Streetsblog Capitol Hill

The House and Senate are getting close to voting on a deal, reached over the weekend, to raise the debt ceiling and cut spending.

President Obama tells reporters about the debt deal. Note VP Joe Biden slumped in the corner, jacketless. The man must be exhausted. Photo: AP

There’s nothing in the legislative text that says anything specifically about transportation or the Highway Trust Fund, but it’s clear that the cuts mandated in the agreement will affect all sectors. This comes after several rounds of budget cutting this spring. Although some key programs, like high-speed rail, were high-profile victims at that time, solid investments like TIGER and other livability initiatives survived. Some of the cuts were really phantom savings, cutting contract authority that was never going to be used anyway. There are no more easy cuts left to be made in transportation.

The weekend’s debt deal trades a $900 billion raise in the debt ceiling (accomplished in two stages) for $917 billion over the next decade in discretionary spending cuts – reducing domestic discretionary spending to the lowest levels since Eisenhower was president – and including $350 billion in defense cuts – the first defense cuts since the 1990s. Later this year, the debt ceiling will be raised by another $1.2 trillion to $1.5 trillion, depending on the deficit reduction recommended by a special new bi-partisan, bi-cameral committee and agreed to by Congress. Alternately, if Congress passes a balanced-budget amendment (the preference of many Republicans), that would satisfy the conditions for raising the debt ceiling.

In the absence of such an amendment, if committee members can’t come to an agreement, or Congress fails to pass their recommendations, across-the-board cuts will automatically be implemented, cutting equally from defense and non-defense spending. Medicare, social security, and some other social safety net programs would be exempted.

After seeing discretionary spending cut time after time with no sacrifices demanded of the defense sector, it’s remarkable that social programs, not defense, were the ones shielded from the painful cuts. Meanwhile, by spreading cuts around to a greater number of agencies, including massive spenders like the Pentagon, each affected agency is affected less.

Still, infrastructure spending is vulnerable. The White House fact sheet on the debt deal, in the section about the automatic cuts triggered by a failure to act on the committee’s recommendations, says:
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We’re pleased to welcome Stephen Smith as a new contributor to Streetsblog Capitol Hill. We’ll be running Stephen’s work on a regular basis, and you can catch more of his writing at his home blog, Market Urbanism.

Amtrak’s annual ridership may inch over 30 million for the first time this year, but the assault on its funding by House Republicans hasn’t abated. Rep. John Mica (R-FL), chair of the House Transportation Committee, recently proposed slashing Amtrak’s federal subsidies by 25 percent over the next two years. While it’s tough to say how much deficit hawks will actually succeed in cutting, it’s looking increasingly unlikely that Amtrak – and indeed public transportation in general – will get the cash that advocates would like. Given the political climate, Amtrak faces, realistically, two choices: do more with less, or cut service and raise fares.

Amtrak is paying a big premium for these locomotives compared to similar purchases made by European rail companies.

Unfortunately, Transportation Secretary Ray LaHood’s recent announcement of a $562.9 million loan to Amtrak to buy new locomotives for the Northeast Corridor suggests that they will not be doing more with less. The money will go to buy 70 electric locomotives, which, as Alon Levy at Pedestrian Observations explains, are far more expensive than comparable European and Japanese models, and will lock us into outdated technology for decades to come.

Europe and Asia have realized the benefits of lighter and more nimble trains – cost, speed, and energy consumption among them – but Amtrak’s planned purchase is further proof that the U.S. is not quite there yet. One easy cost-saving move would be to wait two years for Positive Train Control, an anti-crash safety technology, to be fully installed along the Northeast Corridor. By 2015, Amtrak will no longer have to comply with the Federal Railroad Administration’s requirement that trains be able to withstand crashes with enormous freight trains. Free to buy lighter off-the-shelf foreign designs, Amtrak could then save 35-50 percent off the cost of the locomotives, as Alon notes.

An even more radical modernizing and cost-cutting measure (at least in the long run) would be to transition the Northeast Corridor Regional fleet from locomotive-hauled trains to electrical multiple units, or EMUs, in line with best practices in Europe and Asia. EMUs are, like subways in the US, individually-powered carriages, and standard models can be as cheap as the inflated price that Amtrak pays for its unpowered passenger railcars. The locomotive purchase locks Amtrak into buying more of these unpowered carriages in the future, making Amtrak’s decision to go with locomotives all the more important.

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You’d think the Obama campaign had confused Michigan and Ohio with Iowa and New Hampshire. As his 2012 Republican challengers flooded early primary states last month, the President instead headed to where he could stand beside beaming auto executives and watch proud workers toiling on once-idle assembly lines. The Obama administration and the industry have been making a hard media push this summer, celebrating the auto bailout as a big win — for the politicians who supported it, for the economy that they claim needed it, and for the taxpayer who still begrudges it.

President Obama speaking at a Chrysler assembly plant in Toledo last month. Photo: Paul Sancya/AP

To this day, Americans remain unconvinced of the bailout’s wisdom, and fewer than half of likely voters are optimistic that we will be repaid the total $80 billion we coughed up. And if Americans were more familiar with one underreported aspect of the bailout — the rescues of the automotive financial firms — they’d feel even less enthusiastic about joining the party in Detroit and Washington.

Between 2008 and 2009, we taxpayers forked over $17 billion to GMAC (now Ally Financial) and $1.5 billion to Chrysler Financial under the vague theory that they formed an essential part of the auto industry. In doing so, we preserved two entities that, like the banks and mortgage companies, were making subprime loans to consumers: high-interest loans made to high-risk borrowers. Chrysler Financial has paid us back, but despite making more auto loans than any other company last year, Ally just delayed its planned IPO because it is not doing well enough to enable the government to reduce its majority stake.

To repay taxpayers and be profitable going forward, these institutions have concluded that they must expand their portfolio of subprime loans, and they are doing so with gusto. Last month, the credit scores of those buying new cars hit a five-year low. Overall, lending to buyers with credit scores under 680 has been rising quarter after quarter so that four out of 10 auto loans today are subprime. That’s right: 42 percent of Americans — including many economically vulnerable people — are taking on auto debt at high rates of interest, making purchases set to become albatrosses dragging down their tissue-thin household budgets.

Although these lenders assert that subprime auto loans do not pose a risk to the financial system similar to that presented by subprime home loans, this is distinctly disingenuous. Yes, the auto loan market is smaller than the mortgage market, and yes, lenders can quickly repossess cars against which loans are made. But this by no means ensures that these companies won’t fail or find themselves in need of another bailout. Subprime auto lenders might not be the principal driver of a financial crisis, but they absolutely contributed to and suffered from the last one. Like the mortgage lenders, they bundled, securitized, and sold off car loans into a market that collapsed, and GMAC actually diversified into home loans at the bubble’s peak. Obviously, these firms can feed into — and falter from — the next crisis as well.

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Earlier this week, President Obama spoke to reporters at the White House. Fully aware of the growing concern in the country over the “jobless recovery,” Obama led off by talking about jobs – and pushing Congress to pass a transportation reauthorization. But was he using the wrong talking point?

“Right now, Congress could send me a bill that puts construction workers back on the job rebuilding roads and bridges –- not by having government fund and pick every project, but by providing loans to private companies and states and local governments on the basis of merit and not politics,” the president said. “That’s pending in Congress right now.”

The inclusion of the line about merit went over well in transportation reform circles, where people have been pushing for a greater emphasis on performance metrics and less spending by strict formulas regardless of outcome.

Later, in response to a question about whether the debt debate was hamstringing his ability to take action on creating jobs, Obama talked again about transportation.

“I think it’s important for us to look at rebuilding our transportation infrastructure in this country,” he said. “That could put people back to work right now — construction workers back to work right now.”

Obama’s not the only one to try to sell the transportation bill as a jobs package. Sen. Barbara Boxer likes to have her aides hold up 20 poster-sized pictures of the Dallas Cowboys stadium, filled with people, to illustrate the number of construction workers out of work right now. She uses this to show the urgency of passing transportation investment legislation.

But according to Joshua Schank, CEO of the Eno Transportation Foundation, it’s a mistake to focus on construction jobs.

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According to an analysis by the Center for Neighborhood Technology of 2002 mortgage data, 250 people applied for mortgages every day in Chicago, and only 150 were approved. The top reason for rejecting the other 100? Applicants had too much credit tied up in car ownership.

And mortgage lenders have only gotten more skittish since then about overextended borrowers.

Once you've filled your three-car garage you won't be able to afford this house anymore. Photo: El Gato Painting

Transportation and housing are inextricably tied, but many people are slow to realize the full implications of this link. CNT President Scott Bernstein says that although lenders understand the link when it comes to rejecting applicants who are overextended on car payments, they don’t include transportation costs in their mortgage underwriting. (Changing this practice was a key recommendation of the Congressional Livable Communities Task Force’s “Freedom From Oil” report.)

“The mortgage crisis was more intense in less location-efficient areas,” Bernstein said at a panel discussion on regional transportation planning for equity at the National Building Museum Monday. “I’m not saying car ownership caused it. But a precipitating factor was a lack of flexibility to tinker with your household budget because you had fixed costs for transportation.”

Transportation options, he said, could be an antidote to future recessions. They helped cushion the blow in urban areas, which saw an overall lower rate of foreclosure, even in poor neighborhoods. A 2010 study by NRDC found that in Chicago, Jacksonville, and San Francisco, “the probability of mortgage foreclosure increases as neighborhood vehicle ownership levels rise, after controlling for income.” [PDF]

Housing affordability looks very different when seen holistically as the cost of living in a certain place. “If you measure affordability as just the cost of housing as a ratio to income, 70 percent of people are living in an affordable situation,” Bernstein said. “When you account for transportation costs, that drops to 40 percent.”

CNT has a Housing + Transportation Affordability Index for people to check the true affordability of where they live, but most people don’t access this kind of information when making decisions about where to live.

When agencies start considering housing and transportation costs at the regional level, major changes in infrastructure investment follow. Bernstein says that when Chicago and the Bay Area set out to reduce the joint costs of transportation and housing, their efforts resulted in the reprogramming of state money away from highway construction.

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In an op-ed in this morning’s New York Times, Laura D’Andrea Tyson argues for increased investment in infrastructure, pointing out that the nation’s infrastructure will deteriorate quickly if spending is not increased. Tyson chaired the Council of Economic Advisers under President Clinton and currently serves on President Obama’s Council on Jobs and Competitiveness.

Infrastructure investment creates 11,000 to 30,000 jobs per $1 billion spent. Isn't that a better way to grow the economy and reduce the deficit than spending cuts? Photo: FreeFoto

“Infrastructure spending, adjusted for inflation and accounting for the depreciation of existing assets, is at about the same level it was in 1968, when the economy was one-third smaller,” Tyson argues. “Financing highway projects whose economic benefits exceed their costs would necessitate more than a doubling of federal investment on highway infrastructure from its 2010 level of $43 billion.”

Government spending on infrastructure raises demand, creates jobs and increases the supply and growth potential of the economy over time. The C.B.O. says infrastructure spending is one of the most effective fiscal policies for increasing output and employment and one of the most cost-effective forms of government spending in terms of the number of jobs created per dollar of budgetary cost.

Tyson goes on to support the replacement of formulas and earmarks with performance criteria, the creation of an infrastructure bank, the development of public-private partnerships, and the implementation of congestion pricing.

Those financing tools are getting a lot of airtime in Congress these days, where the theme is “doing more with less.” But financing isn’t the same as funding. While Tyson laments the lower levels of funding likely to be approved by the House, her proposals stop short of getting to the heart of the problem and suggesting new revenues.

Without new revenues, the country has no choice but to slash spending. Right now, a bipartisan group of lawmakers is huddling with Vice President Joe Biden to cut a trillion dollars from the national budget because deficit spending over the past decade has run up $14.3 trillion in debt.

But according to David Walker, former Comptroller General of the U.S. under Presidents Clinton and Bush, “it’s not socially equitable or politically feasible to solve our problems solely with spending cuts.”

Walker says the reticence to increase taxes amounts to nothing but “deferred taxes,” which are still taxes. “People are playing a game,” he said.

Meanwhile, as lawmakers look for places to cut spending, Walker hopes they’re considering what kind of spending they’re cutting.

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Yesterday, the House of Representatives took a “symbolic” vote on raising the debt ceiling without any “strings attached” – i.e., the trillion dollars worth of spending cuts the Republicans are insisting on before they’ll agree to raise the debt ceiling.

House Speaker John Boehner told reporters today that the bipartisan negotiations on budget cuts as a precursor to raising the debt ceiling were "frank" and "productive." Photo: AP

The vote went how it was supposed to go: not a single Republican voted for the bill, and Democrats split almost down the middle on it.

It makes perfect sense for Congress to ask for some guarantee of future fiscal discipline when they’re being asked to allow the U.S. to go deeper into debt. Interest alone on that debt cost $414 billion last year. But the spending cuts the Republicans are demanding could be far more painful than the last round.

Rep. Paul Ryan, Vice President Joe Biden and other big figures in the debt ceiling debate aren’t talking a lot about transportation, but that doesn’t mean the sector doesn’t have a significant stake in the outcome. Transportation will be dramatically affected both by the debt ceiling itself and the strings-attached spending cuts.

First, the Debt Ceiling

Everyone pretty much agrees that the debt ceiling needs to be lifted. If it’s not, the U.S. will default on its debts and worldwide financial pandemonium will ensue. But does it make sense to keep deficit spending, particularly on transportation?

That’s what we’ve been doing, after all. As the Highway Trust Fund balance drops, the U.S. keeps spending more on transportation than it brings in. As Streetsblog has been saying throughout the reauthorization debate, we can either raise new revenue (most likely by raising the gas tax), we can lower spending to levels that would starve our transportation agencies, or we can take money from the already-stretched general fund.

In order to keep repairing our bridges and running transit services, Congress has given the Highway Trust Fund a series of infusions from the general fund – basically, deficit spending. That can’t continue if we don’t raise the debt ceiling.

Of course, we don’t want it to continue. Transportation agencies should be more accountable for the money they spend and should have to prove that the projects they fund are achieving the goals that were established. That’ll help. But we’ll still need to spend more for transportation than we have right now.

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We hear it all the time: The road lobby insists that the only way to reduce mind-numbing traffic congestion on the roads they built is to build new roads. Federal funding gives huge blank checks to state DOTs, which tend to prioritize road building over transit, bridge maintenance or anything else. But mounting evidence suggests that building new roads won’t do anything to alleviate congestion.

In a paper to be published soon in the American Economic Review, two University of Toronto professors have added to the body of evidence showing that highway and road expansion increases traffic by increasing demand. On the flip side, they show that transit expansion doesn’t help cure congestion either.

We’ll spare you the calculus in the report. Here’s the upshot: “Roads cause traffic.”

Duranton and Turner: If you build it, you will sit in traffic on it. Photo: Arch and the Environment

Professors Gilles Duranton and Matthew Turner analyzed travel data from hundreds of metro areas in the U.S., resulting in what they call the most comprehensive dataset  ever assembled on the traffic impacts of road construction. They write:

For interstate highways in metropolitan areas we find that VKT [vehicle kilometers traveled] increases one for one with interstate highways, confirming the “fundamental law of highway congestion” suggested by Anthony Downs (1962; 1992). We also uncover suggestive evidence that this law may extend beyond interstate highways to a broad class of major urban roads, a “fundamental law of road congestion”. These results suggest that increased provision of interstate highways and major urban roads is unlikely to relieve congestion of these roads.

Duranton and Turner say building more roads results in more driving for a number of reasons: People drive more when there are more roads to drive on, commercial driving and trucking increases with the number of roads, and, to a lesser extent, people migrate to areas with lots of roads. Given that new capacity just increases driving, they find that “a new lane kilometer of roadway diverts little traffic from other roads.”

Given the huge amount of time consumed by driving (the average American household spent nearly three hours per day in a car in 2001), the authors note that “the costs of congestion are large.” Considering the economic value of time spent doing anything but sitting in bumper-to-bumper traffic, that becomes an economic problem of the first order.

“Transportation accounts for about one dollar in five that Americans spend,” Turner said in an interview with Streetsblog. “The interstate highway system eats up on the order of two dollars of every $100 of every market transaction in the United States. That’s a huge part of the economy and a huge part of people’s lives. Understanding how that works is really important; you don’t want to make mistakes on something that important. You don’t want to build roads and have them not deliver the effects that you expect them to.”

The implications for this research are significant, especially as Congress considers whether to integrate performance measures into federal transportation spending decisions. These findings make a strong case that Congress should not allocate too many scarce resources to road expansion when that’s not a real solution for congestion.

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Another day, another news story, another media outlet wielding an old saw like this one: high gas prices are a political problem for the president because Americans “love their cars.” American car culture, fed by everything from our sprawled out landscape to a daily bombardment of car ads, is kept alive by journalists’ use of a set of hackneyed narratives. Beyond clichés, these story lines represent a collection of myths that shore up an unhealthy, unequal, and ultimately unsustainable car system.

"Americans Love Their Cars" -- and that's why we pollute our air, destroy our cities, and make ourselves fat? Image: Smashing Magazine

Americans love their cars. A Google search for this statement returns 2.8 times as many hits as “Americans love their pets” and 6.3 times as many as “Americans love their guns”. Yes, there will always be automotive enthusiasts and drivers fond of their cars. But our car culture is both shifting and conflicted: The last time they were surveyed by Pew, Americans saying they saw their cars as “something special”, more than just a means of transportation, had dropped from 43 to 23 percent. Americans may need their cars in our transit-starved and poorly planned landscape, but with mind-numbing traffic and volatile gas prices, the luster is off the chrome.

Teens can’t wait to grab the car keys. The press persists in romanticizing a teen’s first trip to the DMV as the ultimate coming of age ritual. But it’s their middle-aged parents who are more likely to be champing at the bit, fed up with schlepping their kids and steeped in nostalgia about the freedom they felt when they first drove. But this generation is different. Already connected by smartphones and computers, and graduating into a terrible job market, young people are less car-happy than their parents were at the same age. Today’s teens are delaying getting their licenses and purchasing vehicles, and college students are more interested in living in urban centers where they can be less car-dependent.

The economy depends on the auto industry. The popular, business, and political media alike echo the fallacy that a healthy US economy depends on a healthy auto industry. This chorus helped justify the 2009 bailouts of GM and Chrysler. But the auto industry knows that the dependency is reversed:  it needs economic growth, tax breaks and subsidies, and vibrant credit markets to sell cars. A nation more reliant on transit and active transportation would be one in which households had lower debt and more discretionary income to spend on housing, leisure, and other products, enriching a wide swath of industries. It would also be a nation, in the next downturn, less hostage to how a single industry’s fate might affect entire communities and supply chains. Read more…

Source: Brookings Institution analysis of transit agency, Nielsen Pop-Facts 2010, and Nielsen Business Facts data.

If you’re a middle-income person living in the Philadelphia metro area, there’s an 85 percent chance you live within three-quarters of a mile of a transit stop, and you probably have to wait about 12 minutes for a bus or train. But if you’re looking for work, beware: only 20 percent of the jobs in the region are accessible to you via transit in a reasonable amount of time.

Older transit agencies like Philadelphia’s SEPTA are getting left behind by job sprawl, according to the Brookings Institution’s exhaustive new study on transit access to jobs. SEPTA is a hub-and-spoke system, concentrating transit access in the center city, while more and more job centers are located in the suburbs. Surprisingly, Brookings concludes that some sprawling western cities have better transit connectivity than more compact cities, since their transit networks are designed to fit their spread-out metro areas. Most importantly, they connect suburbs to suburbs better than many traditional systems, where all transit lines meet in the city center.

Brookings scholars will tell you, mapping transit access to jobs in 100 metro areas, with data from 371 different transit providers (some of which sent their data on paper) is no easy feat — “an act of academic masochism,” in the words of Bruce Katz, director of Brookings’ Metropolitan Policy Project. What they came up with is the largest database ever collected in the history of Brookings. The resulting report, “Missed Opportunity: Transit and Jobs in Metropolitan America,” could spur a shift in the way metropolitan areas plan transit service.

After all, there’s a difference between having a subway station or bus stop near you and having a transit system that gets you to the places you need to be. And the most important destination is the workplace. Transit is most valuable when it can take people from where they live to where the jobs are. But most regions are poorly equipped to provide that connectivity, especially for the people who would benefit the most: Low-income residents who need access to low-skill jobs.

Brookings found:

• Nearly 70 percent of residents in large metropolitan areas live in neighborhoods with access to transit service of some kind. Transit coverage is highest in Western metro areas. Overall, it’s far better in cities and low-income communities than suburbs and high-income communities.
• But the typical metropolitan resident can reach only about 30 percent of jobs in their region via transit in 90 minutes. Even in Washington and New York, only 37 percent of jobs are accessible to the typical commuter.

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