Wednesday, January 26, 2011

State of the Union – What’s In It for the Construction Industry?

President Obama is a Chicago bred politician, and as such he knows road building contractors are some of the most generous political donors among business people. Yet, in his State of the Union speech, he only glanced briefly in their direction. And, while clean energy construction also got a brief nod, there was nothing specific in the speech for either construction industry sector to hang its hat on. Furthermore, events in the House of Representatives since the speech ended make any hope of significantly increased infrastructure spending legislation look bleaker than ever.

True, Obama did vaguely refer to a budget that will invest “especially [in] clean energy technology,” and proposed taking subsidy dollars from oil companies and using them to set “a new goal: by 2035, 80% of America’s electricity will come from clean energy sources.” Does this mean his plan is to raise oil and natural gas prices to levels which will make “clean” electricity economically competitive?

Obama proposed that the executive branch should seize control of the allocation of federal infrastructure funding from Congress by throwing down the gauntlet with this bold and impractical challenge: “If a bill comes to my desk with earmarks inside, I will veto it.” That should serve to bring federal expenditures for infrastructure construction to a screeching halt. Unless, of course, he means the earmarks will already be inserted into his proposed budget legislation.

During the middle of the address, Obama said a few things which sounded promising for the construction industry. “The third step in winning the future is rebuilding America.” He mentioned high speed rail – for which billions were appropriated in the stimulus package – and which is already meeting resistance from newly elected Republican governors in some of the states which won high speed rail stimulus grants. He promised to “put more Americans to work repairing crumbling roads and bridges.” However, three pages down the teleprompter, he also proposed to “freeze annual domestic spending for the next five years.”

In the tempest of House leadership changes, and the absence of detailed proposals from either side of the aisle, it is difficult to say what these remarks will translate into in terms of appropriations legislation, other than to predict, “not much.” The federal Highway Trust Fund reauthorization legislation is now in the hands of the House Transportation and Infrastructure Committee, which just held its first organizational meeting this morning under the leadership of Chairman John L. Mica of Florida and Highways and Transit Subcommittee Chairman John J. Duncan, Jr. of Tennessee. No one yet knows what is on the Committee’s agenda, or for that matter on the Obama administration’s agenda, by way of fulfilling Obama’s State of the Union promise that long term Highway Trust Fund reauthorization legislation will be “fully paid for, attract private investment, and pick projects based on what’s best for the economy,” other than Congressman Duncan’s statement that “Increasing the gas tax is not the solution to addressing our infrastructure needs.”

Yes, we knew that two years ago when the Democrats ruled the House. So far, neither side of the aisle has put forth a viable alternative to higher motor fuel taxes, however. Congressman Duncan’s subcommittee website says “We must eliminate unnecessary bureaucratic red tape so that infrastructure projects can be built in half the time and taxpayer funds can be spent more efficiently.” Are they talking about eliminating environmental impact reviews?

In a statement issued just this morning, Duncan announced that “Today the House of Representatives passed a resolution to roll back non-security spending to 2008 levels.” At that pace, no motor fuel tax increase would be required to replenish the Highway Trust Fund.

So, despite the rhetoric, or perhaps because of it, I can be confident of only one thing: there won’t be any significant increase in infrastructure funding at the federal level any time soon.
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