Federal highway funding still “temporary”

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federal highway funding still “temporary”

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Jim Haughey

RCD Chief Economist

Nov 03, 2009

Highway interests are aggressively pushing a much expanded version of the six year highway funding renewal program. But as yet they do not have the support of either congressional leaders or President Obama. Highway funding renewal has been put in line behind both healthcare expansion and the electricity tax. Both of these are progressing through Congress far slower than first anticipated. Expect one or more temporary – but less than 100% - extensions before Congress gets to highway funding as soon as the winter and as late as next spring.

Congress is getting nervous about the deficit which has already tripled in the past year. The expanded funding program requested by highway interests now appears very unlikely to be enacted. Instead, Congress will find enough more funds to keep federal money flowing at near the current level. This is before stimulus funds which will permit the forecasted 7-8% rise in highway construction spending from September 2009 to December 2010. Stimulus funds have to overcome both the dip in regular federal funding and the drop in state and local government spending from diminished tax receipts.

The projected gain in nominal spending in 2010 may or may not be a real expansion of volume depending on price trends for oil and metals. These prices are now rising again although they are well below year ago prices. This current price rise is due to the shrinking value of the $US and the accelerating gains in both construction and manufacturing activity elsewhere in the world, especially in Asia. The current price forecast suggests a 1-3% rise in the volume of highway work next year but this outlook has a lot of downside risk.

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