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Why Everyone Is Starting To Freak Out That We Might Be Headed For A 'Construction Shutdown'


July 4th, 2014

By Brett LoGiurato

Read More: http://finance.yahoo.com/news/why-ev...130000828.html

Travelers aren't the only ones who should be worried about Congress' next big economic crisis. Political analysts and groups with an interest in the outcome are starting to become anxious about the battle brewing this summer over the Highway Trust Fund – and they're not convinced any of the likely solutions being floated on Capitol Hill will solve the problem one leading lawmaker has dubbed a potential "construction shutdown."

The Highway Trust Fund, which is financed by gasoline taxes and pays for transportation and infrastructure projects, is set to run out by the end of the summer. The federal highway money will begin to dissipate at the beginning of next month and stop altogether by Sept. 30. --- In a letter to state transportation officials sent Tuesday, Transportation Secretary Anthony Foxx said funding for transportation projects would begin to be affected Aug. 1 if Congress does not take action. Foxx also warned states should expect about a 28% cut in federal funding for construction projects.

The fund is headed towards insolvency because the government now spends more money on those transportation and infrastructure projects than it collects from the gas tax, which has not been raised in over two decades. If the fund dries up, it could have dire consequences for the economy and cost the country hundreds of thousands of jobs, according to some estimates. These consequences make the fund's expiration date one of a few deadlines, including the reauthorization of the Export-Import Bank's charter , that has analysts worried about the economic headwinds coming out of Washington this year. These fears intensified when House Majority Leader Eric Cantor stunningly lost his Republican primary battle to a Tea Party insurgent.

In an email to Business Insider, Guggenheim Securities analyst Chris Krueger indicated the so-called construction shutdown is one of the main potential economic headwinds coming out of Washington this year. He also described the climate on the Hill as the "new hysteria" and warned it could make a solution "difficult" to reach. --- "The new leadership slate has a difficult challenge in the ~140 days to the midterms, with many conservative/Tea Party groups pushing for a more aggressive/confrontational leadership style," Krueger wrote. "Thankfully for the markets, there are few fiscal fights on the horizon this year, though. However, the highway bill and the Export-Import Bank could well fall prey to this new hysteria, as both face expirations before the midterms."

Thus far, Congress has failed to agree on a solution, and the federal government has begun amping up its warnings to states. The Obama administration has estimated as many as 700,000 jobs could be lost and about 112,000 active construction projects could be affected by either being delayed, deferred, or halted. Sen. Patty Murray (D-Washington), who has been the Democratic leadership's point person on the issue, has warned of the potentially disastrous "construction shutdown." President Barack Obama, sounding rather exasperated on Tuesday, pushed the four-year, $302 billion plan his administration has advocated as a solution to the problem — which has no chance of passing through Congress.

"It’s not crazy, it’s not socialism," he said in remarks in front of the Georgetown waterfront with the Key Bridge in the background. " It’s not the imperial presidency — no laws are broken. We’re just building roads and bridges like we’ve been doing for the last, I don’t know, 50, 100 years."

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