Friday, May 16, 2003

Sultans of Slab clash with "The Hammer"


Heavy Tolls Ahead

May 16, 2003

By Mark Murray
National Journal
Copyright 2003

As Congress inches closer to the always-entertaining debate over the highway bill, Washington oddsmakers should keep one important thing in mind: Pete Ruane seldom loses a fight. Ruane is the president and CEO of the American Road & Transportation Builders Association, and he and the other members of the Washington road gang -- such as general contractors, state transportation officials, transit interests, and their champions on the Hill -- have a knack for getting what they want.

Congress's transportation enthusiasts and a powerful lobby hope to steamroll a huge highway bill through Washington this year. But they're on a collision course with President Bush and key Republican leaders.

Last year, for example, the road gang received a shock when the Bush administration requested only $23.2 billion for highways (a nearly $9 billion cut) in its fiscal 2003 budget because of lower-than-expected gas-tax receipts flowing into the Highway Trust Fund. Ruane and the gang rolled up their sleeves, mobilized their extensive grassroots networks, and lobbied their friends in Congress to eventually push that figure up to $31.6 billion.

These transportation advocates achieved a similar victory last month. After the administration asked for $247 billion over the next six years for the upcoming highway bill in its fiscal 2004 budget request, they made another carpet-bombing run and won the Senate's overwhelming approval for an amendment increasing that amount to $311.5 billion. As Senate Budget Committee Chairman Don Nickles, R-Okla., told National Journal's CongressDaily, "I got run over by the highway lobby on the floor of the Senate and have tire tracks all over my body." The final budget resolution whittled the figure down to $273 billion, but it still was significantly higher than the administration's proposal and leaves the door open to even higher funding.

These wins followed the huge success that transportation interests enjoyed in 1998, when the last highway bill, commonly called TEA-21, was enacted. During that legislative fight, they rolled over congressional appropriators and budgeteers to produce a six-year, $218 billion bill -- the largest public works bill in U.S. history.

But as the debate begins on this year's highway bill, the Sultans of Slab have their work cut out for them. As the recent maneuvering over the budget resolution suggests, they're pushing for an even bigger highway bill than they got in 1998. In fact, the leaders of the House Transportation and Infrastructure Committee are calling for a $375 billion bill, which they want to pay for, in part, by hiking the federal gas tax. Yet many of the key advantages that the road gang enjoyed during the last highway-bill battle are now gone.

In 1998, the economy was booming, budget surpluses were piling up, and the Highway Trust Fund was flush with cash that transportation interests could tap. Now, the economy is struggling, budget deficits stretch as far as the eye can see, and the trust fund isn't bulging the way it was two years ago. In addition, in 1998, highway-bill writers already had the revenue from the 4.3-cent-per-gallon gas-tax increase of 1993 to play with. This time, finding new revenue appears harder than finding weapons of mass destruction in Iraq.

Furthermore, in 1998 the powerful Rep. Bud Shuster, R-Pa., chaired the House Transportation and Infrastructure Committee. This time around, the transportation leaders are the relatively untested Rep. Don Young, R-Alaska, who succeeded Shuster in 2001, and Sen. James Inhofe, R-Okla., who just became chairman of the Senate Environment and Public Works Committee at the beginning of this year.

And finally, in 1998, highway-bill advocates had plenty of help from then-Speaker Newt Gingrich, R-Ga., a former member of the old House Public Works Committee. This time, bill proponents face opposition from congressional Republican leaders, who are already struggling to restrain federal spending to make room for the president's tax-cut package, among other things. In particular, House Majority Leader Tom DeLay, R-Texas, has vowed to defeat the gas-tax hike that the highway crowd wants. And President Bush is dead-set against doing one of the things that got his father into trouble during his presidential re-election bid: raising gasoline taxes.

As a result, the highway lobby isn't exactly giddy about its chances right now. "We are in the ballpark to get a bill," said one plugged-in lobbyist. "But I don't think that the odds are better than 50-50."

Although House committee action is expected in June, with floor debate possible in July, there is already talk that Congress might punt and pass a stopgap one- or two-year highway bill, rather than a full five- or six-year bill. The current bill expires on September 30. "I will not reauthorize an underfunded highway program," Sen. James Jeffords, I-Vt., ranking member of the Senate Environment and Public Works Committee, said in a speech last month. "If we can't find sufficient resources for a long-term bill, I will support an extension and revisit the matter next year."

Transportation advocates got more bad news on May 14, when the administration finally unveiled its highway-bill proposal, called SAFETEA. The plan has the same asking price as was in the administration's fiscal 2004 budget request: $247 billion.

For his part, Ruane acknowledges that this fight is much more difficult than the one in 1998, but he says it's too early to give up hope. "We always viewed this as a marathon," he said. "It is not a sprint."

Peter Loughlin, a lobbyist with another important road group, the Associated General Contractors of America, also isn't ready to sound the alarm just yet. "People haven't rallied to raise the gas tax," Loughlin said. "But we're gaining support from members of Congress to increase spending on the program."

Yet the highway bill (or the surface transportation reauthorization bill, as transit supporters urge reporters to call it) will be about much more than just dollar signs. It will be a debate about what's the better way -- building new highways or building mass transit -- to meet America's mobility needs. It will also be a debate over protecting the environment versus cutting the red tape that often stalls important transportation projects. And, of course, it will be an opportunity for members of Congress to grab juicy slices of pork (in the form of highway, bridge, and other projects) to take back to their districts and states.

The focus right now, though, is clearly on finding the money. On a cool, clear morning on April 30, some 200 transportation lobbyists, business leaders, union members, and construction workers assembled on the National Mall, just down from Capitol Hill. They were there to begin their lobbying blitz to persuade Congress to pass a supersize highway bill.

During the speeches at this event, it became obvious why Ruane and the gang almost always win: because they have a good product to sell. They talked about how increased transportation investment spurs the economy, creates new jobs, gives money to the cash-starved states, reduces traffic congestion, and prevents traffic fatalities. "Investing in transportation is not a special interest," said Thomas J. Donohue, president and CEO of the U.S. Chamber of Commerce, which is taking an active role this year in pressing for more transportation funds. "It is a national interest."

But it was also obvious during the speeches that members of the road gang are engaged in the fight of their lives. "We have our work cut out for us," Rep. Thomas Petri, R-Wis., chairman of the House Transportation and Infrastructure Highways and Transit Subcommittee, told the crowd. "It's easy to cheer and rally, but don't underestimate the difficulty of the task before us."

The Hunt For New Revenue

Although the highway bill is frequently associated with parochial "pork" projects, it has also been a source of important policy changes and bitter political debate over the years.

In 1982, road advocates had to defeat a Senate filibuster and persuade a reluctant President Reagan to enact a $75.5 billion highway bill that included a 5-cent-per-gallon gas-tax increase. With the approval of the $155 billion Intermodal Surface Transportation Efficiency Act (ISTEA) in 1991, Congress began to shift spending away from highways to focus more on mass transit. Then with TEA-21 in 1998, supporters were able to erect a budgetary "firewall" around the Highway Trust Fund, so that Congress could use the fund's revenues only for transportation and not for other discretionary spending. Currently, the trust fund is fed by the 18.4-cent-per-gallon federal gas tax, plus other revenue from truck sales.

This time, the House T&I Committee is pushing for a six-year, $375 billion bill. The Senate is seeking a $311.5 billion package, with the Environment and Public Works Committee eyeing $255 billion for highways, and the Banking, Housing, and Urban Affairs Committee penciling in the rest for mass transit. The dilemma for these authorizing committees is that there's not enough money flowing into the trust fund to finance their ambitious plans.

The committees have identified several ways to boost revenue. First, they want to crack down on fuel-tax evasion (for example, by truckers who illegally use jet fuel, which is cheaper), a problem that they estimate steals $1 billion per year from the Highway Trust Fund. Second, the committees want to eliminate the 5.2-cent-per-gallon federal tax exemption that encourages the use of ethanol-based fuel (currently, the federal tax on ethanol is only 13.2 cents per gallon, not 18.4 cents), and they want to divert into the Highway Trust Fund the 2.5 cents per gallon of the ethanol tax that's now devoted to general revenues. They also want to tap much of the trust fund balance, which hovers around $13 billion to $18 billion, plus the interest on this balance.

The good news for highway-bill enthusiasts is that all of these measures are relatively popular and are gaining momentum on Capitol Hill. The bad news is that they don't come close to producing enough money to finance even a $300 billion highway bill. "Say we get ethanol and the [trust fund] balance and the tax evasion -- we still can't get there," said Levon Boyagian, the T&I Committee aide who's writing the legislation in the House.

Consequently, the leaders of the House committee have come up with another -- but much more controversial -- way to boost spending: raising the gas tax. They want to increase the 18.4-cent-per-gallon federal gas tax by 5 cents for fiscal 2004, which would adjust this tax to account for the inflation that has occurred since the last hike, in 1993. Next, they would permanently tie the gas tax to the Consumer Price Index, so that by fiscal 2009, the tax would be at about 26 cents per gallon.

Clearly, raising the gas tax will be a tough -- and maybe even impossible -- sell. For one thing, despite the return of budget deficits, few politicians, outside of some transportation-minded lawmakers, are eager to raise taxes of any kind. And during the war in Iraq, consumers were already hit with gas prices nearing $2 per gallon, although prices have begun to decline since then. "No one wants a gas-tax increase up here," said a senior House Republican aide.

In the Senate, Finance Committee Chairman Charles Grassley, R-Iowa, and ranking member Max Baucus, D-Mont., have come up with a different revenue proposal to expand the highway bill. Yet it's almost as controversial as the House plan. Grassley and Baucus also want to recapture the taxes on ethanol and eliminate fuel-tax evasion. But instead of raising or indexing gas taxes, they would divert most of the 2.86 cents of the 18.4-cent-per-gallon federal gas tax that's currently set aside for mass transit and put it toward highways. To finance and later boost transit spending, they would use proceeds from the sale of bonds.

By fiscal 2009, this plan would produce $45 billion for highways and about $14 billion for transit, according to Dawn Levy, Baucus's transportation tax counsel. The funding scheme would produce about $350 billion in contracting authority over six years. "Give us credit for thinking outside the box here," Levy said. "If we do not have a bill by September, it will not be because Baucus and Grassley did not find the funds."

Yet the proposal faces plenty of obstacles. In 1998, road and transit forces teamed up to move TEA-21 through Congress; their logic was that a bigger pie would produce bigger slices for both highways and transit. Knocking out mass transit in the way that Grassley and Baucus propose could upset this delicate alliance.

In the House, which has many urban and suburban members who favor transit, "we couldn't pass a bill like that," said Boyagian. Still, in the Senate, Grassley, Baucus, and numerous GOP leaders represent mostly rural states, while many of the urban Northeast's longtime champions of mass transit -- such as the late Sen. Daniel Patrick Moynihan, D-N.Y., and Sen. William V. Roth Jr., R-Del. -- have left the chamber in recent years.

Financing transit through bonds is also problematic, experts say. At a time when cash-starved states and localities are already using tomorrow's dollars today, more bond initiatives could drive them further into debt. William Millar, president of the American Public Transportation Association, argues that if bonding is such a good way to finance transit, then it should also be applied to the highways. "What's fair for the goose is fair for the gander," he said.

Unfortunately for the transportation community, the Senate Finance and House Ways and Means Committees hold all the cards right now. Under the fiscal 2004 budget resolution, the highway bill can't exceed $273 billion unless the two tax-writing committees approve additional revenue. So can road and transit interests persuade these two committees to raise federal gas taxes? "That's the ultimate question," Boyagian said. "It's in their court."

The New Chairmen

Whether transportation interests get the highway bill they want will depend largely on the success of the two new transportation chairmen: Don Young and Jim Inhofe. While many observers believe that the true force behind the bill is the powerful highway lobby, it would be a mistake to ignore the roles that Young and Inhofe will play.

After all, many people credit Bud Shuster, Young's predecessor as House T&I chairman, with getting TEA-21 through Congress. "It does matter who is in charge," said Todd Hauptli, a prominent airport lobbyist. "Without Bud Shuster, you don't get that bill."

Shuster, now retired, is something of a legend on Capitol Hill. Although plagued by ethics problems, he was praised for his skillful bipartisanship and steely determination. He repeatedly won legislative battles by flexing the size of his committee -- at 75 members, the largest in Congress -- and the power he had to award or deny pork projects.

During his two years as chairman, Young has developed a different style. According to observers, he has been more inclined than Shuster was to work with Republican leaders and other chairmen, and less inclined to use his committee's heft and power to threaten GOP leaders to get what he wants. In fact, some observers were surprised that Young didn't launch a Shuster-style attack when leaders included no highway spending in the 2001 economic stimulus plan, or when appropriators raided $423 million from the highway program in fiscal 2002.

Does Young think his more accommodating approach will be enough to persuade House GOP leaders to embrace a big highway bill? "I hope so. I am certainly going to try," Young replied in an interview. "This is a matter of communication," he added. "It is my job to explain the needs to them." And Young, a gruff, burly Alaskan who was known for his hard-charging partisan ways while House Resources Committee chairman from 1995 through 2000, noted, "This is the first time I have ever heard I was accommodating."

Young insists that he will use the powers at his disposal in the upcoming fight over the highway bill. "I will use the earmarks," he told National Journal last year. "I would be silly not to use them. And I will also use the pen [to eliminate members' earmarked projects] if I have anybody saying, 'No, we shouldn't be spending the money on highways.' " House members have already bombarded Young's committee with requests for nearly 5,200 earmarked projects in the highway bill -- averaging out to 12 projects per member -- worth about $300 billion.

But House Republican leaders have already grumbled about how Young has handled the highway legislation. In March, an article in The Hill newspaper said that some GOP leaders were unhappy that Young was seeking such a big bill. The article even suggested that DeLay and Majority Whip Roy Blunt, R-Mo., might draft their own highway bill -- which observers say is untrue. In addition, the article pointed out that Young plans to name his bill "TEA-LU" after his wife, Lu -- which is true. "The notion he would have the gall to name this after his wife goes beyond what any other member has ever done," an unnamed lobbyist told The Hill. "He's making a mockery of the procedure."

In addition, other critics contend that Young has made a tactical error -- at least in this early stage -- by emphasizing the bill's gargantuan price tag and the tax increase needed to finance it. Instead, these critics explain, Young should have stressed the need to improve the nation's infrastructure. Once that idea had gained support in Congress, they say, he could have rolled out his asking price and a way to pay for it.

But Young's defenders say that his $375 billion bill reflects the amount the Transportation Department had identified as needed to improve the transportation system. And they say the chairman is just being honest when he discusses funding options. "We are going to do what's correct," Young said. "The figures from the administration alone say we need at least $40 billion for highways in 2004 and $60 billion by 2009. For transit, it's $7.2 billion for '04, and it's got to be $12.4 billion" for '09.

A top Republican Hill staffer who works for a different committee added that Young is just borrowing a page out of Shuster's playbook: Shoot for the moon so the eventual compromise will be to your liking. Shuster did exactly that during the debate over TEA-21 when he attempted to take the Highway Trust Fund completely "off-budget," but later settled for a firewall. "In the political arena," the staffer said, "boldness is usually rewarded."

Over in the Senate, Inhofe now controls the gavel at the Environment and Public Works Committee. He doesn't have as much power as Young does -- mainly because Inhofe's committee shares jurisdiction over the highway bill with the Senate Commerce, Science, and Transportation Committee (which handles the highway safety titles) and with the Senate Banking Committee (which handles transit). But Inhofe will be a key figure to watch.

Inhofe has made clear that he wants a big highway bill, although the Senate's asking price of $311.5 is less than Young's. "We need a highway funding level that will improve safety, congestion, and economic growth," Inhofe has said.

Inhofe sat on the old Public Works Committee when he was a House member, and in a March interview with National Journal shortly after assuming the Environment and Public Works chairmanship, he said transportation issues are close to his heart. "When I came to the Senate, I came to this committee," he said. "I inherited the environmental stuff. I really got on more for the transportation [issues], because I was somewhat versed in that."

In fact, Inhofe, a former businessman and land developer, is a staunch conservative who regularly receives a score of zero on environmental issues from the League of Conservation Voters. He certainly is a stark departure from past EPW chairmen, who for many years have hailed from the liberal, pro-environment Northeast.

Environmental advocates fear that Inhofe's ascension to the chairmanship gives conservative Republicans an opening to roll back some of the environmental provisions that have become mainstays in past highway bills. The legislation sets important standards for clean air and environmental reviews for new transportation projects. But this year, transportation and business interests will be pushing to "streamline" the environmental-review process. They argue that some of the environmental regulations delay road construction for years.

"What I'm trying to do is strike a balance where we can have a clean environment," Inhofe told National Journal in March. "My wife and I have 19 kids and grandkids. We love the clean environment. But we want it to be based, not on hysteria, but on sound science."

The New Opposition

The similarities between President Bush's presidency and his father's are uncanny: There's war with Iraq. There's the slumping economy. And if the highway gang gets its way, there's a gas-tax increase.

As most Americans remember, the first President Bush broke his famous read-my-lips-no-new-taxes pledge with the 1990 budget agreement. The agreement, which aimed to cut the deficit by nearly $500 billion over five years, raised income taxes on the very rich; imposed a surtax on luxury cars, furs, yachts, and planes; and increased taxes on tobacco, liquor, beer, wine, and -- you guessed it -- gasoline. A little over a year later, in December 1991, Bush signed the ISTEA highway bill, saying it would bring "jobs, jobs, jobs" to the ailing economy. The bill partially extended the short-term gas-tax hike that Bush had agreed to in 1990.

The current President Bush has also vowed not to raise taxes, and his administration has continually stated that it opposes any hike in the fuel tax. At the May 14 unveiling of the administration's highway-bill proposal, Transportation Secretary Norman Y. Mineta said: "The president did want us to put this together based on no new taxes and no new indexing."

The word in transportation circles is that Bush is unlikely to veto a highway bill, especially with Republican lawmakers clamoring for all the goodies it offers. But things may never get to that point, because DeLay and other Republican leaders can be counted on to prevent any highway bill that Bush doesn't like from reaching the House floor. DeLay, in fact, is emerging as the biggest roadblock in Congress to a hefty highway bill. Over the last couple of months, he has made clear that he opposes a gas-tax increase.

This opposition is forcing transportation advocates to give serious thought to pushing just a one- or two-year highway bill. The reasoning is that if the only long-term bill they can get is a meager one, they will be locked into that amount for six years. But the hope is that if they opt for a short-term extension, they could win approval of a bigger bill once the economy improves and the 2004 election passes -- after which a lame-duck Bush might be more willing to sign a gas-tax increase.

"If I am a state transportation department official or a CEO of a transportation construction firm, and I look at a six-year bill with a modest increase, or a one-year extension, I am more interested in extending it a year," said Jeff Squires, a top Democratic aide at the Senate Environment and Public Works Committee.

But the road gang isn't giving up hope just yet. For starters, there's precedent for a tax-cutting Republican president to sign a gas-tax hike. Ronald Reagan initially scoffed at the idea of raising the gas tax by 5 cents: "Unless there's a palace coup and I'm overtaken or overthrown, no, I don't see the necessity for that." Yet after the Republicans lost seats in the 1982 midterm elections and after his advisers convinced him of the need to create more jobs, Reagan reversed course. He signed the 1982 highway bill and portrayed its gas-tax hike as a user fee. "The program will not increase the federal deficit or add to the taxes that you and I pay on April 15," Reagan said. "It'll be paid for by those of us who use the system, and it will cost the average car owner only about $30 a year. That's less than the cost of a couple of shock absorbers."

Young believes that selling his proposed tax hike as a user fee will also work this time. "The public will pay for this if they know that we are going to use the money we collect for transportation," Young said. "There won't even be a peep out of them."

Indeed, a recent Zogby poll commissioned by the American Road & Transportation Builders Association shows that 64 percent of likely voters would support a small annual increase in gasoline taxes if the money were used exclusively to improve roads, bridges, and public transit.

The idea of using a gas-tax increase as a budgetary offset to pay for Bush's big tax-cut package has been floating around Capitol Hill and K Street. According to Grover Norquist, who's the president of Americans for Tax Reform and is in close contact with the White House, Bush would not be breaking his own no-new-taxes pledge if he raised gas taxes but also lowered taxes elsewhere. Yet Norquist says that a gas-tax hike isn't good public policy. "This is ridiculous spending that is out of line," Norquist said of the highway-bill proposals. "It should be illegal."

The road gang's ultimate hope is that DeLay and other House GOP leaders will eventually acquiesce to some sort of gas-tax hike. DeLay, after all, certainly wants more transportation funding for his Houston district. He also wants Texas to get a 95 percent return on the gas taxes its motorists pay; the state currently gets about 90 percent. Transportation advocates insist that the best way to increase that percentage is to pass a supersize highway bill. Furthermore, those in the DeLay camp say they realize that it's difficult to stand in the way of members who want more transportation dollars.

In fact, CongressDaily reported in April that DeLay, after meeting with Young and House Speaker Dennis Hastert, R-Ill., dropped his opposition to indexing gas taxes for inflation. Transportation observers and those close to DeLay adamantly maintain that the article was incorrect. Yet there may have been some truth to it. When Young was asked during the interview with National Journal what happened in that meeting, he replied, "I think you need to talk to Mr. DeLay. He has indicated to me that he's willing to look at that proposal, and we'll see what happens."

DeLay spokesman Stuart Roy confirms that the majority leader told Young he would look at his proposal. But what Roy added after that is sure to disappoint the highway crowd: "Congressman DeLay has repeatedly said that he opposes a gas-tax increase."

So who is going to win the battle over the highway bill? As with most good stories -- even one about asphalt, pavement, and pork -- it's something that, in this early stage, could go either way. But pressed to give an answer to this question, Young suggested that his side is the smarter bet. "I always believe I can win anything," the new T&I chairman said.

Staff Correspondent Richard E. Cohen contributed to this report.

© 2007 National Journal Group Inc: www.nationaljournal

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