Friday, June 26, 2015

Transportation Bill Passed - But Where Does the Money Come From?

Highway Trust Fund Puzzle Continues
Shipping News Feature

US – The US Senate Environment and Public Works Committee has unanimously passed a six year surface transportation reauthorisation bill in an attempt to address the problems surrounding the Highway Trust Fund, something we have covered in some detail previously. This latest is good news in a sense that the Government can be seen as actively trying to help save the troubled fund, but really the bill only defers the problem to another government branch, as it seems to set out the distribution of the fund without outlining the much needed financing options.

For anyone that needs a reminder, many roads and bridges across the US are in a parlous state and the fund put in place to fix and update the infrastructure is on the verge on bankruptcy, only being held together by short-term refinancing patches, 34 so far, each of which has which only delayed the problem for a few months. The latest patch was bought in at the end of May and expires on July 31. Whilst acknowledging that there is a real issue with the Highway Trust Fund, Congress has yet to come up with a worthwhile solution, before an inevitable and catastrophic event will at some point occur, when of course it would be far too late, and we can expect the hand wringing and enquiry which will undoubtedly follow.

Senators Jim Inhofe (R-Oklahoma), Barbara Boxer (D-California), David Vitter (R-Louisiana) and Tom Carper (D-Delaware) all introduced the Developing a Reliable and Innovative Vision for the Economy (DRIVE) Act which calls for an investment of $275 billion over the next six years to fix the nation’s infrastructure shortfalls. Whilst the Senate pats itself on the back for passing the bill, the question that has been asked since the fund started declining remains, where are they going to get the money to pay for the necessary upgrades?

Having shifted the financing decision responsibility to the Senate Finance Committee and the House Ways and Means Committee, the Act will see increased funding levels starting from 2016 when over $40 billion will begin the six year series of increased investment ending in 2021 when it reaches over $45 billion. One recent report from the American Society of Civil Engineers said that the US needs to invest $3.7 trillion in infrastructure by 2020, and $1.7 trillion in transportation infrastructure alone, just to reach a condition in which it is fit for purpose.

Photo: A US bridge collapse due to the catastrophic failure of steel-reinforced concrete