Making Sense of the Debt Deal’s Effect on Amtrak and High-Speed Rail

The debt deal is done. And the only certain thing is no one will publicly admit to being pleased with the final deal—not Republicans and not Democrats. It was signed into law on August 2nd, however, and since you’re on this website you’re probably wondering: what does the debt deal mean for transportation?

The short answer simple: is no one’s quite sure. The debt deal explicitly cuts $917 billion from the budget deficit over a span of 10 years through cuts to discretionary spending. The deal also calls for the creation of a new bipartisan committee to come up with a series of recommendations to reduce deficits by an additional $1.2 to $1.5 trillion over that same 10 year span—both cuts in spending and increases in revenue will both be on the table (at least theoretically), as well as changes to entitlement programs (also theoretical). Congressional leaders will select 12 Members from the House and Senate over the next two weeks. The committee will be required to submit a plan by November 23 of this year and Congress to vote it up or down by December 23.

So a majority of the cuts have yet to be identified, since the Congressional committee tasked with lowering the deficit hasn’t even been announced. [It’s worth noting that if the committee’s recommendations are not passed into law, mandatory across the board cuts will be triggered. Half of the cuts would come from national security and defense spending, with Medicare subjected to limited cuts. Social Security and Medicaid are exempt. The rest would come from non-defense discretionary.] And with two-thirds of planned savings supposed to happen between 2017 and 2021, it is far from clear that future Congresses will feel bound by the caps set in the debt ceiling deal. The Financial Times finds this back-loaded scenario implausible for two reasons:

First, it assumes that future Congresses will abide by today’s promise to limit their spending and that representatives elected in 2016, 2018 and 2020 will happily slice ever deeper into the federal budget to fulfil it.

Second, because the deficit cuts build over time, by 2021 federal discretionary spending is supposed to fall to 5.4 per cent of gross domestic product. Pigs may also fly – but not if the research project to give them wings has to be funded from a federal budget of that size. Since 1971, with little variation depending on which party held power, discretionary spending has averaged 8.7 per cent of GDP.

The lowest level federal spending has hit in the past four decades was 6.2 per cent of output in 1999, as a decade-long economic boom headed towards its dotcom apogee and the peace dividend from cold war victory paid out in full.

 

Even the $917 billion is heavily back-loaded, with Fiscal Year 2012’s budget ($1.043 trillion, for those of you keeping track) seeing only a reduction of $7 billion compared to Fiscal Year 2011. So while the number might not be great for passenger trains, the debt deal at least grants advocates another day to fight for choice in U.S. transportation.

Of course, that only sets a ceiling for passenger rail funding in the coming year. House Transportation & Infrastructure Committee Chairman John Mica’s (R-FL) six-year surface transportation reauthorization proposal works for a much different scenario, cutting transportation spending across the board by a third, cutting Amtrak’s funding by 25 percent in FY2012 and FY2013, and eliminating all funding to high-speed rail projects that don’t meet Mica’s 125 mph benchmark (effectively ending funding to any project outside of the Northeast Corridor and California).

Senate Environment & Public Works Chairwoman Barbara Boxer’s (D-CA) counterproposal would maintain funding at current levels for the next two years. The plan—which has bipartisan support in the Senate—received a boost today as reports leaked out of the Senate Finance Committee that Chairman Max Baucus (D-MT) has reportedly found the $12 billion needed to cover a gap between authorized spending levels and gas tax revenue, clearing the way for Boxer’s reauthorization to go forward.

If any of this is unclear: stay tuned for September when Congress comes back in session. The day after Labor Day will sound a starting gun for a legislative sprint to determine the future of American mobility.

Odds & Ends

• One interesting wrinkle pointed out by Herb Jackson of New Jersey’s Pasaic News in an August 3 story is that the $1 billion rescission of high-speed and intercity passenger rail funds included in the FY2012 Energy & Water Appropriations bill might no longer be necessary.

  Another House bill approved last month that provided emergency relief for flood victims was required under the Republicans’ rules to offset disaster relief with other spending cuts. So the bill took the money from a high-speed rail program Amtrak was going to use to upgrade the Northeast Corridor. The corridor cuts across New Jersey and is heavily used by NJ Transit commuters as well. The new budget law does not have the same requirement for offsetting disaster relief, according to a Democratic aide. That means the Amtrak money, which was originally appropriated in 2009 and was going to be rescinded under the House bill, could be safe.

• Lest we paint too rosy a picture of the deal, there is something all Americans need to be worried about—even if they’ve never stepped on a train in their life. In an August 1 Op-Ed, the Washington Post ran an editorial by Michael Gerson which pointed to the peril of focusing solely on spending cuts without consideration to economic fundamentals (like, one could argue, quality of infrastructure):

  Last week’s economic growth numbers were dismal beyond the most bearish expectations—0.4 percent GDP growth in the first quarter and 1.3 percent in the second quarter. This previews equally depressing employment numbers. And it complicates the deficit challenge. President Obama’s budget assumed a 3.6 percent growth rate for 2012. Lawrence Lindsey, former director of the National Economic Council, argues that a slowed economy may increase the 10-year debt projection by as much as $5 trillion—dwarfing the savings of the debt deal.

• The Natural Resource Defense Council’s President, Francis Beinecke, argues for fixing the deficit by reducing subsidies to industries that anchor us to the past and begin investing in clean energy solutions that prepare us for the future—like modern trains:

  That includes building the next generation of energy efficient cars, homes and workplaces. It includes wind, solar and other renewable forms of energy. And it includes building high-speed rail and sustainable communities that will put Americans back to work today while laying the groundwork for a healthier economy tomorrow.