The Senate Commerce, Science, and Transportation Committee will hold a nomination hearing for Transportation Secretary-designate Elaine Chao. In addition to serving as the Secretary of Labor under President George W. Bush, she served as Deputy Secretary at US DOT under President George H. W. Bush, Chairman of the Federal Maritime Commission under Presidents Ronald Reagan and George H. W. Bush, Maritime Administration Deputy Administrator under President Reagan, and a White House Fellow at US DOT under President Reagan. Because of her experience in these positions, Elaine Chao will bring considerable substantive transportation knowledge and experience overseeing large organizations to bear as the Secretary of Transportation. We expect she will enjoy easy confirmation by the Senate.
Elaine Chao will likely be initially tasked with crafting and then moving Trump’s infrastructure proposal through Congress. In response to the Senate’s nominee questionnaire, Ms. Chao identified several issues that she would focus on as Secretary of Transportation. These included (1) effective enforcement of safety measures, strengthening US DOT’s planning and acquisition practices, and considering new technologies in infrastructure; (2) expediting the process of making repairs and building new construction and decreasing regulatory burdens; and (3) striving for equity between urban and rural areas and among modes of transportation.
Ms. Chao’s list of focus areas is so broad as to cover nearly all key functions of the Department of Transportation, so it does not provide significant insight into what her priorities as Secretary would be. However, there are a few issues we believe Ms. Chao will prioritize. These include regulatory reform, Buy America, and private sector innovation, such as support for autonomous vehicles to improve vehicle safety and for public-private partnerships to advance capital project more efficiently.
President-Elect Trump Infrastructure Proposal Update
Throughout the presidential campaign, President-elect Trump advocated for a large infrastructure investment package, however there are few details known about the proposal at this time. Trump initially said he would “at least double” Secretary Clinton’s $275 billion infrastructure proposal, and has at times called for un-named measures to support $1 trillion in infrastructure investment.
During the campaign, Trump associated himself with an infrastructure proposal drafted by Wilbur Ross, his nominee for Commerce Secretary, and Peter Navarro, recently named as the head of a new National Trade Council to advise the President on trade issues. The Ross-Navarro proposal would provide a tax credit to equity investors in infrastructure projects with the aim of attracting greater private investment in such projects and lowering project finance costs. The proposal relies on dynamic scoring to offset the tax expenditure. Revenues gained through tax reform (including one-time funding through deemed repatriation tax on overseas earnings) has been often cited as a viable pay-for for infrastructure funding, and many believe it would be difficult to fund an infrastructure package independent of tax reform legislation.
Because equity investors support a very small fraction of transit and highway projects – those with a dedicated revenue stream to pay back such investment – tax credits for equity investments are viewed by many transportation stakeholders as only a small part of the solution to our infrastructure investment gap. Stakeholders and even some Members of Congress have made clear that any infrastructure package must include grant funding in addition to finance tools.
Trump’s selection of anti-spending crusader Rep. Rick Mulvaney (R-SC) as the Director of the Office of Management and Budget appears to signal strong fiscal discipline by the next President – in any future infrastructure spending and across the Federal budget – so few expect Trump to propose a large stimulus-style spending bill like the one Congress and President Obama adopted in 2009. House and Senate Republican leaders have publicly stated there must be responsible methods of paying for any infrastructure spending.
With reauthorization of the FAST Act still a few years away, Trump’s still-developing proposal is likely to be seen by many transportation stakeholders as the best opportunity to advance their particular interests. While both Congress and the Trump Administration may have little appetite to take on difficult issues in what Trump has billed as a much-needed investment in America’s infrastructure and economy, some straightforward provisions are likely to travel on this bill. On a broader scale, any infrastructure package could also be an opportunity to secure a long-term revenue solution for the Highway Trust Fund (HTF). By the end of the FAST Act in 2020, HTF revenues will support only 55 percent of authorized spending from the HTF. So many transportation stakeholders view Trump’s large infrastructure investment bill as a well-suited vehicle to address this funding shortfall before the end of 2020. However, the Trust Fund’s systemic revenue shortfall has not become any easier to solve, due to: the growing size of the shortfall; bipartisan objections to raising the federal fuels tax; and little support for scaling back popular infrastructure programs.
While the President-elect prioritized infrastructure investment in his campaign, there are a number of potential impediments to successfully advancing a large infrastructure package. Congressional Republicans have recently identified reform of the Affordable Care Act, tax reform, and regulatory reform as the first proposals they will advance in the 115th Congress – not Trump’s transportation plan.
Another potential impediment is that an infrastructure package is simply not a must-pass bill: the FAST Act is in place until 2020. In 2017, the transportation committees in Congress will be focused on an upcoming Federal Aviation Administration (FAA) reauthorization deadline. The current FAA extension expires September 30, 2017, and reauthorizing aviation programs will likely be a priority for House Transportation and Infrastructure Committee Chairman Bill Shuster (R-PA).
One Congressional effort that would build support for infrastructure spending is the return of earmarks. The House is likely to vote on a bill early in 2017 that would reestablish earmarks. In the past, infrastructure bills often enjoyed enormous bipartisan support because many Members were able to secure direct funding for projects in their district or State through earmarking. At this time, it is unclear if earmark supporters have the votes to overturn the earmark ban.
Regulatory Activity
“Drones Over People” Rule Expected Soon
The Federal Aviation Administration (FAA) continues to work on a proposed rule allowing the operation of unmanned aircraft systems (UAS) over people, and has been expected to release the proposed rule before the end of the Obama Administration on January 20, 2017. The proposed “drones over people” rule will significantly expand allowable UAS operations, likely allowing the operation of UAS over individuals that are not directly involved in the operation of the UAS. After the “drones over people” rule is issued, FAA will focus on drafting a propose rule allowing beyond visual-line-of-sight operations. These newly proposed rules follow the final rule on the Operation and Certification of Small Unmanned Aircraft Systems, which went into effect on August 29, 2016.
This Week’s Hearings:
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On Wednesday, January 11, the Senate Commerce, Science, and Transportation Committee has scheduled a confirmation hearing on the expected nomination of Ms. Elaine Chao to be Secretary of the United States Department of Transportation.
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On Wednesday, January 11, the Senate Homeland Security and Governmental Affairs Committee has scheduled a confirmation hearing on the expected nomination of General John Kelly to be Secretary of the United States Department of Homeland Security.
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On Thursday, January 12, the Senate Commerce, Science, and Transportation Committee has scheduled a confirmation hearing on the expected nomination of Mr. Wilbur Ross to be Secretary of the United States Department of Commerce.
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