Report: Proposed Obama budget freeze could hit transportation

Despite the proposed three-year moratorium on increases in spending across 17% of the federal budget, the Department of Transportation could face near-term increases in infrastructure spending if a $154bn ‘jobs bill’ passes Congress. Longer-term decreases, though, might force a re-think of a major transportation spending bill before Congress and favour greater use of PPPs, transportation experts say.

US President Barack Obama intends to propose a three-year freeze in spending on parts of the national budget that could include transportation just as Congressional leaders were preparing to more than double allocations to the nation's worn-out roads and bridges.

The proposed spending freeze, reported by the New York Times and the Wall Street Journal, is to be unveiled at tomorrow night’s State of the Union address. 

A spokesperson for the Department of Transportation declined comment. A White House press officer declined to confirm whether the budget freeze would impact the transportation department. However, the Wall Street Journal has reported the transportation department would suffer budget cuts. Obama's proposal would freeze $447 billion in federal spending, or about 17 percent of the total federal budget. 

It's unclear how a spending freeze on overall transportation would affect the administration's plans for transportation infrastructure. Last month, the US House of Representatives passed a second stimulus package called the “Jobs for Main Street” bill – a $154 billion measure aimed at creating jobs – which could give the department of transportation another $39 billion to spend on infrastructure. The president has expressed his support for the jobs bill, as has Secretary of Transporation Ray LaHood.

The spending freeze could potentially pose a roadblock to a major push by House lawmakers to significantly scale-up the size of the US transportation budget. Last year, Democratic Congressmen James Oberstar and Peter DeFazio led a push to more than double the US transportation spending budget to $500 billion over six years, or roughly $80 billion per year. The Oberstar bill was not resolved, so Congress kept transportation spending at 2005 levels, and last month authorised roughly $64 billion in transportation spending for the federal government’s fiscal year 2010 budget.

Edward Kussy, an attorney at law firm Nossaman, believes the spending halt could give greater impetus to public private partnerships to provide some of the financing for infrastructure projects. “In a budget-constrained environment, in abstract, you’d want to say you’d spend more on lending programs that favour PPPs,” Kussy said.

Shirely Ybarra, a senior transportation policy analyst at the Reason Foundation, a free market think tank, believes the Oberstar bill contains provisions that merit further analysis, such as a proposed oversight body for public-private partnerships (PPPs) in the highway sector. The delay, Ybarra reasons, “gives an opportunity for a very serious discussion” about what should be in the bill. 

The spending freeze proposal comes as President Obama is facing increasing pressure to reign in the soaring federal budget, which exceeded available revenues by $1.4 trillion last year. It was the largest budget deficit as a share of GDP since World War II, according to the Congressional Budget Office, which today predicted this year’s federal budget deficit would top out at $1.3 trillion.