Obama says Congress will kill jobs if highway funds aren't extended

President Obama fired a shot across the bow of congressional Republicans Wednesday, urging action on transportation bills in which he says 1 million US jobs are at stake.

The president said a significant delay in the bills could mean a million people "will be out of a job just because of politics in Washington.... That's just not acceptable. That's inexcusable."

For now, the "inexcusable" label amounts to a preemptive attack, intended to goad Congress into action when lawmakers return from vacation next week. But there's not much time left for Congress to act before both the gasoline tax and funding for road projects expire on Sept. 30.

The difference between the two sides: Mr. Obama and Senate Democrats want to spend far more on transportation than the Republican-controlled House.

Both sides say they want to avoid a construction shutdown, but recent months have seen fiscal fights go down to the wire – including a partial shutdown of the Federal Aviation Administration (FAA).

Behind the debates are fundamentally opposed views on the size of government and its role in job creation. With his transportation comments, Obama is stretching to reset a fiscal atmosphere that has moved sharply toward spending restraint.

From highway funds to hurricane relief, spending that traditionally might have sparked little contention now holds the potential for protracted stand-offs.

Obama's call to fund construction jobs comes as more than 9 percent of the labor force is out of work, and as the persistence of unemployment has weighed on his approval ratings. It also sets the stage for Obama to pitch a larger array of job-creation plans to the nation in seven days, even as rival Republican candidates are unveiling their own blueprints on jobs.

The president, while he has embraced the goal of spending restraint over the long term, says that cutting federal spending too sharply in the short run could harm the economy.

His job proposals next week are expected to include a blend of tax cuts and spending – including on transportation – designed to encourage job growth.

"We have to have a serious conversation ... about making real, lasting investments in infrastructure," Obama said Wednesday. "At a time when interest rates are low and workers are unemployed, the best time to make those investments is right now."

Given the new fiscal environment, the real debate is not so much about stimulus as about the degree to which government spending will be restrained after record years for federal deficits.

A so-called fiscal super-committee is poised to work this fall on new deficit-reduction measures under a budget act recently signed by Obama.

The surface-transport bills in the House and Senate differ markedly. The Senate plan would provide $109 billion in funding over the next two years The House plan calls for $230 billion over six years, or a roughly a one-third cut from recent spending levels.

The Senate plan, backed by Barbara Boxer (D) of California, represents less funding than Obama and many infrastructure boosters hope for. But it would cost more than the revenues from a tax of 18.4 cents per gallon of gasoline, which flows into the Highway Trust Fund.

The House plan would be leaner still, but Rep. John Mica (R) of Florida says it would steer the trust fund out of looming insolvency, and that the funds can be sufficient if partnered with private-sector money.

From construction workers to state governments, many parties that depend on federal highway funds worry about a possible impasse, as occurred recently with the FAA. It's uncommon, they say, for a transportation bill to be so far from resolution so close to when funding expires.

The American Association of State Highway and Transportation Officials issued a statement Wednesday saying it joined the president in
"urging Congress to extend legislation to fund Federal highway and transit programs."

The potential showdown follows other difficult budget-related battles this summer.

For more than a week, airline passenger taxes went uncollected and many FAA programs were put on hold before Congress reached a deal. That followed an even larger stand-off in Congress over conditions for raising the nation's debt ceiling – a dispute that raised talk of a possible default on US Treasury debts.

Another sign of the fiscal pressures on Washington comes from Hurricane Irene. Republicans including Rep. Eric Cantor say that if Congress needs to appropriate new disaster-relief funds through FEMA (the Federal Emergency Management Agency), that money should be offset by other budget cuts.

Many fiscal conservatives say that's a prudent approach, at a time when credit-rating agency's like Standard & Poor's are taking a dimmer view of America's fiscal health.

But it would represent a departure from an era when lawmakers often wouldn't think twice about boosting deficits to cover disaster costs.

Republicans argue that downsizing government will help to boost private-sector confidence and job creation. But an official from the US Chamber of Commerce stood with Obama and AFL-CIO president Richard Trumka Wednesday, in solidarity against any delay in continued infrastructure spending.

A panel of about 250 business economists, in a recent poll, was split on the proper stance for fiscal policy. Some 49 percent said government should become "more restrictive," with smaller deficits over the next two years.

But a sizable minority, about 37 percent, said policy should be more stimulative, in the survey by the National Association for Business Economics.