Republicans Have Unveiled Their Solution To The 'Highway Shutdown,' And Conservatives Already Hate It

The House Ways and Means Committee unveiled its plan to shore up the Highway Trust Fund, providing a proposed solution to what many on Capitol Hill view as Congress' next big looming crisis.

The House Republican plan, which was given a thrust of public support by House Speaker John Boehner on Wednesday, would provide federal financing for federal construction projects through next May. The plan would be financed through unusual offsetting, revenue-generating measures such as a method known as "pension smoothing" and various customs user fees.

The proposal is viewed as an early step toward an eventual congressional deal. A Senate committee spearheaded by Democrats is expected to introduce its own plan on Wednesday.

Lawmakers have warned that the Highway Trust Fund, which helps support tens of thousands of construction projects across the country, will be insolvent by the end of the month if Congress does not act to replenish it. The federal highway program itself is also set to expire on Sept. 30. The House committee's plan, however, was met from immediate resistance by some prominent Senate Democrats and some conservative groups who argue it amounts to a federal "bailout."

"I know these policies are not perfect, but they are viable, have been used by the House and Senate before and should pass both the House and Senate quickly," House Ways and Means Chair Dave Camp said in a statement. "With these policies, we can steer clear of another crisis showdown, and we should."

The highway funding bill would add inject a cash infusion of more than $10 billion into the Highway Trust Fund, which Camp said would fund projects through next May. The main objection from Democrats will likely be the length of the extension.

Democrats want to extend highway funding through the end of the year, which would allow for debate on a long-term solution sooner - and while they still have guaranteed control of the Senate. Republicans want to extend it so that it could be addressed again when they potentially control both chambers of Congress next year.

"The timing difference of three months versus eight months is not one of policy, but politics: the GOP could be in charge of the Senate next May after the midterms and the Republicans are looking for maximum leverage in the negotiations next year when highway spending could also line-up with the debt ceiling," Chris Krueger, a political analyst at Guggenheim Securities, wrote in a research note Wednesday.

Indeed, two Senate Democrats on the Environment and Public Works Committee (from which the Senate's version of the highway bill will emerge) said their main objection was the length. Both Sens. Barbara Boxer (D-California) and Tom Carper (D-Delaware) said it would only "create another fiscal crisis next year."

"This ill-conceived proposal would prolong uncertainty for business, local governments and the states and would create another financial crisis right before the next construction season," Boxer said. "Passing a long-term transportation bill this year would provide a real boost for our economic recovery."

However, Sen. Patty Murray (D-Washington), who has been Democratic leadership's point person on the issue, said Republicans' proposal left her "hopeful" about an eventual solution, even though she didn't comment on the length of the extension.

Some conservative groups also came out in opposition, providing a signal of the potential challenges House leadership faces in getting the bill passed before Congress leaves on a month-long recess in August. Dan Holler, a spokesman for the group Heritage Action, called it a "bailout" and said House Republicans were succumbing to "the Obama administration's reckless rhetoric."

The administration has warned it will start slowing financial support to states by next month if Congress does not replenish the fund. Heritage argues that wouldn't be a crisis, since state and local governments would still provide funding for construction projects.

It eventually wants to wind down the gas tax, which finances the Highway Trust Fund, and hand off control of infrastructure projects to state and local governments - something the conservative group Club for Growth also supports.

The House bill is financed through two main provisions, both of which have received bipartisan support:

• "Pension smoothing," which permits employers to delay contributions to employee pension plans, thereby increasing taxable corporate income and generating revenue for the Treasury ($6.4 billion).

• Customs user fees, a provision in last year's bipartisan budget deal that allows the Bureau of Customs and Border Protection to collect certain fees ($3.5 billion).

Analysts see the likely eventual end game being the preferred solution of Democrats - an extension through the end of the year.

"We also suspect that Senate Democrats will look to their House Democratic colleagues to keep the end-of-year option open," Krueger said.

"It is very unclear if the House GOP can pass this bill (or any highway bill) with only Republican votes, which means the influence of the House Democratic leadership should not be overlooked - particularly given the recent shake-up in the House GOP leadership. This is another reason why we suspect that the Senate Democratic plan of an extension to the end of the year seems the most likely destination for the current highway bill vehicle."