Answers to Frequently Asked Questions
- What's the goal of the Start Us Up USA! campaign?
Our goal is to put Americans back to work in the struggling construction equipment industry. Start Us Up USA! will highlight the deep depression plaguing the men and women of our industry and urge the federal government to act now on transportation legislation that will create jobs and spur economic recovery. Eighteen months is too long to wait if President Obama and Congress want to put us back to work before the spring construction season starts in early 2010.
- Who is backing this campaign and why?
Start Us Up USA! is a joint effort by the Association of Equipment Manufacturers (AEM) and the Associated Equipment Distributors (AED), who together represent a large portion of the manufacturers and distributors of construction equipment nationwide. AEM and AED came together to create this grassroots campaign as a way to bring attention to the critical economic situation facing the construction equipment industry and to urge Congress to take immediate action on key solutions.
- Congress and the Obama administration already have a full agenda with health care, climate change, a slumping economy and two wars. Wouldn't an 18-month extension give Congress time to deal with these other, some might say more pressing, issues before turning attention to highway legislation?
It's important to recognize that the construction and manufacturing industries – two of the most pivotal sectors of the U.S. economy – are mired in a deep depression. Demand for construction equipment has cratered by 50 percent over the past two years, causing significant layoffs and hardship in the manufacturing and distribution network. All the while, our roads, bridges and other critical infrastructure are literally crumbling before our very eyes. Investment in upgrading our nation's infrastructure will not only help ensure that America remains competitive globally, but it will also create the jobs, wealth and economic stability necessary to address many of these other challenges – like health care and continued environmental improvement.
- How many jobs has the construction equipment industry lost as a result of the current economic crisis?
The construction equipment industry has been one of the hardest hit during this slump and continues to weigh down the rest of the economy. The respected analysts at IHS Global Insight estimate that this sector's economic output has contracted by nearly 40 percent resulting in the loss of approximately 550,000 jobs. Put another way, two out of every 25 jobs (8 percent) lost since the start of this Great Recession can be traced to the downturn in construction equipment spending.
- How many machines are sitting unused across the country? If we start those up, how many jobs will it create?
While it's almost impossible to say exactly how many machines are sitting unused, we estimate that there are hundreds of thousands considering that spending on construction equipment has fallen by more than 50 percent. What we can say with certainty is that investing in long-term funding to improve our nation's infrastructure will also create millions of good-paying jobs. For instance, transportation spending alone has the potential to create and sustain six million jobs.
And infrastructure funding is about much more than job creation. A University of Maryland analysis has shown that every $100 invested in infrastructure returns $350 to the U.S. economy. Modern transportation infrastructure is essential to economic growth, increasing productivity and maintaining the competitiveness of American businesses.
- You say our nation's critical infrastructure is crumbling, what is your estimate of how many transportation-related construction projects nationwide are in jeopardy due to lack of adequate funding?
The U.S. Department of Transportation estimates that the current backlog of unfunded but needed road, highway and bridge repairs would cost $495 billion. In addition, a blue-ribbon commission appointed by Congress to study America's transportation policy found that Congress would need to fund the federal highway program at levels between $65 billion and $100 billion annually to improve the system and address serious needs. That's a minimum increase of at least $25 billion per year over current levels. We think it's safe to say that these numbers translate to thousands, if not tens of thousands, of unfunded projects in every state.
- The goal of the American Recovery and Reinvestment Act (ARRA) was to create jobs. To date, $787 billion as already been spent. Shouldn't that have helped get the construction sector get moving again?
The stimulus bill helped kick-start the economy in a number of places and other sectors are seeing a positive response. However, the reality is that only 15 percent of stimulus bill funding went to infrastructure improvement. Many of the transportation projects that the states decided to pursue were primarily shorter-term, shovel-ready projects – like repaving. Those modest projects don't go very far in terms of fundamentally improving and expanding our nation's transportation system, with the view that the SAFETEA-LU reauthorization bill was coming quickly. As a result, unfortunately, the stimulus funds did not make it down to the construction industry. What will make a real difference in creating jobs and growing our economy is providing state transportation departments with an adequate, stable funding stream. That way, they can plan for, and invest in, longer-term transportation projects that benefit the public.
- Most sectors of the economy are suffering right now. Job losses are widespread across multiple industries. Why does the construction equipment industry deserve more attention than other sectors?
The construction equipment industry has been one of the hardest hit during this slump and continues to weigh down the rest of the economy. Two out of every 25 jobs lost since the start of this Great Recession can be traced to the 50-percent decline in construction equipment spending that has decimated this industry.
But Start Us Up USA! isn't about bailing out construction and manufacturing. It's about investing in our nation's future. A safer, less congested transportation network is critical to America's prosperity and competitiveness. Just as importantly, investing in these needed improvements would spur a real economic recovery by creating millions of good-paying jobs. The economic "multiplier effect" of these jobs – the positive impact they spread throughout the economy – means that restoring growth and vitality to these manufacturers, distributors and repair stations will not only spur our nation's overall economic recovery but will ensure its sustained health and growth over the long term.
- I see highway and road improvement projects in progress everywhere I drive these days. With all those projects underway, how can the construction equipment industry be hurting?
Government spending on infrastructure improvement peaked in 2002 and has declined by an average of 1.6 percent annually ever since. During the same time period, our economy grew at an average annual rate of 2.4 percent – so even as we have been using our critical infrastructure more and more, we've been investing in it less and less.
Spending on construction equipment has fallen even faster – declining by 50 percent compared its peak in 2006. As a result, this industry's economic output has contracted by nearly 40 percent and shed approximately 550,000 jobs. That means approximately two out of every 25 jobs lost since this recession began can be traced to the downturn in construction equipment spending.
- What impact would passing new transportation legislation have on the construction equipment industry? How many new jobs would it create?
Investing in our nation's highways, transit and rail systems create jobs. It also promotes the type of economic growth that will be central to a full economic recovery for our nation. In fact, each billion dollars of federal highway investment creates approximately 35,000 new jobs. The reauthorization bill proposed by Chairman Oberstar and Chairman DeFazio of the House Transportation & Infrastructure Committee would create or sustain approximately six million family-wage jobs in the U.S. while improving our nation's infrastructure and laying the foundation for future economic growth.
- How much additional funding is really needed to keep our nation's infrastructure from crumbling?
We believe that the United States must invest more than it currently does in our nation's transportation infrastructure to maintain and improve the system. A blue-ribbon commission appointed by Congress to study America's transportation policy found that Congress would need to fund the federal highway program at levels between $65 billion and $100 billion annually to improve the system and address serious needs. Currently, federal highway funding is less than $40 billion per year. Or put another way, the U.S. spends at most two-thirds of what we should to maintain and improve our transportation system.
- Are there specific policies that you think should be included in the new transportation bill?
We desperately need a greater commitment to upgrading our country's critical infrastructure. Besides providing the increased funding necessary to make that investment, we also urge Congress to:
- Streamline the project approval process. The process of moving a transportation project from planning to reality is a bureaucratic nightmare that delays major improvements by 13 years, on average.
- Promote long-range planning. Cities and states should take a comprehensive approach to ensure investments are strategic and effective.
- Provide incentives. New equipment can be significantly cleaner and more efficient than most machines in operation today. Congress should help make this eco-friendly equipment more affordable for customers and encourage private sector investment in transportation through the creation of a National Infrastructure Bank.
- What else could Congress do to help?
In addition to the highway bill, there are a number of other things Congress can do to get the construction industry back on track.
- Water infrastructure legislation passed by the House and pending in the Senate would dramatically increase federal investment in sewers and drinking water. Like the highway bill, this legislation would put people back to work while addressing critical public health, environmental, and economic needs. Legislation to increase investment in airports is also pending on the Hill and should be a priority.
- The home purchase tax credit Congress created in 2008 and enhanced in this year's stimulus bill appears to be having a positive impact. Congress should extend and expand the tax credit by eliminating the income cap and first time homebuyer status requirements. This would help support continued recovery in residential real estate markets.
- The capital investment incentives in the stimulus bill (the depreciation bonus and increased Sec. 179 expensing levels) should be extended to help motivate equipment purchases in the year ahead. Additionally, Congress should consider tax credits to help contractors buy newer "clean diesel" equipment and retrofit older machines. Combined with the highway, water, and airport bills, these tax credits would be a one-two punch that would really help get equipment markets back on track.
- Extending and expanding eligibility for net operating loss carry-back benefits would free up cash for struggling equipment distributors and manufacturers, help them meet payroll, and keep the doors open.
- Finally, the construction industry is facing an unprecedented credit crisis. Congress needs to make sure that dealers and manufacturers have access to capital to run their companies, that customers can get credit to buy equipment, and that developers can access the money they need to undertake new construction projects.
- Why do we need to increase transportation funding? In this economy, and given all the other pressing issues on the table right now, isn't it enough to maintain current spending levels on transportation?
Present funding and revenue levels are not sufficient to support even current investments for highway, highway safety and public transit in the year 2010 and beyond. In addition, Americans suffer from a number of transportation-related problems that must be improved if our country is to remain competitive globally and support a 21st Century economy.
For example, commuters in major metropolitan areas waste 4.2 billion hours annually stuck in traffic at a cost of at least $87 billion each year in lost productivity and wasted fuel. And at least 33 percent of our nation's major roads are in poor or mediocre condition and 26 percent of bridges are structurally deficient or functionally obsolete. More than half of all highway fatalities – 22,000 deaths annually – are related to deficient roadway conditions. A safer, less congested transportation network is critical for America's future economic prosperity.
- Increased funding for transportation would most likely come from hiking the gas tax. Considering we're still in the middle of the worst recession since the Great Depression, does a tax increase make sense?
The motor fuel tax, which is the primary source of surface transportation funding, was last increased 16 years ago. Since 1993, Americans have significantly altered their driving habits – driving fewer miles and purchasing more fuel-efficient vehicles. While this may be good news for our environment, it is bad news for our roads because these user fees have lost 33 percent of their purchasing power. By 2015, the purchasing power of the fuel tax will be half of what it was in 1993.
While we certainly support exploring financing alternatives, we also support an increase in user fees in order to create safer, less congested roads, reduce pollution, create jobs and spur economic growth. And, we are not alone. The U.S. Chamber of Commerce, American Automobile Association and American Trucking Associations all recognize the need for greater investment. These influential groups all support increasing the user fee – provided the funding is dedicated to improving our transportation network.
- Won't additional funding for transportation increase the already skyrocketing federal deficit?
The federal highway program is financed by motor fuel taxes and other highway user fees. It is a pay-as-you-go system in which the taxes are already collected before the Federal Highway Administration distributes any money to the states for roadwork. The Highway Trust Fund, the primary funding vehicle for the program, must keep a balanced budget by law. In other words, the federal highway program is funded by a deficit-proof trust fund, which is in turn financed by taxes imposed only on those who use the highways. It is one of our nation's most fiscally responsible government programs.
- What does the future look like for this industry if we don't have a new highway bill on the president's desk for signature by the beginning of next year?
An 18-month extension of the current law only prolongs the deep depression ravaging the construction equipment industry. State departments of transportation need long-term, predictable funding to plan adequately and make spending decisions. Without that certainty, they will be hesitant to make significant investments that require them to commit funds they may not have – instead favoring much smaller, "shovel-ready" projects that have a limited impact on stimulating the overall economy and solving larger mobility problems.
The construction and manufacturing sectors together accounted for more than half of all job losses in August. We will continue to see this type of bleeding until a long-term highway reauthorization bill is in place. Delay will also force Americans to continue to wait for safer roads, less congestion and increased transit options.