Senate Commerce Committee hearing on Infrastructure

• Financing Infrastructure: Several Democratic Senators used the hearing as an opportunity to criticize the administration’s proposal, arguing that the primary funding mechanism ($200B/$1.5T) was unrealistic and that the federal government was putting too much pressure for local governments to come up with funding. Chao and other cabinet members argued repeatedly that states and localities could find other ways to fund infrastructure projects, such as through asset recycling, bonds, and availability payments. Chao said the administration was “agnostic” on funding mechanisms. Perry also argued that permitting reform would reduce costs and encourage private capital to get involved in infrastructure by speeding project delivery.
• Permitting Reform: Permitting reform was discussed throughout the hearing and was a frequent topic of questioning from Republican Senators. Chao reiterated her points from her previous appearances before Congress, outlining several permitting reform ideas, including allowing sequential reviews to occur concurrently, and eliminating duplicative permitting steps. She also discussed the cross-agency coordination currently underway to “rationalize” the permitting process. Chao noted that improving the permitting and regulatory environment would attract private capital to infrastructure programs, as private sources of capital may be deterred from investing if the permitting process delays project delivery for years.

• The Honorable Elaine Chao, Secretary, Department of Transportation
• The Honorable Wilbur Ross, Secretary, Department of Commerce
• The Honorable Alex Acosta, Secretary, Department of Labor
• The Honorable Sonny Perdue, Secretary, Department of Agriculture
• The Honorable Rick Perry, Secretary, Department of Energy

Chairman John Thune (R-S.D.)
In his opening statement, Thune briefly provided an overview of the impact of aging infrastructure on the U.S. economy. Thune praised the Trump Administration’s infrastructure proposal, which calls for leveraging $200 billion in direct federal spending into $1.5 trillion in total infrastructure spending over ten years and commended the proposal’s contemplated permitting and regulatory reforms.  Thune expressed optimism that an infrastructure bill is possible “this year.” The Chairman also used his opening statement to draw attention to the lack of broadband internet in many rural areas, a topic that recurred throughout the hearing.

Ranking Member Bill Nelson (D-Fla.)
In his opening statement, Nelson discussed the importance of building new infrastructure to encourage economic growth while simultaneously repairing old infrastructure. Nelson expressed concern about how infrastructure programs would be funded, noting that the recently passed Tax Cuts and Jobs Act is expected to add to the deficit. Nelson also said that tolling is not a viable option for meeting funding costs. He also floated increasing the corporate tax rate to 25%, with revenue raised from a tax increase earmarked for infrastructure programs.

Testimony

The Honorable Elaine Chao, Secretary, US Department of Transportation
In her testimony, Chao discussed the massive backlog of infrastructure maintenance that exists today, especially in rural areas. Chao noted that surface transportation is only one area in need of policymakers’ attention, and that other forms of infrastructure, including broadband, veterans’ hospitals, and drinking and wastewater facilities all have major building needs. Chao briefly outlined the administration’s plan to stimulate $1.5 trillion in infrastructure spending with $200 billion in direct federal spending as “seed capital.” She also argued that permitting and regulatory reform are also important and may stimulate private capital interest in infrastructure projects. Chao said that the private sector should be encouraged to deploy capital where appropriate, and that the administration wants private capital in a “first-loss” position.

The Honorable Wilbur Ross, Secretary, Department of Commerce
In his testimony, Ross outlined the country’s “desperate” need for new infrastructure to encourage economic growth. Ross discussed steps that could be taken to streamline permitting for infrastructure projects, as well as regulatory reform steps that would move projects from inception to completion quicker than occurs today. Ross discussed financing issues for infrastructure, arguing that the federal government should partner with local governments and private actors, and explicitly argued that the federal government is “not privatizing infrastructure” and only wants to partner with other actors. Ross closed by discussing the prospect of technological advances improving project delivery and viability.

The Honorable Alex Acosta, Secretary, Department of Labor
In his testimony, Acosta talked about the recent strong, monthly job creation numbers since the election and noted the falling unemployment rate. Acosta argued that the administration’s infrastructure proposal could help extend these trends for “years to come.” Acosta also said the administration wants to help infrastructure progress with workforce development programs, such as Pell Grants, Perkins Career and Technical Education Programs, work study programs, and changes to occupational licensing requirements.

The Honorable Sonny Perdue, Secretary, Department of Agriculture
In his testimony, Perdue discussed the importance of surface transportation infrastructure for agricultural producers and discussed the different types of infrastructure projects that agricultural producers rely on, including roads, dams, and ports. He also discussed the ability of rural broadband to increase the productivity of farmers.

The Honorable Rick Perry, Secretary, Department of Energy
In his testimony, Perry discussed the importance of infrastructure to the administration and said that in his capacity as Secretary of Energy he has had the opportunity to travel the country and has seen how outdated U.S. infrastructure currently is. Perry said he is glad there is “bipartisan agreement” to take on infrastructure challenges. Perry also said Congress should consider privately-owned infrastructure in any legislative effort, including railways, pipelines, and power grids.

Financing Infrastructure
Several Democratic Senators used the hearing as an opportunity to criticize the administration’s proposal, arguing that the primary funding mechanism ($200B/$1.5T) was unrealistic and arguing that the federal government was putting too much pressure for local governments to come up with funding. Chao and other cabinet members argued repeatedly that states and localities could find other ways to fund infrastructure projects, such as through asset recycling, bonds, and availability payments. Chao said the administration was “agnostic” on funding mechanisms. Perry also argued that permitting reform would reduce costs and encourage private capital to get involved in infrastructure by speeding project delivery.

Nelson led this line of questioning. Sen. Gary Peters (D-Mich.) noted that the administration is turning the traditional 80% federal / 20% state match for funding surface transportation on its head, and Sen. Maggie Hassan (D-N.H.) argued that states are trying to raise money for infrastructure but have concerns that they may not be able to acquire necessary federal support.

Sen. Tammy Duckworth (D-Ill.) was similarly critical, arguing that the President’s FY19 Budget Request proposed cutting spending for certain infrastructure programs, which would negate the ability of a new tranche of $200 billion to meet the nation’s infrastructure needs. Duckworth described the two proposals, combined with tax reform, as a “net loss” in dollars for infrastructure.

Sen. Jon Tester (D-Mont.) asked how rural states like Montana (which also has a balanced budget requirement and is currently cutting state spending) will be able to come up with an 80% match for infrastructure projects. Ross defended the administration’s proposal, saying there are various ways states could come up with the necessary capital. In response to Tester’s questioning on this topic, Chao conceded that “rural America is different” and noted that the administration’s proposal sets aside 25% of the $200 billion for rural states, to be allocated by a formula. Tester closed by noting the difficulty that many state governments would face if they needed to come up with 80% to meet federal match standards.

Sen. Catherine Cortez Masto (D-Nev.) asked the witnesses to provide any modeling or analysis on how the $200B/$1.5T would work in practice.

Permitting Reform
Permitting reform was discussed throughout the hearing and was a frequent topic of questioning from Republican Senators. Chao reiterated her points from her previous appearances before Congress, outlining several permitting reform ideas, including allowing sequential reviews to occur concurrently, and eliminating duplicative permitting steps. She also discussed the cross-agency coordination currently underway to “rationalize” the permitting process. Chao noted that improving the permitting and regulatory environment would attract private capital to infrastructure programs, as private sources of capital may be deterred from investing if the permitting process delays project delivery for years.

Sen. Todd Young (R-Ind.) asked Perdue to discuss how permitting reform can help states meet infrastructure needs and reinvigorate infrastructure financing. Perdue argued that many states would be happy to take less money from the federal government if the permitting process was quicker. Perdue and Chao argued that the Administration does not want to circumvent or harm environmental protections, but that permitting needs to occur in a “rational” manner, possibly through the use of case managers and a streamlined process.

Rural Broadband
Thune asked Perdue to outline the steps the USDA has taken to ensure that its rural broadband grants are being used to develop broadband in areas with poor internet connectivity and not being used to overbuild capacity in higher-density areas. Perdue said that his department is serious about stopping grant cheats and called for Congress and regulators to take a strategic view of rural broadband deployment. Sen. Jerry Moran (R-Kan.) noted the mapping of rural broadband areas is often of poor quality, hindering efforts to bring broadband to underserved areas. Ross said that Commerce is working hard to develop more accurate maps. The accuracy of broadband maps was also the topic of questions from Sens. Maggie Hassan (D-N.H.) and Deb Fischer (R-Neb.).

Trade
With Ross in attendance, several Senators used the hearing to question him about the administration’s trade policy and the recently announced Section 232 tariffs on steel and aluminum. Sen. Tom Udall (D-N.M.) asked if the administration has considered the negative impact on border states of a unilateral U.S. withdrawal from NAFTA, and Ross assured him that the administration is sensitive to those state’s needs (though he said that unilateral withdrawal is not off the table).

Sen. Mike Lee (R-Utah) questioned the national security justification for the Section 232 tariffs on steel and aluminum, and, noting the limited steel needs of the U.S. military, asked if there is “any limit” to the President’s ability to levy tariffs on national security grounds. Ross argued that U.S. steel mills are critical for manufacturing armor plating for military vehicles, and that these mills need to be commercially viable in order to remain open (and to be able to meet U.S. military demand.) Lee asked Perdue if the USDA anticipated retaliation from U.S. tariffs hurting agricultural producers, and Perdue said he is hopeful that exemptions to steel tariffs ameliorate trading partners concerns. Perdue conceded that agriculture is usually the “tip of the spear” in trade disputes.

Sen. Cory Gardner (R-Colo.) asked the witness panel a number of pointed questions about U.S. trade negotiations, the recently announced tariffs, and the possibility of retaliation that harms other economic sectors. He directly asked Ross if the administration opposed continued participation in the World Trade Organization (WTO) and Ross conceded that an intermediary organization for resolving trade disputes may be necessary while arguing that the WTO in its current form is not working well. Ross argued that modifications to the WTO are “very much in the interest of the United States.”

 

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