Tuesday, October 14, 2008

Gov. Perry says he won’t veto legislation to index the state motor fuels tax to inflation.

Pouring billions into aging U.S. infrastructure urged to help avoid recession


The Dallas Morning News
Copyright 2008

Would spending billions putting engineers and construction crews to work rebuilding the nation’s aging infrastructure keep America out of a recession?

A group of leading governors, transportation experts and House Democrats say it’s worth trying, with Gov. Ed Rendell of Pennsylvania and others arguing Tuesday that the federal government should immediately spend billions on America’s highways, bridges and rail systems.

“We can’t wait for this to be discussed next summer,” Mr. Rendell said Tuesday. “Congress and the president-elect must undertake major investments in our infrastructure.”

Mr. Rendell and others on Tuesday called for a two-pronged approach to transportation: More spending now, with an eye toward adding jobs for construction workers, engineers and others, and a much more expensive plan that would involve completely rethinking the way America views transportation.

Tuesday’s announcement by the governors comes just a day after House Speaker Nancy Pelosi took similar steps. On Monday she ordered House committee leaders to begin hearings on a so-called second bailout plan, and promised a renewed push for tens of billions of dollars in new spending on infrastructure.

The House passed a $61 billion stimulus package earlier this year, but it did not pass the Senate. With the nation either already in or fast headed toward a recession, Ms. Pelosi said Monday said she will try again, and this time include even more transportation spending.

“The benefit of the thinking that we’ve had in the week since we passed that [$700 billion] recovery package is that another recovery package is needed,” Ms. Pelosi said Monday. “It may have to be larger than the one we passed in the House in light of the events that have transpired since [then].”

A panel of leading economists, including former Treasury Secretary Lawrence Summer and Nobel Prize winner Joseph Stiglitz, met with Ms. Pelosi on Monday and endorsed her plan to pump transportation money into the economy. Mr. Stiglitz said the stimulus bill would have to be “be a comprehensive recovery program, not just based on trickle-down economics, not just giving money to the financial markets but going directly -- at least some of the money going directly to households, to meet infrastructure needs, to meet the variety of -- of challenges facing our society today.”

Some experts, however, say increased government spending on infrastructure is unlikely to improve the U.S. economy or prevent a recession.

“The short answer is no,” said Professor Mike Davis of the Cox School of Business at SMU in Dallas, when asked if billions in new spending on highways would shore up the economy. “The most obvious reason is that these projects take a long time to get up to speed, to identify the needs, to get the contracts in place, and to have the actual money spent. If you are looking to improve things between now and Christmas, I just don’t see that working. I have a hard time imagining that there is sort of a construction site with a big pad lock on it, and as soon as Congress votes to approve these things then we’ll see 1,000 new people at work and the heavy equipment moving.”

Will it work?

Both presidential candidates have also called for billion-dollar rescue plans for the economy, though they disagree over the role transportation spending should play.

Sen. Barack Obama, the Democratic nominee, has called for immediately spending $25 billion on improving the nation’s infrastructure, money that would be targeted to new highways, rail lines and meeting the system’s growing maintenance needs. Madhuri Kommareddi, a member of the Obama policy team, said the campaign calculates 1 million jobs would be saved or added by spending the $25 billion. “We’ve been certain to focus the plan on projects that are already in the pipeline, that are immediately ready to go.”

Pete K. Rahn, president of the American Association of State Highway and Transportation Officials, said states desperately need money to build more roads and highways, and said $25 billion would put a lot of people to work. Mr. Rahn, who is also Missouri’s transportation secretary, said a survey of state agencies earlier this year found that there were 3,000 such projects — costing $18 billion — ready for an immediate start, should funding be available. With winter coming on, he said that number would likely be smaller now. “But there is still a very large number of projects that would benefit from this spending immediately.”

Sen. John McCain, the Republican nominee, also supports a stimulus package, but his focus is on reducing Americans’ taxes, rather than spending more money on highway projects. His campaign declined an interview request Tuesday but issued a position paper that reiterates his opposition to funding earmarked transportation projects and demands that inter-city rail service be put off until federal rail initiatives can be made more efficient.

His $52.5 billion stimulus proposal would cut capital gains taxes in half for two years and temporarily remove taxes on unemployment benefits.

Mr. Davis said neither candidate’s stimulus approach is likely to have a real impact on the economy. Tax cuts — especially those like the rebate checks sent earlier this year — hardly ever bring about long-term economic improvements, he said, in part because just like new spending they take too long to work.

Instead, he said systemic fixes, like the $700 billion effort already approved by Congress that is aimed at restoring confidence on Wall Street and heating up a frozen credit market, are more likely to succeed.

In Austin, Texas Gov. Rick Perry applauded the idea of reducing taxes, but said trying to stave off a recession by spending more tax money is exactly the wrong idea.

“The government bail-out is a very slippery slope, and we will look back on this in a few years and say, ‘What were they thinking?' ” Mr. Perry said. “The government giving money back to us is just another way of raising taxes. That’s the reason that this whole government bailout was so ill-conceived. They have this idea that if we just shovel more of our own money back to the states, gosh they will be happy. Government spending is going to very little if anything to help our economy.”

Looking at long-term solutions

The long-term solutions offered this week by Mr. Rendell and Ms. Pelosi each call for increasing America’s transportation spending by tens of billions of dollars — and maybe much more — each year. Both presidential candidates have been quiet about making commitments to long-term spending goals, though Ms. Kommareddi said Tuesday that Sen. Obama backs more federal spending on both rail and highways.

But to Mr. Perry, those ideas are dead wrong. About the only thing he said he agrees with the Democratic proposal is their conclusion that the current system is broken.

“If they said that, and stopped there, I’d agree with them,” he said. “But one shoe doesn’t fit all. This is the classic problem with D.C. … : The idea that they ought to be sitting up there collecting our gas tax, and then peal whatever it is out for their bureaucratic largesse, and then send some of it to other states, and then give us the rest.”

He’d rather see the federal government send Texas back every penny its drivers pay in gas taxes and give it the flexibility to build roads as it sees fit.

But in calling for more spending, Mr. Rendell said states can’t fix the system alone.

“America’s highways, bridges, tunnels, and mass transit have fallen behind because the federal government is contributing only 25 percent of infrastructure funding and the rest is coming from financially strapped state and local governments,” he said.

By the time President Dwight Eisenhower left office in 1961, he said, the federal government was spending 12.5 percent of its nonmilitary spending on infrastructure, but it's spending just 2.5 percent now. “Washington needs to step up its commitment of resources.”

He said Mr. Perry’s approach — luring private investors to build toll roads — is one solution, and he agrees with the Texas governor that federal restrictions on tolling existing highways ought to be lifted. But he said even with those steps, Congress must spend more money or the states will never maintain the roads they have much less invest in rail and other projects they will need in the 21st Century.

Mr. Perry said he agrees to a point. He said the next Legislature will see him supporting a variety of measures aimed at increasing funding for highways and bridges, a departure from years past when he has pushed relentlessly for tolls.

“I am not one of these guys who says, ‘I did it right the first time and there is nothing to change,’ ” Mr. Perry said. “I wish I had the benefit of perfect hindsight, but I don’t.”

Come January, he said, he’ll support spending cuts to find as much as $600 million a year in new money for transportation. He’s not going to champion any tax increases, he said, though he also said he won’t veto legislation to index the state motor fuels tax to inflation.

“I think it is an appropriate debate to have,” he said about whether Texas should allow the gas tax rate grow each year to keep pace with inflation. “I am not going to block the debate, or if it is the will of the people, and of the legislature, I suspect I would go along with it.”

© 2008 The Dallas Morning News: www.dallasnews.com

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