Infrastructure: Moving America’s Economy

//Infrastructure: Moving America’s Economy

Infrastructure: Moving America’s Economy

America’s trucking industry transports 70% of all freight in the United States annually. This accounts for nearly $721 billion in revenue, while rail and air transport account for a combined $218 billion in revenue. The United States received a D+ grade on infrastructure by the American Society of Civil Engineers (ASCE).

Greg DiLoreto, P.E., the chair of the ASCE committee on infrastructure says the three things that we need to fix our infrastructure challenge is to invest in the planning, receive bold leadership from elected officials on the local, state, and federal levels, and planning for sustainability and resiliency in infrastructure. ASCE estimates to meet the infrastructure needs of the United States, $4.59 trillion will need to be invested. Without a competitive infrastructure, the United States will pay nearly $3.9 trillion in Gross Domestic Product (GDP). President Donald Trump and Representative Bill Shuster have laid out two infrastructure proposals to help the U.S. become globally competitive in infrastructure.

During the 2016 Presidential campaign, President Donald Trump proposed a $1.5 trillion-dollar increase in infrastructure spending. The comprehensive infrastructure plan which includes traditional highway projects, transit, rural broadband, and education and workforce development projects was released on February 12, 2018, by the Trump Administration. Since President Trump’s inauguration, many legislators support the infrastructure spending increase however, the question has not been how the infrastructure plan would be implemented in the United States but rather how will it be funded.

President Trump has called for $200 billion of funding from the federal government over a 10-year period and the presumption that state and local governments, as well as, public-private partnerships will increase investments to meet the $1.5 trillion-dollar goal. It has been consistently emphasized that the current infrastructure in the United States needs modernization and reconstruction. This dramatic change would bring jobs, economic competition, and allow communities to gain new opportunities. Although this is a bicameral and bipartisan issue, the respective chambers of Congress cannot agree on a funding avenue. Many of the issues arise in the nearing mid-term elections and politicians are not willing to put their campaigns in jeopardy.

Under President Trump’s plan, states would be granted more flexibility to toll existing highways and reinvest the revenue back into the U.S. infrastructure system. The plan also increases the flexibility of states to commercialize rest stops and pushes the federal government to divest some of its property holdings like the Ronald Reagan National Airport, the George Washington Parkway, and the Tennessee Valley Authority. President Trump’s plan focuses on reducing regulations, which would lower the cost of projects by speeding up the approval process and expand financial programs like the Transportation Infrastructure Financing Innovation Act (TIFIA), Private Activity Bonds (PAB), and the Water Infrastructure Financing Innovation Act (WIFIA).

The Trump infrastructure plan does not address the Highway Trust Fund (HTF) or the Federal Excise Tax (FET), although discussions continue about increasing the gas tax. The gas tax has not been increased since 1993. If the U.S. Chamber of Commerce’s plan to increase the gas tax 25 cents is implemented, nearly $346 billion would be generated in new revenue. However, most Republicans aren’t open to an increased gas tax. While reducing the regulatory process and shortening the time for the construction phase will reduce the cost of projects, it will not change the fundamental problems facing the HTF. Although the HTF is not mentioned in Trump’s plan, his council of economic advisors estimate that the President’s plan will boost growth by 0.1-0.2 percentage points per year and generate nearly 290,000 jobs.

On July 23, 2018, the Chairman of the House Transportation and Infrastructure Committee, Rep. Bill Shuster (R-PA) released a legislative discussion draft for a long-term infrastructure proposal in the Building a 21st Century Infrastructure Act. The discussion draft would replenish the HTF through increasing the gas tax 15 cents per gallon for the federal gasoline fuel tax and 20 cents per gallon for the federal diesel fuel tax. The increases would be phased in over three years before indexing both rates to inflation going forward and would eliminate the federal gas tax by 2028, replacing it with a better long-term solution to keep the HTF solvent. The Shuster draft also creates a Vehicle Miles Traveled (VMT) pilot program of which drivers and fleets could opt into for consumer and commercial vehicles.

The Department of Transportation (DOT) would administer the VMT program and help determine if it would replace the gas tax. Additionally, the discussion draft would eliminate the reduced fuel tax charged to intercity buses and public transportation buses, reinstate a 4.3 cent tax on diesel fuel used by passenger trains, include a 10% tax on electric batteries, and charge a 10% tax on bicycle tires. Shuster’s plan, in addition to funding the HTF, would extend projects funded under the FAST Act through 2021.

While neither President Trump or Rep. Bill Shuster’s plans have come into action, the industry applauds both detailed proposals. The transportation industry, specifically the trucking industry, is disappointed that the FET was not discussed but view the proposals as an avenue to begin conversations on priorities for an infrastructure bill in the future. Neither chamber of Congress denies that the United States needs a change in the current outdated infrastructure, but we must find a funding approach. There is still plenty of work to be done but I have confidence in our legislative and executive branches of government to move an infrastructure bill in the next year addressing concerns from the entire transportation industry.

If you have any additional questions about any of the details in this article please email Graham Hall at grahamhall@mckeongrp.com or by phone at 571.447.5002.

By |2018-10-09T21:50:25+00:00October 9th, 2018|Infrastructure|Comments Off on Infrastructure: Moving America’s Economy

About the Author:

%d bloggers like this: