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Federal Stimulus

Democrats Learning to Love the I-Word — But Will Words Bring Action?

The White House is re-centering its message around economic and fiscal concerns ahead of tomorrow's State of the Union address, with a new package of job-creation measures expected to vault to the top of the agenda and a three-year "spending freeze" pitched to deficit-wary conservative Democrats.

FreightRail_1.jpgInfrastructure: Democrats love it. But how will they fund it? (Photo: ShipDTS)

Yet despite data showing that transit stimulus spending's effect on employment was nearly twice as large as that of road projects, it's far from clear that the Obama administration's pivot to the economy will prove a boon to merit-based infrastructure investment.

One thing is clear: Democrats are finally catching on to broad public support for building more efficient and sustainable infrastructure.  As Robert Menendez (D-NJ), chief of the Senate majority's campaign committee, put it to CNN on Sunday (emphasis mine):

[The economy] is something that I expect the president to deal with in the Stateof the Union speech, and something we will deal with as we deal withthe jobs package that talks about ... helping to lookat some of the infrastructure of the country, so people can get to work right away ...

At the same time, White House adviser Valerie Jarrett was telling NBC:

We are investing in infrastructure,we are investing in public education so that our kids can compete goingforth into the next generation. We are investing in renewable energy,to reduce our dependence on foreign oil. These are all connected to theeconomy.

Of course, talking about a better built environment for the nation is one thing; delivering is a messier and far lengthier endeavor. Infrastructure encompasses more than just transportation networks, to be sure -- but looking at the specific challenges of federal transport funding, there remains but a small window for the Democrats to align their fondness for the I-word with the White House's austere new message on spending.

Part of the problem with federal transportation spending is that, in budget-wonk parlance, it manages to be both mandatory (set aside in a special trust fund replenished by the gas tax, not Congress) and discretionary (distributed every year according to obligation ceilings set by Congress).

So will transportation funds be hit by the White House's proposed "spending freeze," thus limiting the amount of available money for the U.S. DOT's newly revamped transit funding plan? The freeze would take effect based on funding levels in the 2011 White House budget, which is set for release next week and could well provide more money for sustainability efforts at the U.S. DOT.

Even if the U.S. DOT budget gets a boost before a freeze kicks in, however, that tricky highway trust fund (which also funds much of Washington's transit spending) remains short of cash. If Congress and the administration can resolve their ongoing stalemate over financing the next six-year transport bill before October, when the fiscal year ends and the freeze kicks in, federal funding would be on a more certain footing.

But if the next federal transport bill is delayed into 2011 or beyond, which remains a very real possibility, money will likely have to be transferred from the government's general fund into highway and transit accounts.

The size of such a transfer is tough to predict -- Senate legislation offered in July would have spent $22 billion to keep transportation accounts solvent for 18 months -- but Democrats would face strong resistance to borrowing the money for a highway trust fund rescue after diverting $15 billion from the Treasury over the past two years.

So it's easy to envision a scenario where another highway trust fund rescue requires cuts to other transport programs, putting federal investments in infrastructure on an even less sure footing than they are now.

And given the negative consequences of waiting too long to solve the current transportation funding crisis, Democrats and the Obama administration could make the tough decisions on taxes now, while backing up their rhetoric on infrastructure with more merit-based grants, or kick the can down the road again.

The predicament brings to mind House Speaker Nancy Pelosi's (D-CA) comments to Washington Post blogger Ezra Klein back in July: Washington, she said, is the "city of the perishable." Wait too long to act decisively on a difficult issue, and you risk losing the chance to address it at all.

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