If Congress and the White House fail to deliver a deal on spending and taxes, funding for an array of federal transportation programs could suffer. But the bigger impact could result from an economic downturn that reduces travel and transportation demand.
A Fitch Ratings report last month warned that the fiscal cliff would drive the U.S. economy into a new recession and unemployment back to 10 percent. In 2009, domestic and international travel declined 5.3 percent from the year before, and Fitch forecasts that it could decline as much as 5 percent next year if the fiscal cliff triggers a broader downturn.
The aviation system would face a huge slowdown with potential cutbacks in operations and personnel, but air travel also would decline in a slowing economy. Highway and transit spending depends on the federal gasoline tax, and that would decline if Americans cut back on driving. Lower demand for consumer goods would hurt trucking companies, freight railroads and port operators.
Meanwhile, the Federal Aviation Administration would face a mandatory $1 billion budget cut that could result in fewer air traffic controllers and more delays for the implementation of NextGen, the advanced aircraft guidance system that replaces decades-old technology.
The Transportation Security Administration would be required to cut more than $500 million, which likely would lead to fewer security screeners and air marshals, and longer lines, at the nation’s airports.
The FAA referred questions about the fiscal cliff to the White House Office of Management and Budget, which estimated how much funding each agency would lose if Congress doesn’t act to avert it before the end of December. But in a speech to air traffic controllers in October, acting FAA Administrator Michael Huerta said it was something he preferred to avoid.
“These cuts would impact air traffic control services, NextGen implementation, and aircraft certification – all of which are critical to our ability to move forward with aviation in this century,” he said. “They would result in significantly less efficient and less convenient air travel service for the American traveling public.”
The Federal Highway Trust Fund is exempt from sequestration, as the automatic spending cuts are called in Washington, but there are still problems. The gasoline tax revenues that support the fund have been declining, in part because Congress hasn’t raised it in 20 years.
The same Congress that won’t raise the gas tax has bailed it out with more than $50 billion in general revenue during the past five years, and that spending is subject to sequestration.
Other transportation programs aren’t exempt, either.
Failure to reach a deal would slash $136 million from the same federal emergency fund that helped repair storm-damaged highways in states battered by Hurricane Sandy. It also would reduce $176 million from the Federal Transit Administration’s New Starts Program, whose grants have helped fund major transit projects across the country, including the Washington Metro’s new line to Dulles International Airport and the Bay Area Rapid Transit’s extension to Oakland International Airport in California.
Amtrak, which has never had a dedicated source of funding since its inception in 1971, would take a $131 million hit.
Joe McHugh, Amtrak’s vice president for government affairs, said the nation’s passenger railroad had anticipated some of the uncertainty over the fiscal cliff and built it into next year’s budget. Amtrak’s critics in Congress have threatened many times to zero out its subsidies.
“We’ve gotten used to this environment of ‘we don’t know how much we’re going to get and when we’re going to get it,’ so we plan accordingly,” he said.