At the time of writing, US president Barack Obama was pushing congress to pass a new transportation bill before it was set to expire at the end of September. The bill provides funding for highway construction, bridge repair and public transport among other projects. Obama has warned that even a 10-day delay in passing the bill would lose the US nearly $1 billion in highway funding. “That is money we can never get back,” he said.
The previous bill had been for $286 billion and expired in 2009, but has been renewed in temporary tranches, delaying the passing of a more permanent resolution. Also expiring is the US tax on petrol, which is currently 18.4 cents and has not been raised since the early 1990s.
Improving infrastructure has obvious benefits for the automotive industry and the larger economy, not least improving the logistics efficiency of US manufacturing. But with the US government entrenched by partisan bickering between Democrats and Republicans, the country stands to lose not only a significant amount of stimulus and jobs, but also substantial infrastructure funding in the long term. It comes at a time when aging roads and bridges in many parts of the country are overburdened by traffic. US investment in new infrastructure now pales in comparison to that of China, for example.
Although both parties want to pass a bill, the issue is again over spending levels. There are several proposals being put forward in congress, including a bi-partisan proposal that would extend the transportation bill for two years at current levels of spending, at a cost of around $109 billion. The house bill, however, is for six years and $230 billion, a $56 billion cut from the previous bill.
A major part of the issue is the gasoline tax, which is supposed to fund highway costs but does not raise enough money, requiring government transfers. But the current climate in Washington would suggest that Republicans will resist any move to increase taxes or perhaps even to renew it–despite the gasoline tax being the main source of funding for highway investment and thus a means of avoiding an increase of the budget deficit. With Americans driving more fuel efficient cars, and regulations coming in place requiring carmakers to meet higher fuel standards (not to mention the potential for electric vehicles), there is a case for raising this tax or coming up with a new funding mechanism. The question is how bold the government will be.
