Every once in a while something crosses our desk that strikes us as unusually timely and perceptive — and worthy of sharing with our readers. Such is the case with the remarks by Jeffrey N.Shane, delivered recently before a group of investors and senior transportation executives in New York City. Mr. Shane served until January 2008 as the Undersecretary for Policy at the U.S. Department of Transportation. He is currently a partner with the law firm Hogan & Hartson and a member of the firm's aviation and surface transportation practice group. Mr. Shane’s remarks are reproduced here in an abridged form.

I have been looking forward to sharing some thoughts with you this morning about what I think will almost certainly emerge as one of the most interesting and challenging periods for the transportation sector in a long time – probably since transportation was deregulated thirty years ago.

I don’t need to spend much time telling you why. First, of course, we are experiencing a level of congestion throughout the system today that is making the challenge of restoring health to the economy even more difficult, and that will be a continuing drag on economic growth even in more robust times if it isn’t addressed effectively. I’m not just talking about commuters stuck in traffic; I am referring even more importantly to goods movement, to serious bottlenecks in the international supply chain – including many in our own country. Whether you look at seaports, airports, rails, or roads, it’s worrisome.

Second, the consequences of under-investment in transportation infrastructure are more widely understood than ever before. Ironically, the iconic event – the tragic Minneapolis bridge collapse last year – probably was not evidence of under-investment, but rather of a design defect. But it became the poster child for the importance of rebuilding our transportation system nevertheless.

Third, the price of fossil fuel has begun to engender some major rethinking about everything – from modal choice to whether it still makes sense to manufacture things so far away from the customers you want to sell them to.

Fourth, the need to address climate change is now a "given" in the public policy equation – and nowhere more importantly than in transportation. Even aviation and shipping, both of which were given a freebie in the Kyoto Protocol, will have to meet daunting new emission reduction requirements in the post-Kyoto regime that will begin in just a few years. If they can’t, they will have to buy very expensive carbon credits from those who have met them. None of this has been worked out in much detail yet, but it’s coming.

Fifth, because governments are determined to protect the global supply chain from terrorism, new security requirements are raising the cost and decreasing the speed and reliability of transportation.

Sixth and last, government coffers – so long relied upon in the U.S. for our most important investments in transportation – are running dry. Many of you will have seen the recent statement by Secretary of Transportation Mary Peters regarding the insolvency of the gas-tax-based Highway Trust Fund. Maybe it’s time to ask whether it makes sense to rely so heavily on a tax we impose on a commodity the consumption of which we are trying to discourage – see my earlier reference to climate change -- and whose price has reduced consumption even more.

Transportation and Politics

One thing I know for sure is that transportation is going to be the focus of a lot of government attention over the next few years. I wish I could say with equal conviction that all that increased attention will be a good thing. It’s just too soon to tell. We are on the cusp of one of those watershed moments in our political history when the Executive Branch of the federal government will transition to new management at the same time the Legislative Branch undergoes its own shake-up.

Aside from some labor issues, however, we’re not likely to be able to predict anyone’s vote on a transportation policy question by reference to his or her political label.

Remember that, while Republicans like to say that they are for less regulation and that Democrats are for big government, the legislation that deregulated most of the transport sector in America was actually developed by a Democratic majority in Congress during a Democratic administration.

So things rarely are as they seem in political Washington, and it’s never easy to base predictions of the direction transportation policy will take on the outcome of elections.

Seriousness of Purpose

No – this isn’t about Democrats and Republicans, and it’s not about heroes and villains. Far more important than political affiliations to the future of our transportation system – and thus to the future of our country -- is what I will call, for lack of a better term, seriousness of purpose. The important questions are: Will the incoming administration and the new Congress understand that overhauling the way we deal with transportation is an essential prerequisite to sustainable economic growth in America? Will they understand that merely extending the life of old models and tacking on an inflation factor will likely turn this country into a second-rate power? And will they have the political courage to make timely decisions that are in the public interest, even if not every industry association is fully satisfied with the result?

If those questions sound hyperbolic to you, I would suggest that you haven’t fully appreciated the magnitude of the transportation challenges that we face. And whether you’re interested in federal support for increased port development, or an investment tax credit for the Class I’s, or a broadening of access to private capital in our highway system, or any other public policy issue affecting a particular mode, the going-in question is whether there will be – both within the new administration and the Congress -- an effective consensus about the importance of dealing with these essential questions in a fresh, timely, and relevant way. Even a cursory look at the last several years of what passes for transportation policy-making on Capitol Hill will make clear, I think, that the job just isn’t getting done.

We need timely action, and we need more than mere replications of previous authorizations. We need, more than ever before, contemporary thinking about how best to ensure that our transportation system will not merely accommodate growing demand, but will actually contribute to the pace of growth in our economy.

Now think about this: "SAFETEA-LU" -- the enabling legislation for our federal highway and transit programs -- will expire at the end of September 2009. The new administration that we’ll elect in November will have been in office for only eight months by then and will have spent a good part of that time getting staffed up. What do you think the chances are that Congress – which was two years late in enacting SAFETEA-LU under far less challenging circumstances -- will get its work done by the end of September 2009? I think the answer is zero. So we will almost certainly be stuck with extensions of the old legislation for some time. And if new ideas were badly needed back in 2003, at the beginning of that two-year delay, they are desperately needed now.

Why? Because of all those challenges I spoke of at the outset. Congestion is strangling the economy while a softening demand for gasoline is sending the Highway Trust Fund into deficit territory for the first time in history. There appears to be little interest in raising the gas tax. So what will we do? How long will it take the government to figure it out? How much will the delay cost us in terms of lost economic activity?

We’re in a similar fix right now with the federal government’s aviation programs. Congress was supposed to have reauthorized the FAA’s programs by October of last year -- 2007. Those programs – supporting airport development and air traffic control modernization, among other things – are huge economic drivers for the country. Despite increasing national frustration with congestion in our airways and the delays and cancellations that so often afflict travelers throughout the system, it didn’t happen. It now appears that those programs won’t be reauthorized this year either. Instead, as with the highway program, we will simply get extensions of old legislation until sometime in 2009. Given the economic challenges America is facing at the moment, this almost routine failure of Congress to engage meaningfully, in a timely way, on legislative obligations that should be treated as nothing less than "make-or-break," is simply dispiriting.

Time to Ask New Questions

There will have to be a much different quality of deliberation over the next surface transportation authorization than we have seen in past cycles if we are to establish effective responses to these challenges. It cannot be business as usual. We will have to ask ourselves fundamental questions about the nature and purpose of our transportation programs and the division of responsibility between the federal government, state and local governments, and the private sector.

Is a system created for the purpose of connecting up the country with Interstate highways in the 1950s likely to address successfully the problem of urban congestion? Is today’s federal-centric system better calibrated to deliver transportation improvements efficiently and responsively to localities than a system that vested greater resources and discretion in local governments? What would happen if we simply deemed much of today’s "federal" gas tax a "state" tax and allowed the states to use the proceeds as they saw fit? Why does federal law limit local discretion in the choice of tools for mitigating congestion that is experienced locally? How can we take greater advantage of the billions of dollars of private capital that are available for investing in transportation infrastructure without compromising the public interest? If the vast majority of economists who have examined the issue believe that more adequate pricing of transportation is the most obvious solution to the congestion problem, why isn’t pricing more widely adopted?

The important unknown is whether Congress will be prepared to take up these questions in a fresh and creative way, listening carefully to industry – to the commercial users of our transportation system – and will thus begin to find new and more effective solutions. The answer depends, I believe, on whether industry communicates to Congress in an effective way its need for more timely and effective legislation.

Conclusion

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