How Transportation will be Affected by a
New Administration, House and Senate

With the U.S. November elections coming up, smart shippers are starting to assess
how transportation will be affected by a new administration and a House and Senate
that are likely to have larger Democratic majorities.

Recently I participated in a session hosted by the Democratic Senate leadership group. There were 18 Democratic senators, and the purpose of the meeting was to discuss infrastructure issues affecting this country. This meeting, coupled with the articles we have read and the work of our representative in Washington, provided some insights into what shippers can expect in 2009 and beyond. While there will be several significant changes, in the interests of time and space I will focus on three critically important areas: infrastructure, security issues and the threat of selective re-regulatory legislation.

On the infrastructure front, the Senate and House are supposed to pass a new highway bill in 2009. Everyone agrees that the infrastructure is overburdened, threatening America’s competitiveness, and that fixing the problem is not going to be cheap. Where the discussions break down is in determining how to pay for the highway bill. Ostensibly the taxes paid into the Highway Trust Fund (HTF) will be a major funding source; however, the amounts required are so big that they dwarf the monies in the fund.

So that you have some perspective, the last highway bill allocated $286 billion to the nation’s highways. Subtract the estimated $26 billion for “earmarks” (a.k.a. “pork”), much of which had nothing to do with our highways, and we will have spent $260 billion on our infrastructure. The Democrats believe that the amount needed for highways, bridges and transit could be as much as $1.4 trillion, so you can appreciate the gap that must be addressed. This is why experts are predicting that two things will occur. First, the highway bill will cost us somewhere between $386 billion and $1.4 trillion. Representative Oberstar (D-MN), a key congressional leader on the issue, recently announced plans for a new highway bill in February 2009 at $450 to $500 billion.

The budget issue could result in a sharp increase in user fees (e.g., tolling on the existing interstate network) and an increase in the federal gas tax (an additional 10 cents per gallon has been mentioned) as major revenue sources. One thing to keep in mind is that raising the gas tax has proven to be a politically risky move, so there is no guarantee that will pass. Without higher fuel taxes, even more tolling and privatization will be needed. Under any scenario, it will cost us all more to use our roads.

On the security front, the Democrats in Congress have been pushing for more aggressive screening of cargo and containers. With a larger majority in Congress and the potential for a Democratic administration, you can expect a major push to strengthen the Container Security Initiative (CSI), the Scan-All initiatives and items such as 10+2 documentation for international shipments. We at NASSTRAC have two concerns. First, the principal sponsors of this legislation do not appear too concerned about the impact these initiatives have on the flow of goods through corporate supply chains. Thus there exists the potential for legislation that will slow things down, lengthen lead times and cause organizations to reassess their inventory/material management strategies. Second, experts estimate that less than 25 percent of American companies can comply with changes taking effect in 2009. If Congress adds additional requirements, compliance could be an even greater concern for shippers.

Finally, re-regulation in the transportation sector is possible. With a Democratic administration, shippers can expect to see major changes at the Department of Transportation (DOT) and the Department of Homeland Security (DHS). Most shippers are oblivious to the threat of legislation that will re-regulate aspects of transportation. For the record, the hours-of-service issue for truck drivers has not been settled, and there is an increasing focus on driver-related issues such as health/medical certification. individually, the impact on shippers of each of these changes may be limited, but the driver shortage problem has not gone away, and these changes will only exacerbate the problem.

Shippers should also be aware that in the future, cities and states may pass legislation that restricts the flow of shipments into major metropolitan areas. One of the ways that cities can deal with the congestion/infrastructure issue is to limit pickups and deliveries in major metropolitan areas. If you’re looking for examples of how far-reaching this legislation can be, look at what is happening at the ports in southern California where significant restrictions are being applied to freight moves. The threat of local or state-sponsored legislation that will affect the movement of your goods is very real. The American Trucking Association (ATA) and others have argued that federal law preempts such initiatives, but court challenges take time and are not always successful.

If there is a new Republican administration, DOT and DHS are more likely to be headed by people who support the current balance between security needs and the flow of goods in commerce. However, Congress could enact laws that tilt the balance toward security. On infrastructure issues, a Republican administration is likely to be more supportive of private-sector solutions, including privatization of highways, public–private partnerships and tolling, with higher fuel taxes making less of a contribution.

For companies that will be affected by changes in transportation policy, one way to prepare is to engage in scenario-planning exercises that address the impact of these issues—infrastructure, security and re-regulation—on your operations. The NASSTRAC Advocacy Group is committed to keeping its members apprised of changes as they occur, and also as they are being considered. We welcome your input and comments.