Obama's Budget: Enough Infrastructure Investment?

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Much of the news surrounding President Obama’s 2013 budget proposal centers on his plan to “tax the rich,” and granted, it’s a contentious issue, whether you see the merits of the plan or think that it’s completely off-base for solving the country’s problems.

However, as far as the metals sourcing world goes, a much more important section of Obama’s 2013 budget contains the Department of Transportation (DOT) line items. As MetalMiner’s previous discussions with Roger Ferch of the National Steel Bridge Alliance showed, much needs to be done between federal and state governments to provide a clear path for the implementation of Buy America, for example, as it relates to infrastructure, thereby supporting the steel industry (and other metal sectors).

In another interview with Jennifer Diggins of Nucor (who will be speaking at our conference, Commodity EDGE), Diggins stressed that legislative steps must be taken to remedy the US’ crumbling road, bridge, air and water infrastructure to secure the competitive advantage of domestic manufacturing. However, in context of Buy America, implementing federal funding is a different story: “We’re continuing to run into issues where federal dollars are going through different federal agencies other than the DOT, and once it hits the state level, (we’re unsure) what they actually do with it,” she said.

So by the look of the 2013 transportation budget, there is much more at stake for US workers and manufacturers.

Transportation Breakdown

Obama proposes to double the Transportation department budget over the next six years, including a 2 percent overall increase ($1.4 billion) in funds for the next year, according to the official document. It also highlights a $50 billion pledge for 2012 to improve roads, bridges, transit systems, border crossings, railways, and runways; $47 billion over six years to build up a high-speed rail network; and more than $1 billion in fiscal 2013 for the Next Generation Air Transportation System, which will update air traffic control systems.

The money will come from a “peace dividend” — in other words, cash no longer being used to fund the military wartime efforts in Iraq and Afghanistan.

However, some point to these proposed amounts still not being enough to cover the country’s infrastructure needs. The Washington Post points to “a 2010 report by 80 experts, led by former transportation secretaries Norman Y. Mineta and Samuel K. Skinner, call[ing] for an annual investment of $262 billion in the nation’s deteriorating transportation infrastructure…that estimate may even be on the low side.”

Another Key Budget Area: Energy

Although Obama proposes to cut out $40 billion of tax breaks for the oil and gas industry — which could have adverse effects on metals producers/suppliers, especially those that supply oil and gas infrastructure — “the Energy Department budget also includes $12 million for a multiyear research effort to reduce risks associated with hydraulic fracturing in shale formations. Pipeline safety would receive a 70 percent, or $64 million, increase,” a Bloomberg article reads.

If the federal government pools its efforts with the gas industry rather than working at cross purposes, this piece of proposed budgeting could actually help companies like Halliburton create cleaner ways of fracking, or replacing fracking with new technologies entirely.

All in all, the DOT budget line items don’t seem to be the crux of the impending battle between Democrats and Republicans over approval. But the increased outlays for infrastructure seem to reflect Obama’s rosy view of where the US economy is going. His administration is projecting GDP growth to be 2.7 percent, which many analysts think to be overly optimistic.

Ultimately, whoever is in the White House a year from now, it’s clear that infrastructure investment is clearly a priority; but so is sound, efficient implementation and accountability. Otherwise, domestic manufacturers and their workers will suffer.

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