[Joint House and Senate Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
S. Hrg. 112-263
MANUFACTURING IN THE USA: PAVING THE ROAD TO JOB CREATION
=======================================================================
HEARING
before the
JOINT ECONOMIC COMMITTEE
CONGRESS OF THE UNITED STATES
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
__________
NOVEMBER 16, 2011
__________
Printed for the use of the Joint Economic Committee
U.S. GOVERNMENT PRINTING OFFICE
71-697 WASHINGTON : 2012
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC
area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, Washington, DC
20402-0001
JOINT ECONOMIC COMMITTEE
[Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress]
SENATE HOUSE OF REPRESENTATIVES
Robert P. Casey, Jr., Pennsylvania, Kevin Brady, Texas, Vice Chairman
Chairman Michael C. Burgess, M.D., Texas
Jeff Bingaman, New Mexico John Campbell, California
Amy Klobuchar, Minnesota Sean P. Duffy, Wisconsin
Jim Webb, Virginia Justin Amash, Michigan
Mark R. Warner, Virginia Mick Mulvaney, South Carolina
Bernard Sanders, Vermont Maurice D. Hinchey, New York
Jim DeMint, South Carolina Carolyn B. Maloney, New York
Daniel Coats, Indiana Loretta Sanchez, California
Mike Lee, Utah Elijah E. Cummings, Maryland
Pat Toomey, Pennsylvania
William E. Hansen, Executive Director
Robert P. O'Quinn, Republican Staff Director
C O N T E N T S
----------
Opening Statements of Members
Hon. Robert P. Casey, Jr., Chairman, a U.S. Senator from
Pennsylvania................................................... 1
Hon. Kevin Brady, Vice Chairman, a U.S. Representative from Texas 3
Witnesses
Mr. Andrew Herrmann, President, American Society of Civil
Engineers, Washington, DC...................................... 6
Dr. Veronique de Rugy, Senior Research Fellow, Mercatus Center at
George Mason University, Arlington, VA......................... 8
Mr. Chris Edwards, Director of Tax Policy Studies, Cato
Institute, Washington, DC...................................... 9
Mr. Robert Puentes, Senior Fellow, Metropolitan Policy Program,
Brookings Institution, Washington, DC.......................... 12
Submissions for the Record
Prepared statement of Representative Kevin Brady................. 30
Prepared statement of Mr. Andrew Herrmann........................ 32
Prepared statement of Dr. Veronique de Rugy...................... 38
Prepared statement of Mr. Chris Edwards.......................... 44
Prepared statement of Mr. Robert Puentes......................... 54
Prepared statement of Representative Michael C. Burgess.......... 59
MANUFACTURING IN THE USA: PAVING THE ROAD TO JOB CREATION
----------
WEDNESDAY, NOVEMBER 16, 2011
Congress of the United States,
Joint Economic Committee,
Washington, DC.
The committee met, pursuant to call, at 2:07 p.m. in Room
216 of the Hart Senate Office Building, the Honorable Robert P.
Casey, Jr., Chairman, presiding.
Senators present: Casey and Klobuchar.
Representatives present: Brady, Burgess, Campbell,
Mulvaney, and Hinchey.
Staff present: Gail Cohen, Will Hansen, Colleen Healy,
Jesse Hervitz, Dan Neumann, Brian Phillips, Christina Forsberg,
and Jeff Schlagenhauf.
OPENING STATEMENT OF HON. ROBERT P. CASEY, JR., CHAIRMAN, A
U.S. SENATOR FROM PENNSYLVANIA
Chairman Casey. We will get started. The hearing will come
to order. I want to thank our witnesses. First, let me say an
apology for being late. We have House Members who are here.
They had a longer distance to travel and they were here on
time, so our Vice Chairman was leading that team.
I will present an opening statement, and then our Vice
Chairman Brady will as well, and then we will get to our
witnesses. But I am grateful to our witnesses for being here,
for your presence, your testimony and the experience and
scholarship that you bring to these issues.
Today's hearing is the fourth in a series by the Joint
Economic Committee that we have been holding, to determine the
best strategies for revitalizing manufacturing in the United
States of America. Previously, we looked at how trade policies
affect manufacturing, and the need for a comprehensive national
manufacturing strategy. We also looked at the importance of job
training and preparing our workers to compete in a global
economy.
With today's hearing, we will examine the positive impact
that infrastructure investment would have on economic growth
and job creation in the manufacturing sector. When the economy
is operating below full capacity, investing in infrastructure
boosts aggregate demand and paves the way for long-term
economic growth.
In the immediate term, I should say, rebuilding roads and
bridges and improving and modernizing our ports and airports
will create needed construction and manufacturing jobs. These
sectors, which were hardest-hit in the Great Recession, are
also the ones that most positively are impacted by an
infrastructure investment.
In the longer term, improving our infrastructure will help
strengthen our Nation's competitiveness, by enabling producers
to move their products to market more quickly and at less cost.
Since manufacturers rely upon roads, rails and ports to
transport their goods domestically, and to export abroad,
infrastructure improvements will have a significant, positive
impact on U.S. manufacturers.
The U.S. has underinvested in infrastructure. That's an
understatement. I'm not sure many people would contest that.
The United States spends just two percent, just two percent of
gross domestic product on infrastructure, half of what we spent
in the year 1960. We also invest far less than our
international competitors. China spends nine percent of GDP,
not two percent, nine percent of GDP on infrastructure, and
Europe is at five percent.
The quality of U.S. infrastructure is poor, ranking 23rd in
the world behind countries such as Spain and Chile. In fact,
the American Society of Civil Engineers has identified up to $2
trillion, that's with a `T', $2 trillion of infrastructure
investments needed to get back on equal footing with
competitors abroad. I don't think there is anyone on this
Committee who would say we can afford $2 trillion today. But I
would also assert that we cannot afford not to begin to invest
in infrastructure, and we certainly cannot afford to do
nothing.
While private sector funding on infrastructure projects is
across the board, there have been many worthy projects that
simply won't deliver the financial return required by the
private sector, but will deliver enormous benefits to the
public and should go forward.
The role for the Federal Government is even greater today
than is typically the case. Normally, state and local
governments shoulder about three-quarters of the cost of
infrastructure projects. But state and local governments are
continuing to feel the effects of the Great Recession,
contending with reduced revenues and increased spending on
other services.
There is a great deal of research showing that
infrastructure investments are highly efficient in the use of
federal funding. The Congressional Budget Office cites
infrastructure spending as one of the most effective policies
for boosting both growth and employment. Moody's Analytics
estimates that every dollar of infrastructure spending leads to
$1.44 of increases in GDP, the usual bang for the buck
analysis. You spend a buck, what do you get in return?
Infrastructure. Spend a buck, you get a buck-44 in return.
The Treasury Department and the Council of Economic
Advisers analysis found that 61 percent of jobs created by
infrastructure investment would be in construction, and 12
percent would be in manufacturing. So more infrastructure
investments are needed to boost demand, put skilled
construction and manufacturing workers back to work, and ensure
that U.S. companies have the physical infrastructure needed to
compete against international competitors.
Just by way of example, in my home State of Pennsylvania,
the Delaware River Deepening Project is the kind of
infrastructure project that we should fund. By deepening the
main channel of the Delaware River, providing access to the
Port of Philadelphia for larger vessels, we can bring down
transportation costs for business, increase productivity, boost
exports and increase jobs in the region.
In addition to making U.S. products more competitive around
the globe, this project would create thousands of construction
jobs immediately, and lead to more than 1,000 long term jobs
through the increased activity at the Port of Philadelphia. I'm
sure other members could cite projects in their own states and
their own districts.
Other traditional infrastructure repairs are also badly
needed. More than a quarter of the bridges in Pennsylvania are
structurally deficient, with a staggering 23 million vehicles
passing over a deficient bridge in a state like ours each and
every day.
Nationwide, there are more than 69,000 bridges in need of
repair--69,000. To delay rebuilding our rails, roads and
bridges would be short-sighted, costing our economy jobs in the
short run and eroding our competitive position in the long
term. Unfortunately, that is precisely what the Senate did
earlier this month, when on party lines it voted down
legislation that would have invested in our Nation's
infrastructure, by creating an Infrastructure Bank, in addition
to other provisions in the bill.
We must figure out a bipartisan path forward in the months
ahead on infrastructure, not to mention so many other
priorities. Today, we are fortunate to have a distinguished
panel of experts who have deep knowledge of infrastructure
investments, thoughtful ideas on where the U.S. should invest,
and useful analysis of how the U.S. competes and how we compare
to our competitors across the globe.
So I want to thank our witnesses. We are going to get to
you in a moment, I look forward to your testimony, but I would
turn the microphone now to Vice Chairman Brady.
OPENING STATEMENT OF HON. KEVIN BRADY, VICE CHAIRMAN, A U.S.
REPRESENTATIVE FROM TEXAS
Vice Chairman Brady. Thank you, Chairman Casey, for
convening this important hearing. I want to welcome our
witnesses as well. A good infrastructure is vitally important
to the U.S. economy, providing Americans with millions of miles
of roads, hundreds of thousands of bridges, tens of thousands
of airports, dams, waterways and transit lines, and hundreds of
train stations and ports.
Pro-growth policies such as low taxes, balanced regulation
and free market innovations drive the need for additional
infrastructure in America. As a former local Chamber of
Commerce executive, I can attest to the need for
infrastructure, as a critical precursor to spark economic
development and attract businesses in communities large and
small across America.
Though America's infrastructure remains among the most
advanced in the world, the American Society of Civil Engineers
gave our infrastructure a letter grade D, highlighting we have
a long way to go until we can meet the current and future
infrastructure needs of our growing country.
The manufacturing sector is a critical input in
infrastructure, with the provision of raw materials, industrial
equipment, and the manufacturing sector is the beneficiary. It
relies on the Nation's infrastructure to transport goods to
compete in the global economy. In fact, the manufacturing
sectors open up the prospect for major energy infrastructure
development.
An excellent opportunity for long-term economic growth
exists today in the form of the Keystone XL pipeline, from
Alberta to Texas, which would result in at least 20,000 new
jobs affiliated with the pipeline. Long-term investment in
infrastructure will help American manufacturing, including
energy manufacturing, remain internationally competitive. Mr.
President, I hope you would stop delaying these needed 20,000
American jobs.
No one disputes the value of good infrastructure. However,
planning and building infrastructure takes years, sometimes
decades. Higher infrastructure spending cannot create a
significant number of jobs in the near term. President Obama
himself remarked months ago, ``shovel-ready was not as shovel
ready as we expected.''
According to the Federal Highway Administration, the
federal project delivery process can take up to 15 years, from
planning through construction. Environmental regulations and
constraints on federal funding can extend this time line even
farther, resulting in costly delays and routine cost overruns.
The current system of federal infrastructure spending is
inefficient. U.S. taxpayers are not getting good value for
their dollars that they are currently spending on
infrastructure. Research over the past decade indicates that
the growth benefits from federal infrastructure spending have
been extremely low. The current system of federal
infrastructure spending is broken, and must be fixed to make
smart investments in good infrastructure projects.
As an example, the GAO reviewed the Department of
Transportation's system of 6,000 employees administering over
100 separate surface transportation programs, with separate
funding streams for highway, transit, rail and safety
functions. The GAO determined this system was extremely
fragmented, and lacked accountability, impeding effective
decision-making and limiting the ability to provide solutions
to complex challenges.
Analysis by the National Surface Transportation Policy and
Revenue Committee found the project that should cost $500
million would actually take 14 years to complete and cost twice
as much, due to the impact of delays and inflation. Examples
already abound at the state level of diverted funds originally
allocated to infrastructure, going to other budget items
suspended or altogether forfeited.
All too frequently infrastructure funding fails to reach
high-priority projects, diverted instead to projects with
little or no real benefit. Federal regulations, such as project
labor agreements, high road contracting, Buy American
provisions and the Davis-Bacon Act have unnecessarily increased
the cost and lengthened the completion time of infrastructure
projects.
For example, the Davis-Bacon Act's prevailing wage
requirements have led contractors to pay an average of 22
percent above the market wage rates, and have bogged down
contractors with extra paperwork. An environmental impact
statement alone can take up to two years to complete. Major
infrastructure projects often require the approval of other
federal agencies, such as the U.S. Fish and Wildlife Service,
the Advisory Council on Historic Preservation and the U.S. Army
Corps of Engineers.
For the good of manufacturing, infrastructure, and American
workers, federal regulators must consider how both proposed new
rules and the cumulative burden of existing rules, affect the
ability of American businesses to create jobs at home by
selling in global markets. Federal regulators must also begin
to perform retrospective analysis, to determine if existing
regulations are meeting their goals in cost-effective ways.
Congress should make it easier for the private sector to
invest in transportation infrastructure, reducing the stress on
already cash-strapped federal resources. Major economies
worldwide have demonstrated success in partially and fully
privatized roads, water and sewage systems, seaports and
airports. America is behind the times when it comes to
involving private capital in infrastructure development.
The United States is capable of keeping up with other
countries and excelling as the leader in infrastructure
development. We strive to achieve an ``A'' in infrastructure,
by addressing the systemic problems with our current means of
funding infrastructure, in conjunction with reform of
burdensome regulations that impede the ability, both public and
private provisions of infrastructure.
Mr. Chairman, thank you and I look forward to the witness'
testimony.
[The prepared statement of Representative Brady appears in
the Submissions for the Record on page 30.]
Chairman Casey. Thank you, Vice Chairman Brady. I will
provide a brief introduction of our witnesses, and then we will
get right to their testimony. We do have a distinguished panel.
First of all, I would like to introduce Mr. Andrew Herrmann, a
principal with Hardesty and Hanover, LLP and president of the
American Society of Civil Engineers. Mr. Herrmann's experience
includes design, inspection, rehabilitation, and construction,
along with managing some of the firm's major bridge projects.
He is a registered professional engineer in 29 states and
Ontario, and is a resident of Pittsburgh, Pennsylvania. That,
of course, is a good helper for you here today. We are grateful
you are here. Thank you so much. The Vice Chairman knows that
we invite Pennsylvanians once in a while. We get some Texans
too.
Next, we have Dr. Veronica de Rugy, and she is the senior
research fellow at the Mercatus Center at George Mason
University. She was previously a resident fellow at the
American Enterprise Institute, a policy analyst at the Cato
Institute, and a research fellow at the Atlas Economic Research
Foundation.
Her primary research interests include the federal budget,
homeland security, taxation, tax competition and financial
privacy issues. Doctor, thank you for being here. That is quite
a lineup of tough issues. Thank you.
Next, Mr. Chris Edwards is the Director of Tax Policy
Studies at Cato. He is an expert on federal and state tax and
budget issues. Before joining Cato, Mr. Edwards was a senior
economist on the Congressional Joint Economic Committee, a
manager with PriceWaterhouseCoopers, and an economist with the
Tax Foundation. Thank you very much, Mr. Edwards, for being
here, and I guess I should say welcome back.
Mr. Robert Puentes is a fellow with the Brookings
Institution, Metropolitan Policy Program, where he also directs
the program's Metropolitan Infrastructure Initiative. His work
focus is on the broad array of policies and issues related to
metropolitan growth and development.
He is an expert on transportation and infrastructure, urban
planning, growth management, suburban issues and housing. He is
also an affiliated professor with the Georgetown University's
Public Policy Institute. Mr. Puentes, thank you for being here.
So we will start with Mr. Herrmann and we will go from my
left to right. Thank you very much. Oh, and I should say before
you start, if you have a longer statement, it will be made part
of the record, and if you could try to keep the summary of your
remarks or any comments you make to within a five minute time
period. Thank you.
STATEMENT OF MR. ANDREW HERRMANN, PRESIDENT, AMERICAN SOCIETY
OF CIVIL ENGINEERS, WASHINGTON, DC
Mr. Herrmann. Thank you. Mr. Chairman, Members of the
Committee, my name is Andrew Herrmann, and I am the president
of the American Society of Civil Engineers. It is an honor for
me to appear before this Committee to discuss the critical link
between our Nation's infrastructure and the Nation's economic
competitiveness, specifically as it relates to the vital
American manufacturing sector.
ASCE's 2009 report card for America's infrastructure gave
an overall grade of D for 15 of the Nation's essential
infrastructure categories, and estimated that a total of $2.2
trillion would be needed to bring these categories into a state
of good repair. More specifically, the report card assessed
that the Nation's roads should receive a grade of D minus, its
bridges a C, and transit a D.
If the Nation continues to underinvest in infrastructure
and ignores this backlog until systems fail, we'll incur even
greater costs and risk public safety. Money invested in
essential public works can create jobs, provide for economic
growth and ensure public safety through a modern, well-
engineered national infrastructure.
For example, the Nation's transportation infrastructure
systems have an annual output of $120 billion in construction
work, while also contributing $244 billion in total economic
activity to the Nation's gross domestic product.
These economic benefits translate into real jobs as well.
The Federal Highway Administration estimates that every $1
billion invested in the Nation's highways supports almost
28,000 jobs, including over 9,000 onsite construction jobs,
over 4,000 jobs in supplier industries, and nearly 14,000 jobs
throughout the rest of the economy.
Equally as important as infrastructure's job creation
potential are the economic benefits to a region's long-term
growth and productivity. This past July, ASCE released the
first in a series of economic studies, which measured the
impacts to the economy in 2020 and 2040, if the Nation
maintains just current levels of surface transportation
investments.
Other pending studies, which will be coming out as the year
progresses, will address water and waste water, energy
transmission and air and marine ports. The present study,
entitled Failure to Act found that if investments in
transportation are not made in conjunction with significant
policy reforms, families will have a lower standard of living,
businesses will be paying more and producing less, and our
Nation will continue to lose ground in the global economy.
The results show that the Nation's deteriorating surface
transportation will cost the American economy more than 876,000
jobs, and suppress the growth of the Nation's GDP by almost
$900 billion in 2020. The study results also estimate that more
than 100,000 manufacturing jobs will be lost by 2020.
Failure to Act also assesses how a failing infrastructure
will drive up the cost for businesses by adding $430 billion to
transportation costs in the next decade. It will cost firms
more to ship finished goods and needed raw materials will cost
more due to increased transportation costs.
Lastly, the report shows that productivity will fall, with
businesses underperforming by $240 billion over the next
decade. As a result, U.S. exports will fall by $28 billion in
key sectors. In particular, 10 sectors of the U.S. economy will
account for more than half of this unprecedented loss in export
value--among them, key manufacturing sectors, including
communications equipment, medical devices, and machinery.
In contrast, the study from the Alliance for American
Manufacturing shows that roughly 18,000 new manufacturing jobs
are created for every $1 billion in new infrastructure
spending. These jobs will be created in fabricated metals,
concrete, cement, glass, rubber, plastic, steel and wood
product industries.
Furthermore, that same study shows that using American-made
materials for these infrastructure products yields a total of
77,000 additional jobs, based on investment of $148 billion a
year. By making infrastructure investments now, the Nation can
grow the economy. Failure to Act estimates that in order to
bring the Nation's surface transportation up to a grade of B
from its D, policy makers would need to invest approximately
$1.7 trillion between now and 2020 in the Nation's highways and
transit systems.
The U.S. is currently on track to only spend a portion of
that, a projected $877 billion during the same time frame.
However, by making these investments in infrastructure at this
critical time, the Nation could protect nearly 1.1 million
jobs, relieve congestion and grow the economy.
ASCE looks forward to working with Congress as it develops
legislation which brings the Nation's infrastructure into the
21st century. For instance, by updating, maintaining and
building our roads, bridges and transit systems, the Nation can
create jobs in both the public and private sector, while
fostering and growing manufacturing in the United States.
Therefore, the first step towards a modernized
transportation system must include passing a multi-year surface
transportation authorization at or above the current levels of
investment, followed by legislation funding other critical
infrastructure needs.
Thank you. I would be happy to answer any questions.
[The prepared statement of Mr. Andrew Herrmann appears in
the Submissions for the Record on page 32.]
Chairman Casey. Thanks very much. Dr. de Rugy.
STATEMENT OF DR. VERONIQUE de RUGY, SENIOR RESEARCH FELLOW,
MERCATUS CENTER AT GEORGE MASON UNIVERSITY, ARLINGTON, VA
Dr. de Rugy. Good afternoon, Chairman Casey, Vice Chairman
Brady and members of the Committee. It is a privilege to be
here today to discuss the important topic of government-funded
infrastructure spending and economic growth. My name is
Veronique de Rugy. I am a senior research fellow at the
Mercatus Center at George Mason University, where I study
budget and tax issue.
In my written testimony, I make three points. First,
infrastructure spending is a particularly bad way to stimulate
the economy. Second, while no one disputes the value of good
infrastructure, public work projects typically suffer from
massive cost overruns, and hence rarely make for good
investments.
Third, the Federal Government shouldn't be in the business
of overseeing the construction of infrastructure. Privatization
and state government public-private partnership are better
alternative. In my oral testimony, however, I would like to
focus on the misconception that infrastructure spending can
create jobs. This morning on NPR, Jerry Bernstein, a former
economist at the Council of Economic Advisers, explained that
Keynesian economics amounts to the government doing all it can
to foster job creation.
Bernstein then described the President's America Jobs Act,
which includes $60 billion for infrastructure spending, as
precisely the right way to help grow the economy and create
jobs. Unfortunately, the evidence suggests otherwise. My
colleague Matt Mitchell and I just finished a research project
that looks specifically at this question, and here is what we
find.
First, there is no consensus among economists about the
ability of stimulus to boost the economy, and there's no
consensus that this is actually the number. Moreover, the
studies that find that such spending is effective assume
conditions that are not found in the U.S. right now, such as
low debt level. We don't have this right now. Fixed exchange
rates, we certainly don't have this right now, and lower levels
of government spending. We don't have this right now.
Second, the greatest problem with infrastructure spending
as stimulus is the way it's implemented. In a perfect Keynesian
world, stimulus spending needs to be timely, targeted and
temporary. Infrastructure spending fails to satisfy these
criteria. Infrastructure spending is not timely. Even when the
money is available, it can be months, if not years before it is
spent. It is because infrastructure projects involving
planning, bidding, contracting, construction and evaluation.
Second, the only thing harder than getting the money out
the door promptly is properly targeting spending for
stimulative effect. The idea is to give the money a jolt, the
economy a jolt by employing idle resources, firm and equipment,
while data from recovery dug up showed that the stimulus money
in the most recent bill, in general, and infrastructure funds
in particular, wasn't targeted to those areas with the highest
rate of unemployment.
However, there is also evidence that even properly targeted
infrastructure spending would fail to stimulate the economy.
Many of the areas hardest hit by the recession are in decline,
because they have been producing goods and services that are
not and may never be in great demand. Building or improving the
roads and other infrastructure in these areas won't change the
structural factors behind their decline.
Finally, infrastructure spending isn't temporary. Even in
Keynesian models, stimulus is only effective as a short-run
measure. In fact, Keynesians also call for surpluses during an
upswing. In reality, however, the political process prefers to
implement the first Keynesian prescription, deficit, but not
the second one, surpluses to pay off the debt.
The inevitable result is a persistent deficit that year-in
and year-out, adds to the National debt. This is important
because as former Presidential economic advisor Lawrence
Summers has argued, fiscal stimulus ``can be counterproductive
if it is not timely targeted and temporary.'' As I've
explained, infrastructure spending simply does not meet those
criteria.
Now even if we could somehow do a better job at
implementing the spending, other factor would get in the way of
job creation, things like the prevailing wage requirements,
because they often impose financial costs through increased
wage for construction project.
According to economists Garrett Jones and Dan Rothschild,
in the case of the last stimulus, this increasing cost may have
prevented the creation of 55,000 jobs. In their words, the
difference between the market wage and the required Davis-Bacon
wage represent, from a Keynesian perspective, a lost
opportunity for job creation.
So basically, if you are a Keynesian economist, you really
want to do away with prevailing wage requirement. To conclude,
economists have long-recognized the value of infrastructure,
roads, bridges, airports or waterways are the conduit through
which goods are exchanged. In many circumstances, private firms
should be the one providing this infrastructure. In other
cases, there may be a role for public provision at the local
level.
But whatever its merits, infrastructure spending won't
provide much of a stimulus, particularly not the sustainable
job the Nation needs. In fact, it may even make it worse. Thank
you.
[The prepared statement of Dr. Veronique de Rugy appears in
the Submissions for the Record on page 38.]
Chairman Casey. Thank you, Doctor. Mr. Edwards.
STATEMENT OF MR. CHRIS EDWARDS, DIRECTOR OF TAX POLICY STUDIES,
CATO INSTITUTE, WASHINGTON, DC
Mr. Edwards. Thank you very much, Chairman Casey, for
having me testify today. In the description of today's hearing,
the Committee asked how infrastructure can help promote jobs
growth in manufacturing. The short answer to that is that we
can spur growth in jobs and manufacturing by making
infrastructure spending as efficient as possible.
Infrastructure spending should go to the highest value
projects, and it should be constructed and maintained in the
most efficient manner. In my view, we can do that by reducing
the federal role in infrastructure, to increase the efficiency
of our investment.
Let's take a look at the overall data. Most infrastructure
spending in the United States is by the private sector.
Department of Commerce data shows that private sector
infrastructure spending is more than four times greater than
government infrastructure spending by all levels of government
in the United States, about $1.7 trillion a year, to about $400
billion in the government sector. So my takeaway from that is
the first thing we should do is remove hurdles to private
sector infrastructure investment.
The second point I would make, and unfortunately it
contradicts something you said, Senator Casey. If you look at
OECD data, they've got a new report out on infrastructure. It
shows that U.S. government infrastructure spending is about the
same share of the economy as the average in the OECD, about 3.5
percent of GDP. So I'm happy to compare notes with your staff
on that. But I don't think we're underinvesting compared to
other countries.
Most of looking just at the Federal Government, most
federal infrastructure spending, in my view, is really properly
state, local and private sort of activities. Our urban transit
systems, highways, community development and that sort of
stuff. The biggest problem I see with federal involvement in
infrastructure spending is that the Federal Government makes
mistakes, and it replicates those mistakes across the country.
So you can look historically at something like the huge
federal involvement in public housing construction during the
mid-20th century. It was a disaster. The Federal Government
built these massive high-rise public housing structures in
dozens of cities across the country. Everyone agrees now it was
a disaster.
The problem is that because of federal involvement, every
city made that same mistake. You can see the same sort of thing
going on now with high speed rail. If California, in my view,
wants to spend its own money, its own taxpayer money to finance
its own high speed rail system, great. I think it's a bit of an
economic boondoggle. But the problem with federal involvement
is it takes money and induces states to make that same mistake
over and over.
The states, in my view, should be laboratories of democracy
and laboratories of innovation and infrastructure, and a big
exciting thing in the area of infrastructure, as Veronique
mentioned, is public-private partnerships and privatization.
This has swept the world. Unfortunately, the United States is a
laggard in this, but there's all kinds of exciting projects
being done even in the United States.
I'll point to one, which I think is very interesting. Down
in Chesapeake, Virginia, an engineering company, FIGG
engineering, is building a $100 million bridge across the
Elizabeth River down there. The old bridge had run out of its
useful life. This private company came to the city and said,
you know, we want to build a new bridge. It's completely owned
and financed, $100 million project, and looking on the Web site
it's really a beautiful project.
So it's complete privatization. It seems to me we ought to
be doing that sort of thing where we can. The OECD notes that
the United States lags far behind Australia, Canada and other
countries on privatization and PPPs for roads and bridges and
that sort of stuff. There's an infrastructure magazine called
Public Works Financing that looks at these PPP and
privatization projects.
Of the 40 biggest companies in the world doing this sort of
privatization for infrastructure, only two of the 40 are
American, which I think is really unfortunate, and the United
States has less of these sort of privatized infrastructure
projects even than Canada, which has a population only one-
tenth of ours.
One big advantage, it seems to me, of privatizing the
infrastructure is that infrastructure will get a more stable
financing source. If you look at our air traffic control system
in this country, it's really--it has a very unstable financing.
Congress keeps fighting over the level of financing for air
traffic control, which is of course a crucial thing.
I would suggest Canada as a model here. Canada privatized
its air traffic control system 15 years ago. It's a self-
funded, non-profit corporation. It's got government and labor
on the board of directors. It works extremely well. It's won
international awards, and the funding source is stable, because
they don't rely on government subsidies.
The Brookings Institution actually has a very good new
report out on PPP, privatization of infrastructure, which I
would recommend your staff take a look at. So to conclude, the
Committee asked how can infrastructure help U.S. manufacturing,
and how can it help us be competitive in the global economy?
That is a crucial question. You know, I am very concerned
when our manufacturing is getting hit from around the world,
when there are things we could be doing to make our
manufacturing more competitive. I think privatizing
infrastructure is one way to go here. You mentioned the World
Economic Forum rankings on U.S. competitiveness.
To give you one example, the World Economic Forum puts U.S.
and American seaports 23rd in the world, which is about right.
The Maritime Administration, MARAD, has the same sort of
assessment of U.S. seaports. Well U.S. seaports are almost all
owned by state and local governments. There are, by contrast,
privatized seaports around the world, which do very well in
Britain and Hong Kong and other places, and indeed, the two
highest, the first and third highest-ranked seaports in the
world, according to the World Economic Forum, are in Singapore
and Hong Kong, and those seaports are completely private.
So I think we can get quality infrastructure in the private
sector. Governments can't afford infrastructure much anymore
because of the giant deficits they're running.
So let's look at these experiments going on around the
world, and see what we can adopt here in the United States.
Thank you.
[The prepared statement of Mr. Chris Edwards appears in the
Submissions for the Record on page 44.]
Chairman Casey. Thanks, Mr. Edwards. Mr. Puentes.
STATEMENT OF MR. ROBERT PUENTES, SENIOR FELLOW, METROPOLITAN
POLICY PROGRAM, BROOKINGS INSTITUTION, WASHINGTON, DC
Mr. Puentes. Thank you very much, Chairman Casey, Vice
Chairman Brady and Members of the Committee. I am pleased to be
here today. I very much appreciate the invitation.
Throughout most of our Nation's history, I think we have
always had a clear understanding of the role of strategic
investments in our physical infrastructure in advancing the
American economy.
But the conversation, I think, has new meaning today,
because the understanding now seems to be that we are too
broke, both financially and in spirit, to make similar
investments in our Nation's economic future, or to beset by
various political, regulatory or institutional barriers, to get
anything really important done.
I don't think we should let this be the case. Today, we
really need targeted and smart ways to drive economic growth,
create jobs, restore fiscal health and regain our lead in
manufacturing, innovation and productivity.
One critical economic imperative is to boost exports and
manufacturing, as we talked about, and to fully connect
American firms and metropolitan areas to the global
marketplace, particularly with nations that are rapidly
urbanizing and industrializing.
Today, exports in the U.S. make up only 13 percent of our
GDP, compared to 30 percent in China and in Canada, and higher
levels in India and Japan. We need to reorient our economy to
take advantage of this new, rising global demand. But doing so
not only means opening up foreign markets to American goods and
services; we also need to build and retool the next generation
of advanced production facilities, and the underlying
infrastructure to move goods, services and ideas quickly and
efficiently by air, land and sea.
But to do that, we need systemic reform. That means fixing
the infrastructure and the institutional partnerships that
exist today, as well as the process for choosing those
infrastructure projects. We need to address a range of
overlapping financial, regulatory and institutional hurdles
that currently stand in the way of these investments, and
understanding these barriers and where reform can really be
achieved should help us craft policy solutions, to streamline
processes and invest in transformative projects that truly can
catalyze economic growth.
There are several critical areas that demand attention.
First, in collaboration with states and metropolitan areas, the
Federal Government should develop a comprehensive policy for
national goods movement. This process should build off the bill
that was just passed by the Environment and Public Works
Committee, to conceive a national freight program, and
prioritize corridors and projects on a cost-benefit analysis
that includes all of these modes: air, rail, sea and road.
Today, we are one of the only industrialized countries on
the planet that takes a compartmentalized rather than holistic
approach to goods movement. Programs like the Department of
Transportation's TIGER Program have been helpful in this
regard, but there is clearly much more to do.
Another idea is for the Federal Government to help states
reform their own state infrastructure banks. The problem is
that rather than bringing a tough, merit-based approach to
funding and project selection, many state infrastructure banks
are simply used to pay for projects selected through a state's
wish list of infrastructure improvements, without filtering
these projects through a competitive application process.
A better approach, we think, would be for states to use
their infrastructure banks more strategically, such as to
directly support exports, manufacturing and the things we're
talking about today.
On a national level, the creation of an infrastructure bank
would leverage federal dollars for large projects whose impact
is of national significance, like border crossings and ports
that are integral to our National trade strategy. This is
especially crucial for projects that cross multiple state
borders, and require funding and coordination across a number
of public agencies, and from the private sector in particular.
Recent polling shows strong willingness for public sector
agencies to consider private investments, rather than
increasing taxes, cutting budgets or taking on more debt. It's
not a silver bullet, but while half of the states have enacted
enabling statutes for public-private partnerships, the wide
differences between them makes it time-consuming and costly for
private partners wishing to engage in PPPs in multiple states
to handle the different procurement and management processes.
For this reason, we think the Federal Government should
play a helpful role with states and metropolitan partners, by
helping them think through the potential costs and tradeoff of
these deals, as well as assessing true significant national
interests. Over 25 countries have been implementing specialized
units throughout various government agencies to assist with the
expanding opportunities for public-private partnerships.
These units fulfill different functions such as quality
control, policy coordination, and project promotion. We think
that in the U.S., the primary purpose would be to provide
technical non-binding information, assistance and advice to
states and metropolitan governments.
Entities like PPP units or an infrastructure bank would
ideally help infrastructure investments, by leveraging existing
funding and finance sources. These approaches epitomize a new
21st century style self-help that the National government
should fully recognize and embrace. Mr. Chairman, we know that
our global competitors in both mature and emerging markets
alike are in the process of making these kinds of investments,
and in doing so, they're supporting their national economies.
These investments at their core are the physical means to
an economy shaping end, rather than the ends in and of
themselves. Thank you again for the invitation to appear before
you today.
[The prepared statement of Mr. Robert Puentes appears in
the Submissions for the Record on page 54.]
Chairman Casey. Thank you very much. We will start our
round of questions. I will start with Mr. Herrmann, and this is
obviously a Pennsylvania-specific question, which is okay once
in a while, right?
We have talked a little bit today about the Port of
Philadelphia. We have in Pittsburgh, as you know better than I,
I think, based upon your expertise, we have an inland port in
Pittsburgh, and it's the reason or the source of a lot of jobs
in Pittsburgh.
We are told that 38 million tons of cargo go through that
port every year. It has an $800 million benefit to the region,
and as I said, a huge job impact, 45,000 jobs in the
southwestern corner of our state.
One of the problems they have is in the lock and dam
system, they have some basic, fundamental infrastructure needs
or deficiencies that we're all trying to work on together. Some
of the Recovery Act money was helpful, but I mean right now, it
has come down to the Army Corps, and everyone here knows what
good work that they do, but the Army Corps of Engineers, we are
trying to construct, and have used some of the Recovery Act
dollars to do this, river and guard walls, something that
fundamental, just guard walls for the lock and dam system.
I wanted to get your assessment of that, of that kind of
investment, and then in a larger sense, the impact of that kind
of an infrastructure investment, not only in a community like
southwestern Pennsylvania, but more broadly. Can you speak to
that?
Mr. Herrmann. Sure, yes. It's funny. If we had waited a
couple of months, we would have had another economic study on
water ports coming out, probably the beginning of next year.
But just to talk to that right now, the number of ports on the
East Coast have to be dredged, they have to get wider, they
have to, in some instances, raise bridges. Because of the
improvements to the Panama Canal, there are going to be larger
vessels coming through the Canal and the Northeast on this side
is going to be at an economic disadvantage if we don't improve
our ports.
So to stay competitive in the world market, and to be able
to take that shipping and not have that shipping go to other
countries, we're going to have to improve our ports. The rails,
the side walls, that's all part of improving the ports, the
levies, the dams. That is just part of it. So yes, we're going
to have to do that improvements, so that we can stay
competitive, so that the shipping actually comes to the U.S.
and doesn't go to other countries.
Chairman Casey. I wanted to pick up on some of the
discussion here. Obviously we have, based upon testimony from
here and by our witnesses, there is a debate about how to do
this. I think there's a recognition that we need to figure out
some way forward on investing in infrastructure, that it is a
priority, no matter how you arrive at the solution, that
government can play a role, obviously, the private sector as
well.
We have a number of parts of our economy that are fortified
by and strengthened by public-private partnerships. We see that
all the time in economic development. Infrastructure is another
example of that. But how do we do that? In other words, if we
agree on the goal, how do we get there in this kind of an
economy, where there are limitations on what the Federal
Government can do? State governments have very little in the
way of resources to dedicate to this. How do you get there?
One of the reasons why I was so, not just supportive of,
but encouraged by the bipartisan agreement in the Senate to
form an infrastructure bank--a $10 billion investment which
would leverage many, many multiples of that initial investment.
We had a Democrat from Massachusetts, Senator Kerry and
Senator Hutchison from the State of Texas. So you had Democrats
and Republicans from different parts of the country agreeing on
at least one idea, the infrastructure bank. It didn't pass. So
I guess I'd ask, and I know it's a tough question. We're low on
time, but you can amplify it later. How do we move forward on
this priority that we all agree is important? How do we move
forward, not only philosophically, but how do we move forward
within the limitations of our fiscal constraints, our political
gridlock that we often see here in Washington, as well as the
limitations at the state and federal level?
I am at zero (time) now, so why don't you hold that answer
in abeyance, as they might say, and I want to turn to our Vice
Chairman, because I don't want to cut off your answer. But
thank you for your testimony.
Vice Chairman Brady. Chairman, thank you, and again, thank
you to the witnesses. There are clearly some different
viewpoints on how to move forward best in infrastructure, but
we need to hear the whole, full range of options. Clearly, you
know, this economy is our number one concern. Clearly, the
President inherited a very poor economy. But now after three
years, many of his policies, in my mind, have made things
worse.
Certainly, the stimulus failed to jumpstart the economy or
restore consumer confidence. We were predicted to have a 6-1/2
percent unemployment rate today. Clearly, we missed it by a
highway mile. The stimulus, after all that money spent, we
actually have 2.1 million fewer Americans working today than
when the stimulus began. We actually have fewer Americans
working than when we began to spend all that borrowed money.
The infrastructure was a significant part of the first
stimulus, and it was predicted that manufacturing and
construction would see the greatest job growth as a result of
it. But the opposite proved to be true, that construction jobs
were predicted and projected at the end of last year, to be a
gain of 678,000 jobs in construction.
In truth, we still today have lost 903,000 construction
jobs, not gained but lost 900,000 jobs. In manufacturing, in
the last quarter of 2010 we were predicted to have gained
408,000 jobs from the stimulus. Again, we've actually lost more
than 600,000 jobs in manufacturing. Clearly, the infrastructure
in the first stimulus has not stimulated the economy.
Today, we face a second round of stimulus and
infrastructure again. In this case, the President has proposed
a $50 billion infrastructure bank, to stimulate job creation.
My question is, and I'll start with Dr. de Rugy, today a pretty
compelling case has been made that our infrastructure system is
a leaky bucket, and before we pour more funding in it, we
probably ought to fix those leaks, if we want to get the best
bang for the buck.
I look at your study that was done this year, reading
through it that estimated, because of paper work, permits,
labor laws, environmental assessments, that drive out and delay
projects, that that drives cost overruns in infrastructure. On
average, unit cost overruns have reached $55 billion annually.
So here we have a $50 billion proposed stimulus, second
round. First, is the prospect that a concerted effort to reduce
those delays and that paper work and the permitting, could
actually give us bang for the buck equal or, over time, larger
than the expenditure today? Dr. de Rugy, could you tell us
about how you formulated those cost overruns, and is it
possible for Congress, in a concerted effort, to lower that
number considerably?
Dr. de Rugy. So the study was--there are two studies that
you are talking about, and neither of them were mine. I was
just reporting on them. The cost overrun was a pretty broad
study that was done by a Danish economist, and they're
specialized in planning, in infrastructure planning. They found
that overall, nine out of ten federal public jobs are cost
overruns.
The other one is for my colleague Garrett Jones and Dan
Rothschild, who looked at the impact on this round of stimulus
of the prevailing wage. They did two separate ways. They did
the theory and then they went and looked and interviewed people
who had received stimulus money. What they found is in fact
that people think they would have been able to hire more people
if they weren't subjected to these laws.
That being said, I mean while I'm entirely in favor, and
even if you're a Keynesian economist, as I said, of getting rid
of these prevailing wages law and all the other things that
actually artificially increase the cost of infrastructure
spending, we really need to remember that it's not going to
create jobs. It just can't, and it is because even in the
context of Keynesian theories, infrastructure spending takes a
lot of time to put in place. It can't be timely.
As such, I think your question is a good one, but even if
we get rid of all the inefficiency in the system, it would
still not be a good idea. Let the private sector do it.
Vice Chairman Brady. Thank you. Mr. Edwards, comments?
Mr. Edwards. I'd say two bullets on sort of different
issues. One is the whole issue of jobs. I direct your
attention, and I can send it to your staff, there's a new
report out by Wells Fargo a couple of weeks ago, which was kind
of surprising. It was about U.S. manufacturing, and it actually
gave a very glowing sort of look at U.S. manufacturing, which
kind of surprised me.
Their argument is is that U.S. manufacturing has gone
extremely capital-intensive and high tech. They've cut jobs,
jobs, jobs. We know that, but because of that, the end of fact
is the remaining U.S. manufacturing companies are very
productive actually in world markets, and they see looking
ahead that U.S. manufacturing companies are going to be doing
better and better, because labor costs in places like China and
Brazil keep rising, and U.S. companies have already made this
transition to a very high tech mode of production.
On infrastructure, I would add that the new Brookings study
on infrastructure is very interesting. They point out some of
the advantages that private infrastructure has over government
infrastructure. One of them is in these PPP deals, where you
get a lot of private finance and management, the same private
sector company both constructs and then maintains and manages
the piece of infrastructure, like a bridge, over the long term.
By doing that, they can be a lot more efficient from sort
of a life cycle point of view. The current system, you've got
one company, you know, building it. The government manages----
Vice Chairman Brady. I'm sorry, Mr. Edwards. You're running
out of time. I apologize. But I appreciate both points. I wish
they were somewhat close to the question I asked. But still, I
think those were important points to make. Thanks, Chris.
Chairman Casey. Congressman Hinchey.
Representative Hinchey. Thank you very much, Mr. Chairman,
and thank you very much. It was very interesting so far, and
I'm sure it's going to continue to be very interesting. We're
dealing with a very serious situation here in the United
States. We have an unemployment rate now that is nine percent.
That's the official rate, but the real unemployment rate is
much higher than that. Many more people are unemployed and not
working.
This is something that really needs to be addressed. You
have basic operations in this country that are very, very
essential-- roads and bridges, for example--that are beginning
to decline. Infrastructure in this country is being neglected.
All of that needs to be adressed; it needs to be invested in
and upgraded.
When you upgrade it, you generate very substantial numbers
of jobs. All of these things and a lot more really needs to be
done. This is something that really has to happen over now.
We're looking at this Congress here, right now. It's almost
been a year, and nothing has been done to stimulate the
economy.
So this has to happen. There are a number of things that
are being talked about now. For example, one of them is the
National Infrastructure Bank which is something that I think
would stimulate the economy, generate jobs and overall would be
very, very important.
So I would like to ask Mr. Puentes and Mr. Herrmann, if you
would please talk about that. What do you think about the
National infrastructure bank, and what do you think should be
done and what could be done in the context of that, to generate
growth and stimulate this economy which would make these
economic circumstances here in the United States much more
effective?
Mr. Puentes. Thank you. I think that, and it builds off the
conversation we've already had here today. I think the first
round of stimulus that we saw from the recovery package was
about speed, was about putting people back to work in the
immediate term. It was helping local governments, it was
helping state governments through the tremendous fiscal
challenges they were facing.
When we talked about the infrastructure bank though,
particularly in this current context, we're really talking
about something much different. We're talking about making
longer-term type investments that aren't things that are going
to be done in the short term necessarily. This isn't about
pothole refilling and the repaving and the things that we
certainly need to do. But this is about connecting
infrastructure investments to the next American economy.
We're at a point now where we need to move away from this
consumption-based economy that predated the recession, focused
on the real estate markets and financial shenanigans, to
something that's really more about getting Americans back to
work, in a productive manufacturing-based society, so making
those infrastructure investments that are going to support
that.
So we have to get away from just infrastructure or
transportation for its own sake, and connecting it directly to
things like exports, for example. If we believe that doubling
exports in five years is the right kind of national goal that
we need to have, great. What kind of infrastructure investments
do we need to make then, to achieve that goal?
It's about ports, it's about trade corridors. It's about
the things we're talking about here today. If we're going to
move to more of a low carbon-based economy, not just as an
environmental imperative, but as a market imperative, what kind
of infrastructure do we need to put in place? Where is it going
to go? What's the federal role in that?
Those are the kind of questions we need to ask. It's got to
come through an economic lens, rather than through an
infrastructure lens, and I think we'll have a very, very
different conversation. That's what an infrastructure bank
really should be doing, choosing projects, setting the
framework and making sure that those investments are made to
advance the American economy, not just for infrastructure for
its own sake.
Representative Hinchey. Thank you very much. Mr. Herrmann.
Mr. Herrmann. Yes. The first stimulus bill, I think there
is a little confusion. They said a significant part of it
actually went to infrastructure, when out of the $787 billion
originally obligated, less than $100 billion went to actually
infrastructure. So a very small portion, less than ten percent.
So it really didn't have that much of a chance at that point.
The other thing, the infrastructure banks that you
mentioned. The way they're proposed, they would actually act as
a bank. They would look at a project, prioritize it, make sure
there would be a return on investment. So that an
infrastructure bank could be self-sufficient. It could actually
get repaid.
Representative Hinchey. And what else do you think about
it? What kind of strong stimulus would it create?
Mr. Herrmann. It would provide not only a stimulus to start
projects, but also make a judgment on which projects are the
best, which projects have the basis of repaying to be
successful. So I think that's a very strong part of the
infrastructure bank concept.
Representative Hinchey. But actually put them into play
then?
Mr. Herrmann. Yes.
Representative Hinchey. Not just speculate, but actually
put them into operation?
Mr. Herrmann. Oh definitely, because they would be truly
acting as a bank. So they would have to make the judgments that
these projects are critical for hopefully the region, the
state, the local area, and then also make sure there's a stream
of revenue to pay them back.
Representative Hinchey. Thank you very much.
Chairman Casey. Congressman Mulvaney, I want to note that
for the record, my staff tells me that you arrived at 1:45.
There's no prize for that, but maybe an extra minute. But thank
you very much.
Representative Mulvaney. Thank you, Mr. Chairman. Mr.
Herrmann, I enjoyed your testimony. I enjoyed all the
testimony, had a chance to read through some of yours before
the hearing. You do a pretty good job of presenting some of the
numbers. I always find it a little bit helpful around here to
actually dig down into the numbers, and when you look at your
testimony, there's some statistics from the Federal Highway
Administration that would suggest that a billion dollars
invested in the Nation's highways supports about 28,000 jobs.
You're absolutely correct, your last comment about
somewhere under $100 billion of the last stimulus program going
to infrastructure, and I think the number for actual roads was
closer to $48 or $50 billion dollars. We take the number 50,
because I don't have my calculator and I'm doing this the old
fashioned way up here.
That if you assume that that is correct, and that that $50
billion should have created $28,000 per billion spent, that's
1.4 million jobs that would have been created from just that
part of the stimulus bill, just the part spent on roads.
Clearly, that cannot be the case. The very largest number that
I have seen anybody try and lay claim to from the stimulus is
three million jobs. That's from the Obama administration, and
that was jobs saved or created.
So on the very best day, the very best argument I've seen
is that the stimulus created three million jobs, yet the FHA
would have us believe that 1.4 million of those came from
roads, leaving 1.6 million jobs to have been created from the
other $800 billion. That's 16 times larger than the amount of
money we spent on roads, supposedly created only 1.6, and
that's on the very best day.
By the way, as you dig down into it a little bit and you
look at the weaknesses of numbers, while the Federal Highway
Administration says a billion dollars in spending creates
28,000 jobs, the Alliance for American Manufacturing says it
only creates 18,000 jobs. So almost 40 percent less.
Clearly, it didn't work. Clearly, it didn't work. The
definition of insanity to me is doing the same thing again and
again, and expecting a different outcome. So as we sit here
today and hear calls for new and expanded stimulus, why should
we expect that the next time it would be any different than
last time?
So Dr. de Rugy, I'll ask you this question. You mentioned
Dr. Summers' line about if it's not done correctly, if it's not
targeted, if it's not timely and not temporary, that it could
actually be counterproductive. Is that what we saw here, and if
so, why is that?
Dr. de Rugy. Well so the Keynesian theory, at least as it
goes, is that you need to inject money quickly into the
economy, and then you will have this multiplier effect. So not
only do you need to do it quickly and timely, but you also
needed to do it in a very targeted manner, which means the
assumption is that you're going to be picking up people from
the unemployment line and putting them back to work.
Representative Mulvaney. Is your experience--sorry to cut
you off, but again, we're on a time clock. Is it your
experience that the Federal Government is able to do that on a
$50 billion project?
Dr. de Rugy. No, and that's one of the things that happened
with the stimulus bill, is that rather than actually thinking
of how to spend the money productively, they basically went
through the common and already-existing channels. But more
importantly, when it comes to infrastructure and targeting the
spending, I mean people have to understand that the people who
are unemployed right now, people who were usually before the
recession building houses, are not the ones who have the skill
sets to go and start building bridges and roads.
So this idea that you're able to actually get people from
the unemployment lines, who were doing different type of
construction and make them and train them and get them prepared
to have the skills to actually build roads, is completely a
misconception of how the way it's done.
The study by Garrett Jones and Dan Rothschild showed that
half of the jobs that were supposedly created or saved, were
actually jobs that were poached from other existing jobs, other
companies, and that it is very likely that these other
companies didn't hire behind, because they actually used these
poaching to shrink the size of their labor force as they were
struggling. So it can't work.
Representative Mulvaney. Thank you, Doctor. Mr. Puentes, I
heard both you and Mr. Herrmann talk about the relative small
size of the first stimulus. It was only $50 billion, or I think
the total infrastructure spending was about $100 billion, after
you add things like the electrical grid, and that there's a lot
of folks, I take it you're one of them, claiming or calling for
a larger stimulus next time.
Have you ever seen gentlemen, I'll put it to you, Mr.
Puentes first, any academic studies whatsoever that suggest
there's any economies of scale when it comes to infrastructure
spending, that if $50 billion didn't work, $50 billion didn't
get us the 1.4 million jobs that it was supposed to, that $100
billion will. Have you ever seen any academic studies that show
that?
Mr. Puentes. Well, I'm not sure I understand. The concept,
I think that we're talking about something now that is very
different from what we were talking about just three years ago,
and this idea of using this money to capitalize an
infrastructure bank, gets back to this larger point about what
we want--again, what we want the American economy to do, and
how do we make those investments strategically, right, in
projects that it's not--this is not just a general grant
program. The idea is for the money not just to go out to the
states, and to hope that the money is spent in ways that are--
--
Representative Mulvaney. I'm going to cut you off, because
we're out of time and I'm trying to be respectful. I'll save my
extra minute for another time. What you're really saying is
that next time we're going to do it better than we did last
time?
Mr. Puentes. It has to be fundamentally different. I think
the idea is to do it very differently.
Representative Mulvaney. Thank you, sir. Thank you, Mr.
Chairman.
Chairman Casey. Thank you, Congressman. Congressman
Campbell.
Representative Campbell. Thank you, Mr. Chairman. I wanted
to start out, before I get to a question by amplifying
something that was pointed out. A lot of the reason we don't
have some of the infrastructure going on is not actually
financial or fiscal, but it's regulatory.
In my district in Orange County, California, there is a
toll road that we are ready to build. It has been ready to
build for years. It is ready to build right now, and it is a
toll road. It is entirely privately funded. It is being stopped
and has continued to be stopped by eco-extremists, abusing the
California Environmental Quality Act, and the federal
Endangered Species Act, in order to stop all growth and kill
jobs.
There are a couple of schools in San Diego, the same thing.
They're ready to build but the Endangered Species Act is being
used by eco-extremists to stop those jobs and kill those
projects. So let us remember, as we're looking at this, that a
lot of the problem before us is regulatory, and if we just
sweep that out of the way, there's a lot of projects, some
publicly-funded, a lot privately funded, that are ready to go
and will go if we get the regulatory problems out of the way.
But that being said, financing this in the future is a
problem, so I wanted to run by you an idea I've had and have
been kicking around for a couple of years here now, which is a
public-private partnership type idea, which is to form a new
class of master limited partnership for infrastructure,
specifically for building public infrastructure using private
funds.
That this master limited partnership would have greatly
accelerated depreciation, so the investors in it get a very
rapid return. If it's for public infrastructure, there would
need to be a tax increment or a fee increment or something that
went to that master limited partnership to fund that.
But that I am aware of a number of investors and a lot of
people that would be very interested in having private money go
into fund public infrastructure under this kind of a structure,
if it existed. So I open that up for anyone on the panel to
comment, as to it's a good idea, a lousy idea, an interesting
idea, whatever.
Mr. Puentes. Just very quickly, I think that it actually
gets to your initial point about the barriers that are facing
some of these projects. As we work with state and local
partners all across the country, particularly in private sector
folks, the barriers that they're facing to getting projects
done are regulatory. But it's not just the environmental kind
of regulations, which are frequent target.
But there are many states that actually prevent these kind
of public-private partnerships from happening. There's only a
handful of states that have the legislation in place. There are
certain states that require each project to go through a
legislative conversation. So the private sector is not looking
at states where there are a tremendous amount of regulatory
hurdles for them to enter the game. They're looking for those
states that have the legislation in place, and where they know
they're going to get a fair shake when it comes to negotiating
these things.
Representative Campbell. So those sorts of things would
prevent this kind of activity, is what you're saying?
Mr. Puentes. Indeed. There are many states where you just
couldn't get to the table to do those.
Mr. Edwards. Right. Virginia is probably the most advanced
in PPP. It's because they passed the 1988 law on PPP, and
they're going gangbusters on it. I would say that of these
international global firms, mainly four of them that do this
PPP stuff, I've read a number of quotes from the leaders of
these companies. They say there's more money ready to invest in
these projects, but they don't see the projects in the United
States.
So it's got to come--the states have to throw up the
projects, and then there will be more than enough money going
after them. You hear that from Wall Street people too, that you
know, a lot of them don't want to compete on these projects,
because they're all competing on them. So there's more money
there than----
Mr. Herrmann. One of the things that's interesting, I've
been traveling around the country, talking about
infrastructure, talking about ASCE's report card. When I came
to Orange County, they had a local report card, and it had
better grades than the National. So I asked them why, and they
said they had an educated public. They increased their sales
tax to improve their infrastructure. So I think we just have to
educate the public that we have to make these investments.
Dr. de Rugy. But we could also educate, if I may----
Representative Campbell. Please.
Dr. de Rugy. Educate the public that, you know, the private
sector, it doesn't have to be funded through taxes. It can
actually--there is a lot of money on the, private money, who is
willing to be invested in these roads. They may have toll
roads, but that means that basically the people who use these
roads are going to be the ones paying for them.
Representative Campbell. Right, and of course in Orange
County, we have three different toll roads now, and this is--
the one that's being blocked now is just the completion of one
of those. So there's a number of this sort of thing being done,
trying to be done, where people are trying to respond to some
of the roadblocks that are out there, and create their own
solutions. My time is up, so I thank you very much.
Chairman Casey. We were about to move to a second round,
but Senator Klobuchar has just joined us. The second round will
be the lightening round, three minutes. Senator Klobuchar is
still in the first round, so she will have her five minutes.
Senator Klobuchar. So I'll just take my time then, Senator
Casey.
Chairman Casey. Do whatever you'd like.
Senator Klobuchar. Thank you very much. Thank all of you
for being here. Obviously, the transportation issues for our
country came to everyone's attention when that bridge fell down
in the middle of a day in Minneapolis, six blocks from my
house, actually an eight-lane highway road that I drive over
all the time with my family, and there it went down. I said
that do a bridge just shouldn't fall down in the middle of
America, but it did.
Since then, I've been very involved in these infrastructure
issues. We obviously rebuilt that bridge in record time, an
example, I think, for everyone of how we can get things done.
But the second thing is that I carried the infrastructure bill
that we just nearly passed in the Senate. We had 51 votes. In
any other body, that would be a majority, which it is. But it
was blocked by the filibuster.
So I'm very focused on trying to get this done again, with
the infrastructure bank and other things that we'd like to get
done. As you pointed out in your testimony, Mr. Herrmann,
inefficiencies in infrastructure are expected to drive up the
cost of doing business by an estimated $430 billion in the next
decade, and I think most Americans think about this in terms of
delays in traffic and the billions of hours people sit in
traffic.
But it's also a drag, because we have a deteriorating
system. If the future of our country, which I believe it is, is
building through exports, we need to get our goods to market.
We need to get them on barges and on GPS system that works for
our airplanes, on the roads and the bridges, on the trains. So
could you talk a little bit more about how this is interrelated
with our business, and the effect if we just put our heads in
the ground and don't do anything?
Mr. Herrmann. Our economic study did show that
transportation costs for businesses would increase by $430
billion by 2020, and that's due to the inefficiencies. It's
going to take longer to deliver finished products to market,
and also to get the raw materials to the factories, the
manufacturing areas where they're going to put it together.
So our bad infrastructure is slowing down our economy, but
it's also adding to costs because we're damaging our vehicles,
due to the bad roads. I mean there's studies that come out that
show, you know, we're wasting how many billions of hours in
traffic every day. But there's also numbers in terms of dollars
of another, I believe it's $70 billion, due to damages to our
vehicles. So it's costing us several ways, due to bad
infrastructure, not only just the delays to get our goods to
market.
Senator Klobuchar. Very good. Could you talk a little bit,
and anyone can join here, about the infrastructure bank and how
that could work? You're familiar with Senator Kerry--Senator
Hutchison's proposal, which was incorporated in this bill, but
how that would provide an incentive for the creation of public-
private partnerships? Anyone want to----
Mr. Herrmann. Sure. We talked a little bit about the
infrastructure banks earlier. If they can truly act as a bank,
that they can look at projects and look at them from an
economic basis, a standpoint, to see if they will be
successful, if they will affect regional areas, if they're
coordinating regional areas, state and local, they should be
successful.
They also should have a stream of income to pay back the
bank, so it can truly act as a bank. So this is what is, can be
enacted, this will be very--should be very successful for the
country.
Senator Klobuchar. Ms. de Rugy.
Dr. de Rugy. If I can add, I mean the infrastructure bank,
while it looks good on paper, and I'm assuming that a lot of
economists would kind of welcome this idea of incentivizing the
private sector to invest in infrastructure, my worry is that it
may, it has the potential to become the public work version of
Freddie Mac and Fannie Mae, and that we know is not a good
thing.
The other thing is like with all of these projects that are
guaranteed by the Federal Government, there is also a risk of
the project being hijacked for political reasons, and basically
instead of having this project, you know, focused on building
roads and picking the right project, it will be focused on
hiring, you know, unemployed people, of hiring the right type
of people, imposing some social goals to the process, which
then would make it extremely inefficient.
Senator Klobuchar. I don't think Senator Hutchison would
want to make it inefficient, is what I'm thinking.
Dr. de Rugy. I mean there's a political process, right,
which makes it risky.
Senator Klobuchar. And how else would you fund these other,
all these projects that we need to get done?
Mr. Edwards. I would say, you know, there is--you know, one
of the problems with getting a lot of these private projects
done is that the private finance is at a disadvantage to public
finance. So in Northern Virginia 15 years ago, the private
investors built the Dulles Greenway, which is a 15-mile private
toll road, completely privately financed. But you know, they
are against competition from nearby free government highways.
So the drivers on private toll roads pay the gas tax, and
also the funders of private toll roads have to raise monies
through taxable bonds. So there is a problem there, and if
Congress could, you know, should consider ways to even the
playing field here, so that private sector projects aren't put
at a disadvantage to the public sector projects. We may get
more private sector, you know, money coming in to fund
projects.
Mr. Puentes. I just wanted to pull us back a bit from the
public-private partnerships. I'm very much in favor of the
National Infrastructure Bank. We think that this is a critical
entity that needs to be established in the U.S. We've seen it
work in other countries. We know that we don't have this kind
of decision-making kind of process now to make decisions for
projects that are truly of national significance.
We have 50 states operating pretty much independently. When
we have projects that are related to things like doubling
exports, for example, those are national projects. They have
national significance and we don't really have the mechanism
for making decisions based on that kind of level.
So we think that there's definitely a need for this. But we
have to understand that this is really just a niche, and there
are certainly projects that are going to be filled through an
infrastructure bank. But this doesn't obviate the need to
continue to raise revenues, to continue to pay for those kinds
of projects that is just, I mean, the mundane kind of stuff
that we need every day.
I mean there's still trucks that are driving over roads
that are in bad condition. You mentioned the bridge as a great
example of projects that probably aren't ripe necessarily for a
infrastructure bank. It may or may not be. But we have to
understand this not a silver bullet that's going to solve all
of our problems. It's obviously something we need to do, but
it's just one arrow in the quiver. It's just one thing that we
need to do with a whole menu of things.
Senator Klobuchar. I agree. I'm going to over the Secretary
with it right now, but another bridge that I'm working on with
Representative Bachman, between Minnesota and Wisconsin, in
which people are deciding whether or not we should allow an 80-
year-old lift bridge to exist, that's falling into the river.
Hopefully, they will decide the right thing.
Chairman Casey. Thanks, Senator Klobuchar. I think what
I'll do is I'll cede my time, just to make one quick statement,
because I think we need a lot more time on this topic. I hope
that folks listening to this don't think that somehow there's a
choice here, that in order to meet this challenge, we've got to
have all private sector. That is, it's all the responsibility
of the private sector or it's all the responsibility of the
public sector.
It has to be both. There's no other way it's going to work.
But I hope that the conclusion here, the path we don't go down
is that we do nothing, because I think if there's one thing we
can agree on, we cannot allow this problem to persist, even if
it means just getting a start on it. So I'm going to give my
time up to Vice Chairman Brady or anyone else, but we need more
work on this obviously. We don't have all the time today. Thank
you.
Vice Chairman Brady. Chairman, thank you very much. I'll be
brief as well. I think Senator Klobuchar made a key point about
the quick response in rebuilding the Minneapolis bridge, which
collapsed because of a design flaw, of undersized steel gusset
plates that eventually factored and generated the collapse. It
points out what we're capable of doing when we want to cut
through the red tape, and move projects to completion.
Mr. Herrmann, when you talk to state highway officials, do
they clamor for an infrastructure bank, or for Congress to
finally fix the Highway Trust Fund?
Mr. Herrmann. I think the Highway DOT people are looking
for long-term funding. They need that for their planning.
Vice Chairman Brady. Yes.
Mr. Herrmann. They need to reauthorize the Surface
Transportation Act.
Vice Chairman Brady. When you talk to ports, do they seek
an infrastructure bank or do they want the Harbor Maintenance
Fund fixed and distributed?
Mr. Herrmann. I think they probably want both.
Vice Chairman Brady. I'll bet you that's not the case. Do
you talk to airport managers? Are they asking for an
infrastructure bank or for Congress to finally fix the Aviation
Trust Fund long term?
Mr. Herrmann. The FAA, they want to fix that.
Vice Chairman Brady. I think so. In every case, they're
talking about local officials making those decisions. They want
the long-term certainty. One of the points Mr. Edwards makes
that I found intriguing, is that at one point in America's
history, it was public sector funding of the infrastructure.
Then it moved to more private sector funding, and now we've
sort of reverse course and moved back into a great deal of
public sector funding.
But other countries have moved the other direction in order
to finance. Can you, really quickly; I only have about 30
seconds left, can you tell us why they're doing that, and why
we ought to look at that model?
Mr. Edwards. Well, I think a lot of European airports, for
example, are private. London's Heathrow, of course, and Gatwick
are private. Sydney and Melbourne, Australia are private
airports, and as I said, seaports have been privatized all over
the place. In 1983, Thatcher privatized most British seaports.
Seaport dredging in Britain is private. There's a company
called UK Dredging that basically goes around. They contract
with the private ports if they want dredging.
I think in a lot of countries it's not an ideological
thing. They just, you know, the government sector doesn't have
the money anymore, so the same problem we have. Deficits are
high, and so they're going to the private sector. So again, I
don't think it's an ideological thing. I think they're getting
good results, and as I said, you know, because of that, these
companies that are at the forefront of this privatization,
they're virtually all foreign these days, Australian, Canadian,
Spanish.
These companies are going around the world and building
infrastructure, and you know, these should be American
companies. I would love American companies to become the
infrastructure experts, and then go around the world exporting
this knowledge. But unfortunately, it's the other way around.
Vice Chairman Brady. Again, thank you to all the witnesses
today.
Chairman Casey. I have to run out the door, but I want to
make sure that Congressman Hinchey and then Congressman
Mulvaney have the last words. Thank you.
Representative Hinchey. Well, thank you very much. The
Congressional Budget Office, as you know, which is objective
and independent, estimates that infrastructure spending is one
of the most effective fiscal policies for increasing economic
growth and employment over the short term. Moody's Analytics
determined that every dollar of infrastructure spending as a
multiplier of a $1.44 out of every dollar.
We made significant investments in manufacturing, in
infrastructure here when we passed the American Recovery and
Reinvestment Act. So Mr. Herrmann, Mr. Puentes, in your
opinion, what would our current economy look like if we had not
passed the American Recovery and Reinvestment Act, and what
will it take for our Nation's roads to be upgraded from its
current rating, which is D? Please.
Mr. Herrmann. I think, as stated a little bit earlier, we
needed $1.7 trillion over a period of years, to upgrade our
roads from that D. I think it's a D minus for the roads, up to
a B level. That also includes bridges and transit. We've been
neglecting our infrastructure for years. I mean the last time
we really put money into it was the interstate highway system,
and that was back to the 1950s, maybe the early 1960s.
So we really haven't been investing in our surface
transportation, and it's starting to show. Our bridges have an
average age of 43 years. The life span when they were designed
probably was 50 years. Now bridges can be maintained; they can
be--their lives can be extended by repairs, rehabilitations.
But we have to invest, and we just haven't been doing that in
the last couple of decades.
So to answer your question, how do we move forward? We have
to invest in our transportation infrastructure and all our
infrastructure, to make sure it lasts for our children, because
right now, we're living on our grandparents' investments.
Representative Hinchey. Thank you. Mr. Puentes.
Mr. Puentes. Thank you. I think we know that things would
be much worse. The states were in particular financial
distress. Transportation spending makes up eight, nine percent,
something like that, of most states' budgets. So it's a big
share, and this is really a helpful shot in the arm to them.
But that money is now gone, and so they're facing some
challenges again.
But in order to make sure that we don't continue to fall
behind, and that the condition of the infrastructure is
maintained, I think we need to look at what was just passed by
the bipartisan Environment and Public Works Committee. I think
MAP 21 is the acronym.
This is starting to make sure that the money that is spent
is done so on more of a performance-based kind of level. So to
monitor the conditions of the roadways today, and to frankly
hold states and metropolitan areas accountable for how that
money is spent. Make sure that we're not just pouring money
into a black hole, that we're not just getting the short-term
injections that we need, but that we're actually getting long-
term value out of this enormous investment.
This is how we've done it in the past. We had the Federal
Government has been kind of absent, right, and this has just
been a block grant that's gone to the states, with no real
accountability or transparency for how that money is spent. The
legislation that's moving through now and is being discussed is
trying to change that. I think it's a really good example of
how we can have the Federal Government be present where they've
been absent.
Representative Hinchey. Thank you very much.
Vice Chairman Brady. Mr. Mulvaney.
Representative Mulvaney. Thank you. Dr. de Rugy, before I
move on to my last question for Mr. Edwards, I wanted--it
occurred to me, as we were having that discussion about timely
and targeted, we actually had a circumstance in my district
where a road was deemed to be too shovel-ready to participate
in the stimulus program.
It had actually--part of a phase had started and was
partially funded, and for that reason, additional phases were
not allowed to be funded with stimulus money. So it goes back
to my point originally about the difficulty of the government
operating efficiently.
Mr. Edwards, earlier today, the Chairman mentioned and
several folks from the panel up here have talked about the
states lacking the fiscal ability, the financial ability right
now to sort of get involved heavily in infrastructure. I think
we've failed to take it to the next step of the analysis, and
admit that we don't have the money either, and that what you've
described today, which is something more along the lines of a
privatized system, holds some appeal.
It sounds like maybe the European and Asian countries have
been driven to that type of model out of a similar type of
necessity, and as a result, they have a system that seems to be
beating us at various different levels.
So I ask you sir, if we wanted to explore that possibility
in this country, of moving towards more private funding of
infrastructure, getting down to brass tacks, what would this
Federal Government need to do, and how much would it cost?
Mr. Edwards. It's mainly the states are, I think as was
mentioned, are in substantially different positions to bring
more private sector funding in. I think something like about 30
of the 50 states have PPP laws on the books. Again, Virginia,
the most advanced. I'd encourage the states to look, you know,
at what Virginia has done.
I think with the passage of federal transportation bills,
we need to sort of look at evening the playing field between
public and private. You know, one of the big advantages of
public infrastructure is that it's tax-free finance, municipal
bonds are federally tax free. That puts the private sector at a
disadvantage automatically.
Congress partly takes a response to that with so-called
private activity bonds. These are, there's a certain amount of
bonds that can be used, that states can use for private
projects which are tax-free. I'd look into, you know, that in
expanding or extending that. That seems reasonable to me.
I mean ultimately, I would eliminate the tax-free nature of
muni bonds, because I think it does unfairly favor the public
over private sector. So for example, when Intel Corporation
builds a new factory, they've got to use taxable finance. When
a local government builds, you know, a new courthouse, they use
tax free. That seems unfair to me.
So I think that the Federal Government can do a lot to
encourage the PPP movement in the state governments, but it's
mainly the state governments.
Representative Mulvaney. Thank you, Mr. Edwards. Thank you,
Mr. Chairman.
Vice Chairman Brady. Our witnesses, on behalf of Chairman
Casey and myself, thank you again for bringing insight into an
awfully complex issue, and I appreciate the members being here
as well. With that, the hearing is adjourned. Thank you all
very much.
[Whereupon, at 3:32 p.m., Wednesday, November 16, 2011, the
hearing was adjourned.]
SUBMISSIONS FOR THE RECORD
Prepared Statement of Representative Kevin Brady, Vice Chairman, Joint
Economic Committee
Thank you, Chairman Casey, for convening this important hearing.
A good infrastructure is vitally important to the U.S. economy,
providing Americans with millions of miles of roads; hundreds of
thousands of bridges; tens of thousands of airports, dams, waterways,
and transit lines; and hundreds of train stations and ports. Pro-growth
policies such as low taxes, balanced regulation, and free market
innovations drive the need for additional infrastructure in America. As
a former local Chamber of Commerce executive, I can attest to the need
for infrastructure as a critical precursor to spark economic
development and attract businesses in communities large and small
across America.
Though America's infrastructure remains among the most advanced in
the world, the American Society of Civil Engineers gave our
infrastructure a letter grade of ``D,'' highlighting that we have a
long way to go until we can meet the current and future infrastructure
needs of Americans.
The manufacturing sector is a critical input in infrastructure with
the provision of raw materials and industrial equipment, and the
manufacturing sector is a beneficiary that relies on the nation's
infrastructure to transport goods to compete in the global economy.
In fact, the manufacturing sector has opened up the prospect for
major energy infrastructure development. An excellent opportunity for
long-term economic growth exists today in the form of the Keystone XL
pipeline from Alberta to Texas, which would result in at least 20,000
new jobs affiliated with the pipeline. Long-term investment in
infrastructure will help American manufacturing remain internationally
competitive.
No one disputes the value of good infrastructure. However, planning
and building infrastructure takes years, often decades. Higher
infrastructure spending cannot create a significant number of jobs in
the near term. As President Obama remarked months ago, ``shovel ready
was not as shovel-ready as we expected.''
According to the Federal Highway Administration, the federal
project delivery process can take up to 15 years from planning through
construction. Environmental regulations and constraints on federal
funding can extend this timeline even farther, resulting in costly
delays and routine cost overruns.
The current system of federal infrastructure spending is
inefficient. U.S. taxpayers are not getting a good value for their
dollars that are currently spending on infrastructure.
Research over the past decade indicates that the growth benefits
from federal infrastructure spending have been extremely low. The
current system of federal infrastructure spending is broken, and must
be fixed to make smart investments in good infrastructure projects.
As an example, the Government Accountability Office reviewed the
Department of Transportation's system of 6,000 employees administering
over 100 separate surface transportation programs with separate funding
streams for highways, transit, rail, and safety functions. The GAO
determined this system was extremely fragmented and lacked
accountability, impeding effective decision-making and limiting the
ability to provide solutions to complex challenges. Analysis by the
National Surface Transportation Policy and Revenue Committee found a
project that should cost $500 million would actually take 14 years to
complete and cost twice as much due to the impact of delays and
inflation.
Examples already abound at the state level of diverted funds,
originally allocated to infrastructure, going to other budget items,
suspended, or altogether forfeited. All too frequently, infrastructure
funding fails to reach high-priority projects, diverted instead to
projects with little or no real benefit.
Federal regulations--such as project labor agreements, high-road
contracting, ``Buy American'' provisions, and the Davis-Bacon Act--have
unnecessarily increased the cost and lengthened the completion time of
infrastructure projects. For example, the Davis-Bacon Act's prevailing
wage requirements have led contractors to pay an average of 22 percent
above market wage rates and have bogged down contractors with extra
paperwork.
An Environment Impact Statement alone can take up to 2 years to
complete. Major infrastructure projects often require the approval of
other federal agencies such as the U.S. Fish and Wildlife Service, the
Advisory Council on Historic Preservation, and the U.S. Army Corps of
Engineers.
For the good of manufacturing, infrastructure, and American
workers, federal regulators must consider how both proposed new rules
and the cumulative burdens of existing rules affect the ability of
American businesses to create jobs at home by selling in global
markets. Federal regulators must also begin to perform retrospective
analysis to determine if existing regulations are meeting their goals
in cost effective ways.
Congress should make it easier for the private sector to invest in
transportation infrastructure, reducing the stress on already cash-
strapped federal resources. Major economies worldwide have demonstrated
success in partially and fully privatized roads, water and sewage
systems, seaports, and airports. America is behind the times when it
comes to involving private capital in infrastructure development.
The United State is capable of keeping up with other countries and
excelling as a leader in infrastructure development. We can strive to
achieve an ``A'' in infrastructure by addressing the systemic problems
with our current means of funding infrastructure in conjunction with
reform of burdensome regulations that impede the ability of both public
and private provision of infrastructure.
Thank you, and I look forward to the witnesses' testimonies.
[GRAPHIC] [TIFF OMITTED] 71697.001
[GRAPHIC] [TIFF OMITTED] 71697.002
[GRAPHIC] [TIFF OMITTED] 71697.003
[GRAPHIC] [TIFF OMITTED] 71697.004
[GRAPHIC] [TIFF OMITTED] 71697.005
[GRAPHIC] [TIFF OMITTED] 71697.006
[GRAPHIC] [TIFF OMITTED] 71697.007
[GRAPHIC] [TIFF OMITTED] 71697.008
[GRAPHIC] [TIFF OMITTED] 71697.009
[GRAPHIC] [TIFF OMITTED] 71697.010
[GRAPHIC] [TIFF OMITTED] 71697.011
[GRAPHIC] [TIFF OMITTED] 71697.012
[GRAPHIC] [TIFF OMITTED] 71697.013
[GRAPHIC] [TIFF OMITTED] 71697.014
[GRAPHIC] [TIFF OMITTED] 71697.015
[GRAPHIC] [TIFF OMITTED] 71697.016
[GRAPHIC] [TIFF OMITTED] 71697.017
[GRAPHIC] [TIFF OMITTED] 71697.018
[GRAPHIC] [TIFF OMITTED] 71697.019
[GRAPHIC] [TIFF OMITTED] 71697.020
[GRAPHIC] [TIFF OMITTED] 71697.021
[GRAPHIC] [TIFF OMITTED] 71697.022
[GRAPHIC] [TIFF OMITTED] 71697.023
[GRAPHIC] [TIFF OMITTED] 71697.024
[GRAPHIC] [TIFF OMITTED] 71697.025
[GRAPHIC] [TIFF OMITTED] 71697.026
[GRAPHIC] [TIFF OMITTED] 71697.027
Prepared Statement of Representative Michael C. Burgess, MD
Thank you Mr. Chairman for the recognition. I'm glad to be here
today to discuss this important subject.
One of the best ways our economy could rebound, and benefit the
manufacturing industry, would be to pass a long-term highway
reauthorization bill. On November 28th I will be holding a
transportation summit back in my district in Texas where engineers,
consultants, design firms, and state and local officials will gather to
discuss the importance of a highway reauthorization bill. I would like
people here in Washington to know that reauthorization is the goal that
people should be focusing upon, not political messaging bills.
Reauthorization is not the one-off political proposals used to get
on the news, but instead the long-term proposals that require hard work
from both sides of the aisle. If passed, this law would put thousands
of people to work over the next several years. This includes engineers,
road workers, and design firms. It also includes the factories that
produce large equipment like road graders, and the companies that
provide the raw materials for our highways and transit systems that
will all benefit from such a law.
This is one of the areas of agreement in Washington that we should
focus on. We should take our attention away from messaging bills and
quick political points, and we should do the hard work it takes to pass
a highway bill. Both parties agree we need a reauthorization of these
programs. My only hope is we can actually sit down and agree and pass
such legislation.
I am eager to hear from our witnesses today to hear what Congress
can do to help our economy. Thank you Mr. Chairman and I yield back.