owns and manages its own networks and uses its own funds for infrastructure investment.
While singling out the private railroad industry for its alleged sins, Sen. Rockefeller has often championed subsidies for other modes of transportation. West Virginia’s highway system has long been one of the most federally subsidized in the nation, and Sen. Rockefeller never misses an opportunity to protect wasteful taxpayer subsidies of government-owned Amtrak and the completely misnamed and unessential Essential Air Service.
August 13, 2014 1:55 PM
Perhaps the one thing Time magazine's Michael Grunwald loves more than drone assassinations of American citizens and dissident journalists is heavily subsidized passenger rail. This is not the first time I’ve criticized Grunwald’s sloppy high-speed rail reporting, and it probably won’t be the last.
Over at Time, Grunwald takes issue with a recent New York Times story on President Obama's high-speed rail initiative. In particular, Grunwald attacks the Times article for referring to the over $10.5 billion in high-speed rail obligations as "$11 billion." Grunwald also argues that the Times' use of "spending" is an inaccurate way to describe the total obligations since actual outlays so far are only around $2.5 billion.
First, rounding up from $10.5 billion to $11 billion does not work against the main thrust of the Times article. And note that if Grunwald wanted to be really accurate, he would have noted, as the federal government has, that “approximately $10.6 billion” has been made available for high-speed rail projects.
Second, Grunwald doesn't seem to fully grasp budget lingo, yet spends much of his piece attacking the Times for supposedly misusing it. Now, "spending" is an imprecise term that could mean either apportionments, obligations, or outlays—or it could simply refer to the spending process, which involves apportionments, obligations, and outlays.
Grunwald is equating “spending” to mean “outlays,” i.e., funds disbursed by the Treasury. But it is unclear that the Times was referring to anything beyond the apportionments and obligations. Indeed, these appear to be the two offending sentences in the Times article:
High-speed rail was supposed to be President Obama’s signature transportation project, but despite the administration spending nearly $11 billion since 2009 to develop faster passenger trains, the projects have gone mostly nowhere and the United States still lags far behind Europe and China.
And the second:
Instead of putting the $11 billion directly into those projects, critics say, the administration made the mistake of parceling out the money to upgrade existing Amtrak service, which will allow trains to go no faster than 110 miles per hour.
The second sentence implies the projects funded by the federal government have yet to be completed—“which will allow trains…” Anyone familiar with the budget process knows reimbursements are generally how the federal government involves itself in infrastructure investment. It works a little like this: a state applies for a grant, the federal agency approves a grant, the state builds whatever project is supported by the grant, the state is reimbursed by the federal government when the project is completed. This is why the Federal Railroad Administration wrote in its 2011 announcement regarding the availability of funds rejected by Florida for the Tampa-Orlando I-4 rail corridor that “[t]he funding provided under these cooperative agreements will be made available to grantees on a reimbursable basis.”
While it is possible some readers of the Times believed, despite language to the contrary, that $11 billion is gone and all work funded by that money is completed, I am skeptical. The main point of the Times article is to compare President Obama’s lofty claims a few years ago to the reality today. Objectively, very little has happened and very little is likely to happen in terms of huge future high-speed rail investments necessary to support the president’s plan to give 80 percent of Americans access to high-speed rail by 2025, a project that would likely cost between $600 billion and $1 trillion to deliver. This simply isn’t going to happen and that's why the president's plan has been a complete failure.