Secretary Anthony Foxx
The U.S. Chamber of Commerce
Washington, DC • February 20, 2014
“Remarks as prepared for delivery”
Thanks very much, Janet Kavinoky for the introduction.
I came to Washington after serving as a mayor.
Just about every mayor in America can tell a story about a business considering locating in his or her city, with hundreds, sometimes thousands of jobs in the balance.
Invariably, the business representative will bring up a road, a curb cut or bridge that needed to be built or repaired to make a site work. I understand that first-rate infrastructure and job growth go hand-in-hand.
So, I want to begin today with a statement of the obvious: The United States faces a massive infrastructure deficit. If not addressed, this infrastructure deficit will stunt the recovery we’ve begun and cripple our economy.
I don’t have to tell the people in this room how big the infrastructure deficit is – you are moving goods around America, and your people need efficient ways to get to work.
But that task gets harder when:
We have 100,000 American bridges old enough for Medicare.
We’ve fallen 20 spots, according to the World Economic Forum, over the past ten years when it comes to the quality of our infrastructure, putting us behind Barbados – a country with one airport.
We hear the American Society of Civil Engineers pointing out that, without investment, “deficiencies in our nation’s infrastructure” will cost businesses more than $1 trillion every year in lost sales.
Further, they say – and I’m quoting here – that “if current trends are not reversed,” our economy will take a $3.1 trillion hit before the decade is out. That’s like wiping out the economic impact of an entire U.S. state, a state like Virginia, for almost ten years.
A number of commentators have expressed concern about what happens to transportation spending when the Highway Trust Fund runs out in fiscal year 2015. Little do some of them know that the Fund is on track to bounce checks before FY 2015 – as soon as this August.
But, again, you know this.
That’s why, recently, your president, Tom Donahue rightly urged Congress to stabilize the Highway Trust Fund. I’m grateful to him and you for stepping up and ringing the alarm bell.
That’s why we’ve put a ticker up on the DOT website to make sure the American people can track how close we are to insolvency.
That's also why I am here today – to ask all of you to ring the alarm bell with your members of Congress.
For years, the growing infrastructure deficit has been an issue akin to termites in our national basement, slowly eating away at our foundation. Now, it is a wolf at the door.
When we add it all up – crumbling infrastructure, significant new capacity needs, economic costs associated with not addressing these needs, a Congress either unable or unwilling to handle business until emergencies loom, a Highway Trust Fund fast approaching insolvency, a surface transportation bill close to expiring, and the rest of the world running faster towards building 21st infrastructure than we are, transportation – and specifically failing to tackle the infrastructure deficit – is the next crisis we’re heading towards.
When I mention this looming crisis outside the beltway, to mayors, governors, business leaders, labor and NGO leaders, they are astonished.
“How can we,” they say, “kill the goose that has laid so many golden eggs:” the transcontinental railroad… the interstate highway system… some of the most heavily used transit systems in the world.
These are mechanisms that day-after-day, year-after-year, get products and people where we need them – and they keep the economic engine of America going.
So, two things can happen now as I see it:
One, we can push America into a larger pothole, a bigger infrastructure deficit, by neglecting to handle our business as a nation.
Or, two, we can drive out of that pothole, address the funding gap and put our infrastructure on a sustainable course.
And, by the way, if we work our way out of that pothole, it will not be a Democratic success or a Republican success. It will be an American success.
There is reason for some optimism.
For one thing, it is good and constructive that members of Congress are now offering ideas to fund transportation. Chairman Shuster of the House T&I Committee has said he hopes to have a bill before the August recess. Senators Boxer and Vitter have agreed that they want to have a bill by April.
And President Barack Obama is putting ideas on the table, too. In his State of the Union, he put forward a proposal to fund surface transportation with the savings generated from corporate tax reform.
Our problem isn't math. It's that, for a generation, the concept of government spending has been under attack, and it is bleeding into our approach on an issue that has traditionally been bipartisan.
But you know and I know that spending on transportation is really investing in our country – its economy and its people – and that’s the Rubicon we’ve got to cross and cross fast.
So how do we get there?
First, we need to aim at the right target. For years, our national dialogue has focused on how to get the Highway Trust Fund leveled off. To translate that into business terms, we’ve been trying to reach the same level of sales revenue and expenditures as the last year instead of growing revenue and expenditures to meet customer demand. The plain fact is that the gas tax is spinning off less and less revenue. Meanwhile, we’re anticipating 100 million new people in the country and 4 billion more tons of international freight to move around America by 2050.
Less revenue, more people, more freight, more gridlock. This is not a good formula for success. We should stop aiming just to get the Highway Trust Fund level again; we should aim to cut into a bigger piece of our infrastructure deficit by investing more - now.
The American Society of Civil Engineers has estimated the overall infrastructure needs of our country at $3.6 trillion by 2020. Now, that’s an all-in number including things other than bridges, roads and transit.
Other estimates say that we need more than $70 billion on an annual basis just to bring our highways up to a state of good repair. Every year we wait is compounding the investment our children and grandchildren will need to make - and passing those costs to them flies in the face of our national ethic of leaving future generations better off.
Second, we need to be reminded that, in the case of infrastructure, the fiscally responsible path is to invest now, not later.
Yesterday, I stood with Vice President Biden in Southwestern Illinois to commemorate the fifth anniversary of the American Recovery and Reinvestment Act, which made the largest investment in American infrastructure since Eisenhower built the interstate highway system almost 60 years ago.
And it turns out that making the investment then, rather than putting it off, was actually the smart thing to do.
Because while we all remember those years as a particularly painful time for the economy, that time period between 2008 and 2010 was an incredibly cheap time to pay for infrastructure. The cost of construction had dropped by 18 percent – and has risen since. We got more infrastructure projects for the dollar.
Unfortunately, the increasingly more typical example is the investment we weren’t able to make due to lack of funding.
In 2009, for example, Norfolk Southern, one of our Class 1 rail companies, decided it wasn’t cost effective to maintain the 135 miles of track they owned in Michigan. So the state tried to step in and buy that track because it was part of a crucial artery between Detroit and Chicago.
It took almost four years to secure the funding, though – and, by that time, the tracks had been neglected for so long that the repairs cost hundreds of millions of dollars more than they would have if Michigan had been able to make them in 2009.
At the federal level, it is perhaps not that noteworthy that funding challenges like this exist. But the cumulative effect of our years of instability and uncertainty is creating a massive chilling effect at the state and local level.
In fact, two weeks ago, when I was in Missouri, Senator Claire McCaskill told me that their state Department of Transportation has stopped investing in projects that build new capacity, in part, because of unpredictable funding.
Then, there’s a small community in Texas that, I’m told, began digging up their roads – and turning them back into gravel – because they couldn’t afford the maintenance costs.
In America? Folks, that’s not who we are. We are a nation that finds a way.
Third, as part of our case for more investment to tackle our infrastructure deficit, we also need to double down on reducing cost, just like any business would.
As executives, you know that sometimes when you have a low-performing asset, you can’t just pass all of the cost of fixing it to your customers. Sometimes you have to cut costs to make room for the investments that you really need.
An illustrative case is Ford. In 2006, the Ford Motor Company was on the brink. They may not have known it yet, but the company was about to lose more than $12 billion that year – and another $2 billion the year after.
And Alan Mulally, their new CEO, was tasked with restructuring the company ahead of – and in the midst of – the greatest financial crisis since the Great Depression.
Money was certainly a part of the solution.
In ’06, Ford put up nearly all of its assets as collateral, including its logo – the Blue Oval – and secured a $23.6 billion loan.
That said, Ford’s problem wasn’t just the cash flow – it was where the cash was flowing.
For almost 30 years, Ford had been known for its pick-up trucks, big cars that right before and during the recession few people were buying.
So, Ford got smart. They streamlined. They shifted their portfolio towards smaller, more economical cars.
And they made sure the entire company knew why they were doing it. Every employee carried a card with the company’s new mission statement – “One Ford” – in their pocket.
There are several good lessons from Ford’s comeback story, but among them is the importance of investing even when times are tough – and the necessity of investing wisely even if it means rethinking how you do your business.
The same is true of transportation. We don’t just need better funding. We need to, as my grandfather would say, leave no stone unturned – to squeeze every effective ounce out of our transportation dollars. That’s one reason why I do not think we should simply let the funding questions alone dominate the debate about transportation this year.
We have a surface transportation bill that will expire – and we need to go further than technical corrections to MAP-21, we need a bill that reshapes the transportation landscape for the 21st Century, building on MAP-21 but going further.
We need a transportation system smart enough to plan along economic lines, not just political ones.
We need to expand our ability to harmonize federal permitting processes and incentivize states to do the same. We can do so without jeopardizing the environment or project integrity, and in the process, save valuable time and money. When we do so, we also create a more conducive environment for public-private partnerships.
A recent McKinsey study found that countries can “obtain the same amount of infrastructure for 40 percent less” just by adopting best practices.
Sure, we have examples of best practices in the U.S. but we can do better. Just for the sake of argument, let’s say we could only achieve half of that 40 percent savings. If you applied that 20 percent savings to our last funding bill, MAP-21, that would have equaled $21 billion – that's a lot of additional projects.
We cannot do this work alone. Our partners at the state and local levels are critical. We have an agency with a $70-plus billion dollar budget, and more than $40 billion of that goes to states in formula dollars. We cannot be efficient if our states and other project sponsors are not efficient. In addition to stabilizing the Trust Fund, new investments could introduce new competitive programs that reward innovation and adoption of best practices at the state and local levels.
By taking this approach, we will dramatically increase the value proposition of federal dollars by encouraging investments that help whole economic regions, and improve mobility and quality of life.
You know how much this matters.
I want to go back to where I started. Somewhere in America right now, as sure as we are sitting here, there is a business leader and a Mayor or a Governor or a County Commissioner sitting around a table.
They’re talking about bringing jobs back to the USA. But they need an access road or that bridge or that rail line built in the right place, and if it happens, hundreds and perhaps thousands of people will start working again.
I’ve seen it happen in my prior life as a mayor and I see the opportunities all across America.
In Dubuque, Iowa, USDOT helped redesign the roads in part of the city where old mills and factories laid vacant – and when we did, IBM moved in and gave those old factories a new lease on life.
The Chamber, I mentioned, has been one of the loudest voices calling for an increase in the gas tax to fund surface transportation.
Your president, Tom Donohue, went up to the Hill last week and told Congress what a lot of people in this town don’t have the guts to tell Congress – that it was time to show a little courage.
Now, at DOT we happen to believe that we could pay for infrastructure with the savings from tax reform. But I would much rather see a national debate about how – rather than whether – we're going to tackle our infrastructure deficit. That's why I’m glad Tom is standing up -- we absolutely agree that Congress is going to have to show a little political courage to fix this problem. Their courage increases when core constituencies like all of you tell them it's okay to figure this out. It's actually the fiscally responsible thing to do.
We need you to speak up. All of you can play a role in putting our transportation system on a more certain and sustainable path. Tell Congress no more one-year or two-year band aids. Tell them what's at stake for you and your employees and the products you sell. Tell them to get to yes.
They care about your priorities. They care about your companies. They care about the jobs you create. And they will care when you tell them that turning this crisis around is your top priority.
So speak up – and, then, let’s get to work.
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