Obama Discounts Standalone Highway Bill, Sees Infrastructure Waiting for Tax Reform

AASHTO Journal, 5 December 2014

President Obama told corporate executives in the Business Roundtable he thinks Congress cannot pass a standalone highway/transit bill due to lack of consensus on how to pay for it, but he sees a transportation measure possible as part of a larger deal on tax reform that generates a revenue stream for project investments.

In a lengthy Dec. 3 appearance that covered a wide range of economic and foreign policy issues, Obama said: “Infrastructure I think gets wrapped up in tax reform. The challenge for infrastructure… I think it’s the pay-fors, how do you pay for it.”

He said Republicans in Congress are “very sensitive, as you know, to anything that might be construed as a tax,” but added, “of course, it’s hard to pay for things if you don’t have some sort of revenue stream.”

Here is a White House transcript of his entire remarks to the business leaders.

Some believe that a tax reform package could generate a temporary windfall of business tax receipts by enticing U.S. corporations to repatriate their foreign profits home with a lower tax rate. The revenue could pay for four to six years of spending by the Highway Trust Fund and perhaps other transportation accounts.

“It’s hard for me to envision this Congress being able to vote on a big infrastructure bill on its own, because I don’t know where they would get the money for it,” the president said. “I’ve got some proposals, but I don’t think they’re likely to adopt them.”

Separately, on Dec. 4 a member of the House GOP leadership said a transportation bill would be a priority of GOP leaders in the new Congress, and that an outline on how to move forward is already being shared in the House and Senate.

Rep. Cathy McMorris Rodgers of Washington state, who chairs the House Republican Conference, made the remarks on the “Morning Joe” MSNBC show, The Hill newspaper reported. “As you think about building a healthy economy, we have a long list of important infrastructure needs in this country, and that is a priority,” she said.

To the Business Roundtable, Obama said he is also exploring ways to bring more private investment into infrastructure project spending, “but I do think that if we are successful with tax reform that may give us an avenue for a one-time big push on infrastructure.”

He said he will work with the top congressional Republicans — House Speaker John Boehner and incoming Senate Majority Leader Mitch McConnell, as well as Democratic leaders – on infrastructure and tax law changes. Obama said the tax overhaul will take time to assemble: “That’s probably a full six to nine months before we could really solidify something.”

At one point Fred Smith, chairman and CEO of package carrier FedEx, asked Obama why he does not work with Congress to get a transportation deal in the lame duck session this month, by building on bipartisan measures some lawmakers have introduced to increase motor fuel taxes. (In this video of the event, Smith’s question and Obama’s response begin at about 50 minutes in.)

Smith said the Business Roundtable would “echo the fact that our highways and bridges are deteriorating, and the lack of investment is creating congestion, which is retarding economic activity.”

If Congress does not push through a transportation bill right away, the FedEx chief said, the Highway Trust Fund could run out of money when current funding legislation runs out next May.

The Obama administration has never proposed raising fuel taxes, and outright opposed the idea during the first years of recession and weak recovery. The transportation plan it offered last year would fund programs through a tax repatriation windfall over four years.

Obama told Smith: “In fairness to members of Congress, votes on gas tax are really tough. Gas prices are one of those things that really bug people. When they go up, they’re greatly attuned to them. When they do down, they don’t go down enough. And so, historically, I think there’s been great hesitance.”

The president said he wanted to separate the short-term funding issues from the long-term ones of getting funding that covers years of transportation spending.

Fred Smith, chairman and CEO, FedEx

“I will engage with Speaker Boehner and McConnell to see what they think they can get done to make sure that we’re not running out of money” in the short run, Obama said. “Because we’ve got a whole bunch of construction projects that are in train right now that — set aside the stuff that we need to do — just keeping going on the stuff that is currently operating would be endangered if we don’t replenish it.”

As for a bigger funding package, Obama said: “The question is going to be, is there a formula long term for us to get a dedicated revenue source for funding the infrastructure that we need that is not so politically frightening to members of Congress that it’s reliable. The gas tax hasn’t been increased for 20 years. There’s a reason for that.”

He also said that amid the upcoming debate on taxes and infrastructure “It’s probably a good time for us to redesign and think through how do — what is a sustainable way for us on a regular basis to make the investments we need. And this may be something that we can introduce into the tax reform agenda. It may end up being too complicated and we got to do something separate, but we’ve got to figure this out. We are falling behind.”

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