• Tax Cuts for Businesses
  • Cut in half the taxes paid by businesses on their first $5 million in payroll, targeting the benefit to the 98 percent of firms that have payroll below this threshold.
  • Completely eliminate payroll taxes for firms that increase their payroll by adding new workers or increasing the wages of their current worker (the benefit is capped at the first $50 million in payroll increases).
  • Extending 100 percent expensing into 2012
  • Regulatory reductions to ease access to capital for smaller businesses and entrepreneurs
• Tax Cuts for Individuals/Families
  • Expand the payroll tax cut passed last year to cut workers payroll taxes in half in 2012 — providing a $1,500 tax cut to the typical American family without negative impact to the Social Security Trust Fund.
  • Allowing more Americans to refinance their mortgage at today’s near 4 percent interest rates, which can put more than $2,000 a year in a family’s pocket
• Incentives To Address Unemployment
  • As part of an unemployment insurance extension reforms are proposed to prevent layoffs and give states greater flexibility in support of those seeking jobs:
    • Unemployment insurance for workers whose employers choose work-sharing over layoffs
    • A new “bridge to work” program that utilizes and improves upon state programs that allows those without jobs to take temporary, voluntary work or pursue on-the-job training
    • States allowed to implement wage insurance to help reemploy older workers and programs that starting a new business more accessible
  • A $4,000 tax credit to employers for hiring long-term unemployed workers
  • A prohibition on discrimination against unemployed workers during the hiring process
  • Expanding job opportunities for low-income youth and adults through a fund for successful approaches for subsidized employment, innovative training programs and summer/year-round jobs for youth

Obama has promised that the plan, which is estimated to hold a $447 billion price tag, will not impact the national deficit. He said he will call on the Joint Select Committee on Deficit Reduction to come up with additional initiatives that will pay for the proposed plan and still meet reduction targets. A more detailed plan of what the Obama administration would like to see will be forthcoming, he said. Costs associated with the plan break down as follows:

• Tax Cuts to Help America’s Small Businesses Hire & Grow — $70 billion
  • Cut employer payroll taxes in half & bonus payroll cut for new jobs/wages — $65 billion
  • Extend 100% expensing in 2012 — $5 billion
• Putting Workers Back on the Job While Rebuilding and Modernizing America — $140 billion
  • Teacher rehiring and first responders — $35 billion
  • Modernizing schools — $30 billion
  • Immediate surface transportation — $50 billion
  • Infrastructure bank — $10 billion
  • Rehabilitation/repurposing of vacant property (neighborhood stabilization) — $15 billion
  • National wireless initiative — $0 (Proposal has a gross cost of $10bn, but a net deficit reducing impact of $18bn because of spectrum auction proceeds.)
  • Veterans hiring initiative — $0
• Pathways Back to Work for Americans Looking for Jobs — $62 billion
  • UI Reform and Extension — $49 billion
  • Jobs tax credit for long term unemployed — $8 billion
  • Pathways back to work fund — $5 billion
• More Money in the Pockets of Every American Worker and Family — $175 billion
  • Cutting employee payroll taxes in half in 2012 — $175 billion

Iowa Responses Hint Continued Partisanship The most critical of the responses from the Iowa delegation came from Kiron Republican U.S. Rep. Steve King, who based the White House for not offering an immediate detailed plan for payment. “The President has given his jobs proposal speech tonight, and put a series of things into the speech, none of which had a price tag on that I could see. And he asked us to figure out how to pay for all of that in the Super Committee that will be meeting in October. I think the President has made a lot of proposals; I’d like to hear him make a proposal on how he is going to do what he said he was going to do which is reduce our deficit and pay down our national debt,” said King. “I think given the proposal of spending some number that approaches another trillion dollars makes it impossible to pay down our national debt. We first have to balance the budget. The best thing he could have done would be call for a balanced budget amendment, instead he called for a lot more spending and he called for us to figure out how to pay for it. And he told us this is all paid for; well it is if we figure out how to do that here in Congress.” As a part of the earlier debt-ceiling deal struck by Congress and the White House, all members of Congress will vote on a balanced budget amendment later this year, following the work of the Joint Select Committee on Deficit Reduction, commonly referred to as the Super Committee. U.S. Sen. Chuck Grassley, another Iowa Republican, described the proposal as “more of the same,” and in-line with the earlier federal stimulus effort. “That massive government spending bill passed two years ago, right after the President took office, and was touted by the administration as a way to keep unemployment below eight percent, which it hasn’t be a long shot,” Grassley said. “When we’ve testing something like that, and it failed, we need to try something new.” Grassley believes new incentives should predominantly appeal to the nation’s business sector, providing long-term answers as to regulatory and tax reforms to allow better future planning. “The best way for Congress and the President to lessen that [corporate] anxiety is to make a serious effort to get rid of duplicative, outdated regulations and really consider the economic impact of forthcoming regulations before reflexively moving them forward, as in the Environmental Protection Agency’s proposed dust regulation, which doesn’t reflect an understanding of farming and the economic impact on rural communities; to make sure the biggest tax increased in the history of the country, which everyone knows is coming on December 31, 2012, doesn’t happen; and to get under control the excessive government spending that’s tripled the national debt over the last two years,” he said. Grassley said he is willing to work with those on the other side of the political aisle, “but that doesn’t mean more of the same.” Iowa’s third Republican federal lawmaker, U.S. Rep. Tom Latham, appeared to be the only of the three that picked up on the appeal for more cooperation or at least chose to address the same in his response. “There is one thing that all Americans can agree upon tonight; that too many of our neighbors continue to struggle with unemployment, grim economic news, and anxiety about the future due to the worst economic downturn in a generation,” Latham said. “The simple truth is that we must do better as a Congress and as a government to work together to find real solutions to these problems. Our nation’s history has proven time and again that when Americans set aside our partisan differences and work together towards common sense solutions we can achieve great things. I am, as I have always been during my service to Iowans, committed and ready to work with anyone, regardless of political affiliation, who is willing to join me to move our country forward and once again give the American people the peace of mind of long-term economic security.” On the Democratic side of the Iowa delegation, there was hesitation toward the plan as well, with most members electing to praise the portions of the plan found most appealing. “I am encouraged that the President’s proposal goes to the heart of [creating a short-term federal agenda to boost the economy and create jobs] by investing in the jobs that sustain a strong middle class. In particular, new funding he proposed for educator jobs will keep teachers in the classrooms. This echoes a bill that I pushed through Congress last year to provide $10 billion to keep teachers on the job in the face of deep cuts to state budgets,” said U.S. Sen. Tom Harkin, who also praised initiatives that would renovate schools and rebuild and repair the nation’s infrastructure. “As we move forward, we must also address the fact that two-thirds of adults with disabilities are not working. In the HELP Committee, I intend to continue to hold hearings on the best way to address this issue.” Special interests, said U.S. Rep. Leonard Boswell, must be removed from the process in order for Congress to find its way forward in a bipartisan manner. ““Washington needs to get its priorities straight and focus on how to spur hiring and create an environment that fosters job growth, instead of continuing the firestorm of empty rhetoric and political pandering. I am hopeful that the President’s speech will refocus lawmakers on what really matters – jobs,” he said. “In order to invest in job creation, Washington must get on the same page as the rest of America and stop putting corporations and special interests above everyday workers and small businesses. It is clear to most Americans that oil companies are doing just fine without the taxpayer’s help. It is clear to most Americans that Bill Gates and Warren Buffet can afford to pay the same percentage of payroll taxes that their own secretaries pay. It is clear to most Americans that our nation will never recover if the federal government keeps offering tax breaks to companies that outsource U.S. jobs. Let’s redirect the taxpayer dollars that fund these luxury handouts and corporate incentives to put Iowans back to work, repair our roads and bridges, update our public buildings, and get Americans making things again. I look forward to the hard work ahead.” U.S. Reps. Bruce Braley and Dave Loebsack echoed the President’s call for putting people before partisanship. “I hope tonight’s speech helps refocus the debate in Washington right where it needs to be: on jobs and growing the economy,” said Braley, noting his pride that Jan Heister of Peosta, owner of Premier Tool, was invited to join First Lady Michelle Obama at the address. “In February 2010, I introduced the Back to Work Act, which provides tax incentives to businesses to hire unemployed workers and my provisions passed into law in March 2010. Since that time, over 100,000 Iowans were hired using this tax incentive, and some of these workers were hired at Jan’s company, Premier Tool. I visited Premier Tool in January 2011 and I was so proud to talk to Jan and some of the workers hired through my Back to Work Act. I’m glad the President has also recognized the good work done at Premier Tool, and invited Jan to attend tonight,” he said. Loebsack added, “Growing our economy and creating jobs should have been the number one priority since the economic downturn began. After multiple displays of ugly political posturing, Washington must finally listen to what Iowans have been telling me for a long time, we need to work together to find commonsense solutions to ensure good jobs are available. “Now that we have heard from the President, the real work begins. What is most important now are the actions Washington takes to put Iowans and our economy ahead of partisan politics and actually work together to boost jobs.” It’s always difficult to read the Washington tea leaves in determining if White House proposals will find enough favor — or at least congressional champions from both parties willing to burn the shoe leather necessary to run the bills in the chambers — to eventually become law. Consideration of the measure could be greater, Harkin said, if the Obama administration makes use of its bully pulpit. “Now that this proposal has been unveiled, I encourage the President to use the bully pulpit and fight to get it passed,” he said. “Where necessary, draw a sharp contrast to those who offer only obstruction and do-nothingism. It’s time to break up the gridlock in Washington and put America back to work. The future of our middle class – and our economy – depends on it.” An enhanced version of Obama’s address was provided by the White House and is embedded below:

Tom Harkin

“The urgency of President Obama’s job speech tonight cannot be overstated,” Harkin said Thursday morning during a conference call with reporters. “Last week the Labor Department reported that zero net jobs were created for the month of August. The United States remains mired in the most protracted period of joblessness since the Great Depression.

“Count me among those who believe the President needs to be bold tonight, very bold.”

For starters, said Harkin, Obama needs to speak out against “the mindless march to austerity” while continuing to find compromise on necessary spending cuts and tax increases to address the long-term national deficit.

“But in the short-term we need a robust federal agenda to boost the economy and create jobs,” he said.

A similar message was delivered Wednesday night during a lecture at the University of Iowa by Reich, who called for additional government stimulus and state loans to boost the fragile national economy. A proposal that only addresses continued unemployment needs and ongoing tax cuts, he said, would not be enough to get the country back on its feet.

Robert Reich

“The debt — the national deficit — although real, is manageable,” he said. “What needs to be addressed right now is jobs and [economic] growth.”

Both men also advocate directed government stimulus toward a hurting middle class, which both agree have been the worst hit by the ongoing economic downturn. They also agree that not enough attention is being paid to issues surrounding America’s middle class — a subject that Harkin, most recently joined during the August recess by U.S. Rep. Bruce Braley, has discussed at length in HELP Committee hearings as well as Iowa-based town hall meetings and roundtable discussions.

“I can report that there is a serious disconnect between Washington, D.C. and Iowa,” Harkin said. “In Washington, politicians have persuaded themselves that the number one issues is the budget deficit. Iowans are focused on a more urgent deficit, the jobs deficit.

“But I’m also concerned about a third deficit — the deficit of vision and courage in Washington. We have failed to confront the jobs crisis with the boldness that earlier Americans summoned in times of national challenge.”

Regardless of Obama’s proposals during his jobs speech Thursday night, Harkin said there will be a certain element within the Republican Party that will oppose it.

“Their mantra is, ‘Government can’t create jobs.’ Well, that’s just nonsense,” he said, added that it was government visionaries who funded and built the nation’s interstate highways, created the Internet, advanced the bio-sciences and explored space.

“These government initiatives spawned countless inventions and new industries, creating 10 of millions good, middle-class jobs,” Harkin said.

It’s been hinted that Obama will proposed $300 billion stimulus package that would include both tax cuts and spending. That won’t be enough, Harkin argued, especially if it is too spread out to make a real difference.

“If [that amount] is really focused on infrastructure — school modernization, for example, [or] roads, bridges, sewer and water systems that will help our local communities — that could be a good shot in the arm,” he said. “But if it is $300 billion spread all over the place, I’m not certain it is going to do much good. If you are going to spread it out, it’s going to have to be a lot more than $300 billion.”

Since it is a given that some will be opposed to whatever Obama proposes, “even if it is $10,” then Obama needs to “do an FDR, a Harry Truman, a Dwight Eisenhower type program that is big and bold and captures the imagination of the American people,” he said.

In the 1950s and 1960s, the Republican Party had a brief flirtation with the 20th century,” Reich wrote while discussing the Sept. 7 GOP presidential debate.

… Mark Hatfield of Oregon, Jacob Javits and Nelson Rockefeller of New York, Margaret Chase Smith of Maine, and presidents Dwight Eisenhower and Richard Nixon lent their support to such leftist adventures as Medicare and a clean environment. Eisenhower pushed for the greatest public-works project in the history of the United States — the National Defense Highway Act, which linked the nation with four-lane (and occasionally six-lane) Interstate highways. The GOP also supported a large expansion of federally-supported higher education. And to many Republicans at the time, a marginal income tax rate of more than 70 percent on top incomes was not repugnant.

But the Republican Party that emerged in the 1970s began its march back to the 19th century. Ronald Reagan lent his charm and single-mindedness to the charge but the foundations had been laid long before. By the time Newt Gingrich and his regressive followers took over the House of Representatives in 1995, social conservatives, isolationists, libertarians, and corporatists had taken over the GOP once again. …

An emphasis on the type of infrastructure Harkin described above, Reich advocated in a recent video message that is embedded below, is the nation’s way forward and the path to American jobs.

According to Roll Call, Rep. Steven LaTourette (R-Ohio) is among the Republican contingency that believes the term earmark needs to be clarified. Yet the GOP’s House leadership seems set on the ban that was decided in November in a closed-door conference voice vote.

GOP leaders are suggesting the Conference as a whole doesn’t want to revisit the issue. Spokesmen for Boehner and Majority Leader Eric Cantor (R-Va.) both said Monday that the ban is settled.

“The House Republican Conference has adopted an earmark moratorium. Period,” Boehner spokesman Michael Steel said in a statement.

Still, several GOP appropriators echoed LaTourette’s sentiment that lawmakers needed a clearer sense of what is included in the ban before they move forward on legislation that funds water, roads and infrastructure projects.

“If Congress wants to use its Constitutional authority to direct spending, then we do need to discuss where that authority can be reclaimed and where it [can’t],” said Rep. Jack Kingston, a Georgia Republican who has long been in favor of addressing the earmark issue.

Kingston, who introduced banning legislation in 2007, said the Army Corps of Engineers’ projects was one area for which Congress should appropriate funding, according to Roll Call.

On the Senate side, Bloomberg reported that Sen. Lindsey Graham (R-S. C.) is pushing to deepen Charleston Harbor in South Carolina and is worried an earmark ban could affect funding for that project.

This is how the Office of Management and Budget defined an earmark back in 2007, when earmark-banning legislation was first introduced:

Earmarks are funds provided by the Congress for projects or programs where the congressional direction (in bill or report language) circumvents the merit-based or competitive allocation process, or specifies the location or recipient, or otherwise curtails the ability of the Administration to control critical aspects of the funds allocation process.

In December, Politico’s Mike Allen succinctly described the predicament for Republicans that want to “redefine” earmarking:

Treasury Secretary Timothy Geithner and Transportation Secretary Ray LaHood flanked the president — as did a bevy of mayors; Norman Mineta, a Democrat and George W. Bush’s transportation secretary; and Samuel Skinner, a Republican and George H.W. Bush’s transportation secretary.

“By making these investments across the country, we won’t just make our economy run better over the long haul,” the president argued, repeating a push he first made on Labor Day. “We’ll create good, middle-class jobs right now.” To back him up, the Council of Economic Advisers released (PDF) a new analysis of the White House’s $50 billion proposal, tied to a re-authorization of the surface transportation program and the creation of a new National Infrastructure Bank.

The public broadly supports such infrastructure spending. From the CEA report:

As a result of years of under-investment in our transportation system, Americans’ satisfaction with our public transit system, when compared to public satisfaction with public transit systems around the world, ranks 25th out of 32 OECD nations. While our nation has historically favored road building over public transit, we rank only 17th out of 32 — in the middle of the pack — with respect to our satisfaction with our roads and highways. The relatively higher satisfaction with roads and highways is consistent with the observation that our nation’s historic investment pattern favored highways and roads over public transit.

One study found that almost 19 out of 20 Americans are concerned about America’s infrastructure and 84 percent support greater investment to address infrastructure problems.

But Congress has proved intransigent. Republicans have repeatedly blocked any additional stimulus spending, no matter how many jobs it might create, citing concerns over the deficit. And Obama cannot create new investment — no matter how economically rational — without Congress.

The group argues that President Obama and Congress should press for legislation to create jobs, including infrastructure investment, state aid and public-service jobs programs — and should ignore calls for immediate cuts to reduce the deficit and start bringing down the national debt.

On a call with reporters, Robert Borosage, the head of the Institute for America’s Future and an author of the letter, argued that “to constrict spending will not only deepen the stagnation and spread the misery, it will ironically fail to reduce the deficit.” Unless the economy starts moving again towards full employment, any efforts at deficit-reduction will falter, he said.

He argued that austerity plans, such as Rep. Paul Ryan’s (R-Wis.) Roadmap for America’s Future, assume a return to economic growth and a drop in the unemployment rate — changes that have not yet happened. Deficit reduction would hamper growth and worsen joblessness, as the government would essentially withdraw demand from the economy before regular consumers and businesses started providing it. Plans such as Ryan’s fail to “address the remaining gaps” and kick-start growth, Borosage said.

Dean Baker, an economist and the co-chair of the Center for Economic and Policy Research, agreed, noting that deficit hawks have pushed “a narrative through this downturn that is 180 degrees from reality.” The economy needs more demand and more jobs from somewhere, and absent demand from other sources, the government should give it. He and others argued for Congress to focus on things like infrastructure investment, rather than slashing the federal budget. “Anyone with a whit of business sense” would know now — given the low interest rates and a enormous pool of construction workers idled — is a good time to build.

Former Labor Secretary Robert Reich also argued “the right way to approach and address long-term deficits” is growth. He noted that the country is “not just in danger of a double-dip recession, but we are not getting out of the doldrums at all.” Economists expect “rapid economic growth” after a deep recession. That growth has not happened.

The Obama administration has in recent week proposed a series of measures to gin up growth and jobs — including a new infrastructure package. And policymakers within the White House certainly would like to push for much bigger, more expensive bills. The problem is Congress — and specifically the Senate. No measure that cannot overcome a Republican filibuster by winning a Republican cross-over vote will pass. And Republicans thus far have proved intransigent on most spending measures, insisting on deficit-neutral bills and eschewing the idea of big spending programs.

That said, Republicans aren’t exactly focusing on deficit reduction either. This week, Sen. Mitch McConnell (R-Ky.), the minority leader, proposed a $4 trillion tax cut, without naming where he would cut the budget to pay for the bill.

Hazelroth went through his program’s successes, then brought up “an unusual financing request” from the mayor of Los Angeles, who had come to Washington earlier in the year looking not for a grant, but for a loan or loan guarantee. The mayor’s shovel-ready transportation projects would take thirty years to build on a pay-as-you-go plan, Hazelroth explained, but by borrowing the money, using a tax as security, the city could finish the project in a third of that time.

Hazelroth continued: “The initial reaction to the Mayor’s request was that such a program doesn’t exist. That is exactly my point here today. A national infrastructure bank is designed to respond to just this kind of need.”

This week, President Barack Obama proposed exactly this sort of bank, as part of a Labor Day push for jobs. The national infrastructure bank would “leverage private and state and local capital to invest in projects that are most critical to our economic progress,” the White House said. “This marks an important departure from the federal government’s traditional way of spending on infrastructure through earmarks and formula-based grants that are allocated more by geography and politics than demonstrated value.”

The idea for a national infrastructure bank has been around for decades, with proposals coming intermittently from legislators on both sides of the aisle. In 2007, for instance, Sens. Chris Dodd (D-Conn.) and Chuck Hagel (R-Neb.) proposed just such a bank, arguing that “current federal financing methods do not adequately distribute funding based on an infrastructure project’s size, location, cost, usage, or economic benefit to a region or the entire nation.”

It’s because of that lack of “adequate distribution” of funds that so many people want a national infrastructure bank. Right now, most infrastructure projects happen because individual politicians make them happen — appropriating, via old-fashioned pork-barrel politics, specific funds for specific bridges, highways or rail lines. (You can see examples of this in the distribution of stimulus funding, and federal funding more generally. Money does not naturally flow to states with the highest unemployment rates or greatest infrastructure needs.)

A national bank would have an appointed but politically sheltered board to grant funds to or loans for projects based on national concerns. And now is a particularly good time for that to happen. The United States desperately needs infrastructure improvements, even with the 2009 American Reinvestment and Recovery Act funding thousands of upgrade projects. Hundreds of thousands of construction workers are unemployed. The cost of construction has dropped. And interest rates are at record lows.

That said, Obama’s proposal is not much to go on — and you cannot divine how effective a bank would be without reading the fine print, says Adrian Moore of the Reason Foundation.

For one, it is not clear whether the bank would take the jobs situation into account when choosing which projects to fund. “Obama is couching this as a jobs program, and that worries me,” Moore says. “Let’s say we’ve got a bridge in Alaska that’s a complex project, a big bridge that goes across to an island. It’s going to create 7,000 jobs. And let’s say you’ve got a road in Los Angeles that is near a congested freeway and needs to be widened. That project is going to create 1,000 jobs.

“Under this proposal, the money is going to go to the Alaskan bridge, to make more jobs, even though the Los Angeles road is going to create more wealth in the longer term.”

In a statement, Independent Petroleum Association of America Chairman Bruce Vincent says the tax hike on the industry will kill jobs. According to Vincent:

With the nation’s unemployment rate on the rise, moving closer toward double-digit figures, and America’s dependence on unstable regions of the world to fuel our economy growing by the day, it’s unfortunate that the president still doesn’t recognize that billions of dollars in higher taxes on America’s independent oil and natural gas producers, who drill 90 percent of the nation’s wells, is not a jobs plan — it’s a job-killer.

Billions of dollars in new energy taxes will lead to fewer American jobs, less stable supplies of homegrown energy, and an increased reliance on foreign oil.

Now Keen is the commander of the U.S. military mission in Haiti, working alongside the Haitian government and the U.N. security mission to get humanitarian assistance to a population in dire need of it. Updating bloggers on a conference call Sunday night, Keen made it clear that one of the most difficult obstacles he has to overcome is the sorry state of Haiti’s pre-earthquake transportation infrastructure.

Take the airport. Yes, airport, singular. Haiti has a single airport, with just one runway and one taxiway. Before the quake it managed 13 flights daily. But maintaining that pace is a death sentence for Haitians in need of water, food, shelter, medical care and other necessities. So Haitian President Preval authorized the U.S. Air Force to control the so-called “slot times” for letting planes land and then depart, which the airmen set at two hours per plane. That means planes have to be back in the air after two hours’ wheels-down to unload their cargo and refuel if necessary. The pace has meant over 100 planes went through Haiti on Sunday with no delays, Keen said, the first time in six days the airport hasn’t reported a delay. But the rapid turnaround also meant a mobile hospital had to get back in the air — a major problem, and one Keen sounded frustrated about.

The quake seriously damaged Haiti’s major seaport. Keen sent divers into the port, which he called South Port, and found “we do have some separations [between] the pylons and the pier.” He estimated it would be at least the end of the week before the port could be opened, something he called “absolutely critical” to move cargo in and take pressure off the airport.

It’s a tense moment. Keen was proud of delivering 233,000 bottles of water to civilians on Sunday, but said it was “nearly not enough,” considering there are an estimated 3.5 million Haitians — nearly a quarter of the population — suffering from the quake. A more sustainable solution for hydration is on its way: 16 water purification units are being shipped to get people off of bottled water. The USS Carl Vinson, an aircraft carrier with 19 helicopters, is just offshore, and the hospital ship Comfort will arrive later this week. In the next several weeks, Keen said his military contingent will grow to about 10,000, with half kept offshore to minimize the logistical needs — food, water, shelter — that go along with large-scale deployments.

“Everyone is doing the best they can,” Keen said. “Obviously, there is much more to do.” And only a handful of ways of getting the necessary assets into the country.

In Iowa we’ve been fortunate that construction money for highways is going to get out very quickly. The governor is making decisions now on education funding and Medicaid funding, which are the other two big pots of money. So I believe you’re going to see the stimulus impact of that taking place pretty soon.

I think with, for instance, in the state aid money — I should say the stimulus money that’s going to go through the state aid formula — you’re going to find some teachers that might otherwise be laid off maybe won’t be laid off. And the Medicaid money — I think you’re going to find some cutbacks at the state level that would have happened without the stimulus package won’t have to happen now.

Grassley voted against the bill in February because, among other things, he said the package didn’t include enough tax cuts for small businesses.

Secretary of Transportation Ray LaHood (dot.gov)

A controversial proposal to shore up federal transportation funds has set off a firestorm in Washington, with a high-profile disagreement between the transportation secretary and the White House leaving the nation’s strategy for combating an impending highway budget shortfall in doubt.

In an interview with the Associated Press last Thursday, Secretary of Transportation Ray LaHood proposed a vehicle miles traveled tax, which would charge motorists for each mile driven rather than fuel consumed, as an alternative to a higher gas tax. He called it a way of “thinking outside the box on how we fund our infrastructure in America.”

Illustration by: Matt Mahurin

The White House quickly shot down the proposal. In his daily press briefing Friday, White House Press Secretary Robert Gibbs said bluntly that the tax “is not and will not be the policy of the Obama administration.” A Transportation Department spokesperson, who asked to remain anonymous, clarified the discrepancy to TWI on Monday: “The Obama administration is not advocating a VMT [vehicle miles traveled] tax. In the interview with the AP, Secretary LaHood was simply stating a spectrum of ideas available for financing transportation infrastructure in the future.”

Still, the mileage tax remains on the table as a potential long-term solution to the revenue shortage, and LaHood’s apparently unilateral proposal triggered a flurry of debate on the merits of the tax. A Washington Post editorial on Monday came out strongly in favor of the plan, while on the same day a piece in the Baltimore Sun criticized it as the “height of stupidity” and other publications called it “impossible to administer” and “far from a ‘green’ policy.” Among industry leaders, the president and CEO of AAA praised the plan, while the CEO of Federal Express called it “ill-advised” and unfair to residents of rural states.

Although most of the media coverage has focused on the administration’s rejection of LaHood’s proposal and the tax’s pitfalls, a number of experts, backed up by a successful pilot program in Oregon, maintain that a mileage tax is a sound policy to reverse the highway budget shortfall without endangering environmental incentives or creating excessive logistical difficulties.

The discussion of alternatives to the gas tax comes at a critical time. On Monday, House Appropriations Transportation Subcommittee Chairman John Olver (D-Mass.) announced that the Highway Trust Fund, which provides for the maintenance of America’s highways and bridges, will run out of money by the end of September. The fund relies mostly on revenue from the gas tax, and according to Olver, it is headed for a deficit as Americans cut back on their fuel usage.

The Treasury Department has projected a $3.2 billion shortfall for the fund in the fiscal year 2009. Congress kept the fund solvent last fall with an $8 billion emergency spending bill, and while a similar cash infusion would help now, other solutions are needed in the long run to prop up what Olver called a “severely underfunded” program.

A mileage tax would be one possible route. Supporters of the mileage tax point to the success of a pilot program in Oregon, which demonstrated the viability of such a tax as a steady and practical long-term source of revenue. According to a November 2007 report by the Oregon Department of Transportation, the program was initiated amid fears that as more people started driving hybrids and cars that run on alternative fuel sources, “Oregon’s road system would be in jeopardy as the gasoline tax revenues necessary to preserve, maintain and modernize the system slowly but steadily drained away.”

The experiment began in April 2006 and included 285 volunteer vehicles and two gas stations. The cars were outfitted with mileage-calculating GPS devices, and the tax was paid automatically at the specified gas pumps, just like a standard gas tax.

The 2007 report declared the trial a success. Despite the limited scope of the program, participants found it fair and convenient, and 91 percent indicated that they would be open to a mileage tax if enacted statewide. Only three participants had privacy concerns, although the report conceded a “trade-off between privacy and information stored for enforcement and dispute resolution.”

Developing, manufacturing and installing each GPS device in the pilot cost $603 per vehicle, but the report estimates that if they are produced on a larger scale, the cost will be under $100 per vehicle. Likewise, the state spent $78,000 to replace some gas pumps, but it will require gas stations to use compatible systems if the mileage tax is enacted statewide. At 1.2 cents per mile, an average driver would currently pay about the same amount as under a gas tax. At first the state would break even as tax revenue recouped costs to initiate the program, but “after the initial start-up period, the mileage fee implemented statewide would begin to generate more revenue than the [standard] gas tax would be expected to generate since the gas tax erodes because of improvements in vehicle fuel efficiency, while the mileage tax does not,” according to the report.

The Oregon Department of Transportation also suggested that in order to avoid the expense of retrofitting all vehicles, the mileage tax could be phased in, with new vehicles paying the mileage tax while older ones continued to pay a gas tax.

After the success of the Oregon pilot, other states have begun to consider a mileage tax. Idaho, North Carolina, Rhode Island and Massachusetts are all debating some form of the tax, although the proposals have faced criticism.

Environmental advocates point out that innovation in green transportation policy tends to happen first on the state level. Nearly a century before experimenting with the mileage tax, Oregon pioneered the first gas tax in 1919, and all other states followed suit in the next decade. After the success on the state taxes, a national gas tax was put in place in 1932. “Traditionally the states have a little more flexibility,” explained Eli Hopson, the Washington representative for the Union of Concerned Scientists’ Clean Vehicles Program.

“The states have been leading the way on environmentally sound transportation approaches,” agreed Daniel Becker, director of the Safe Climate Campaign, an environmental advocacy group. “I think we’ll see more of this kind of [mileage tax] approach in states.”

Still, not all analysts believe that a mileage tax would be environmentally friendly. A chief criticism of the tax is that it would serve as a disincentive to purchase fuel-efficient vehicles. A high gas tax, in place in much of Europe and elsewhere, discourages people from driving gas-guzzling SUVs and pickups, which not only release higher volumes of greenhouse gases into the atmosphere, but also do more damage to roadways than smaller, lighter cars. A tax based purely on mileage, on the other hand, does not distinguish between high- and low-efficiency vehicles. According to Gilbert Metcalf, a Tufts University economist who specializes in energy issues, a mileage tax would “make it more expensive for the fuel-efficient cars, because they have the upfront expense” of a higher price tag at the dealership.

But Deron Lovaas, the federal transportation policy director of the Natural Resouces Defense Council, dismissed the notion that a move away from the gas tax would slow the trend toward hybrids and other energy-savers. “There’s no doubt that the gasoline tax provides an incentive for the purchase of more efficient vehicles, but let’s be honest, it’s a modest incentive at best,” he explained. “Gasoline taxes are in the single digits as far as the percentage of money you pay at the pump.” The gas tax is far outweighed by fluctuations in the price of crude oil, he noted.

To address the issue of incentives, some analysts advocate a mileage tax that takes fuel efficiency and other factors into account. By installing a GPS chip in every vehicle, Lovaas argues that regulators could use a “sliding scale” to charge drivers more for using larger vehicles or traveling on busy roads during peak hours. Monitoring of this sort, however, has raised privacy concerns, since it would allow a driver’s movements to be tracked.

Again, Lovaas is unfazed by this line of criticism. “Anyone who has a cellphone on their person has traded away a lot more privacy than you would lose through a program that had data collection in vehicles,” he said, adding, “By limiting the amount of data collected and encrypting that data, you can trump privacy concerns.”

In spite of the arguments in favor of a mileage tax, it appears that it will not be implemented in the short term, given Gibbs’ strong statement to that effect. It is clear, however, that something must be done to address the coming Highway Trust Fund deficit. The federal gas tax has not been raised since 1993, although inflation has led to higher maintenance costs. Increasing the tax is one possible solution, but President Obama has spoken out against “putting additional burdens on American families” with a higher gas tax.

The administration will continue to explore its options for raising additional infrastructure revenue, including new tolls and public-private partnerships, according to the Department of Transportation spokesperson. In the meantime, if LaHood has another proposal to unveil to the press, he might want to run it by the White House first.