Fresh Gallup data show Americans remain “slightly positive” about the U.S. economy, more optimistic today than eight months ago. Yet many observers, from Main Street to Wall Street to K Street, are singing from the same song sheet in saying, “yea but.”
Without action from Washington policymakers on a number of issues, the positives could slide to negatives, as much of the optimism across the nation rests on cautious assumptions that major policy achievements will deliver real growth. This includes the private freight railroad sector, which continues to see year-over-year traffic gains – directly tethered to the activities of the business community and consumers – and which remains deeply invested in some of Washington’s most visible policy discussions.
In the first of these quarterly outlooks published in May, I noted, among other matters, tax reform would move forward alongside significant regulatory reforms this year. This has proven true to a limited extent, but rubber will meet the road in the months to come as Congress breaks for August recess and barrels towards the 2018 election cycle.
Here is what the Association of American Railroads is watching most closely among Washington’s salient policy discussions:
1. The “pivot” to tax reform and the urgent need for action. Long viewed as the greatest area for success, it is no secret that the collective focus of elected leaders will center on reforming a tax system last revamped in 1986. This is for good reason – economists widely agree that America’s tax code is too complicated and no longer globally competitive.
To be effective, small and large businesses alike must come together to show that tax reform will work for the American economy, workers and consumers. The rail sector will do its part, as it did recently in filing comments with Senator Orrin Hatch of Utah, noting, “A more competitive corporate tax rate means a stronger economy and more freight demand, which leads to more investments and a stronger network to serve our customers.”
But voters will play a key role, particularly with Congress returning home in August and the President slated to sell reform to the masses. Anyone interested in spurring economic growth for the rail sector and economy writ large should weigh in, sending a letter to their members of Congress, engaging online or attending a town hall or Presidential rally this summer.
2. Instilling a Federal Railroad Administration Administrator. The White House nominated railroad veteran Ron Batory for FRA Administrator earlier this month. He will appear in front of the Senate Commerce Committee Wednesday and the entire rail community is optimistic he will be confirmed in the somewhat near future. It is important to industry, labor and the public alike to have leadership in place.
The railroad industry will make clear to the new Administrator now and through his expected tenure that the rail sector is an undeniable safety success story and is increasingly technological. To best encourage innovation, however, we need to rethink rulemaking to embrace outcomes, not command and control prescriptions. Proposed legislation from Senator Deb Fischer, R-Neb., titled the “Railroad Advancement of Innovation and Leadership with Safety Act,” or the “RAILS Act,” provides ample guidance for the future FRA leader and supporting staff.
3. An infrastructure package built on user fees. Along with tax reform, some leaders have increased their calls for an infrastructure package in Congress, even if details still remain vague. We are watching this closely for an obvious reason: we believe users of infrastructure should pay for that use, just as our industry does with massive private investments.
In the last decade alone, taxpayers have subsidized the Highway Trust Fund to the tune of $143 billion, a swollen number due in large part to the continued underpayment of commercial truckers. When adjusted for inflation, the DOT findings show 80,000 pound trucks currently underpay their federal cost responsibility by around 27 cents per gallon of fuel.
While the House Appropriations Committee recently resisted calls to increase truck weights, the idea will surely rear its head in this larger infrastructure discussion. Any serious talk on infrastructure must begin with sustainable funding streams – from users, not repatriated tax dollars – and the freight sector will do its part to make this known.
There is no reason why innovative solutions like a vehicle miles traveled fee, the subject of a recent study from the Brookings Institution, should not be considered.