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AED Washington Insights Newsletter

AED Washington Insights

September 2010

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Prepared by Christian A. Klein, AED Vice President of Government Affairs
and the AED Washington team

In this Issue:


President Obama Unveils Plans for Infrastructure Investment

At a Labor Day rally in Milwaukee, President Obama announced that he will pursue an aggressive new initiative to increase infrastructure investment to turn the U.S. economy around.

The White House proposal is a combination of front-loaded surface transportation spending and long-term infrastructure investment that aims to:
  • Rebuild 150,000 miles of road

  • Construct and maintain 4,000 miles of rail

  • Rehabilitate or reconstruct 150 miles of runway
Those goals would be accomplished through:
  • An upfront investment of $50 billion to "help jump-start additional job creation, while also laying the foundation for future growth"

  • A new "long-term framework to reform and expand our nation's investment in transportation infrastructure." SAFETEA-LU, the most recent multiyear highway authorization law, expired last September. After almost a year of inaction, the White House is now urging Congress to "complete a long-term reauthorization that expands and reforms our infrastructure investments and returns the transportation trust fund to solvency."
The White House is proposing some significant policy changes as part of the initiative, including:
  • Establishing an Infrastructure Bank to "leverage federal dollars and focus on investments of national and regional significance that often fall through the cracks in the current siloed transportation programs." The White House is urging a break with the federal government's traditional distribution of transportation money through earmarks and state formula-based grants. Instead, Obama wants an Infrastructure Bank that will base investment decisions on "clear analytical measures of performance, competing projects against each other to determine which will produce the greatest return for American taxpayers."

  • Putting high-speed rail "on an equal footing" vis-à-vis other surface transportation programs to "ensure a sustained and effective commitment to a national high speed rail system over the next generation."

  • Streamlining, modernizing, and prioritizing surface transportation investment by consolidating more than 100 different programs and focusing on performance measurement and "race-to-the-top" style competitive pressures to drive investment toward better policy outcomes.

  • Expanding investments in areas like safety, environmental sustainability, economic competitiveness, and livability – helping to build communities where people have choices about how to travel, including options that reduce oil consumption, lower greenhouse gas emissions, and expand access to job opportunities and affordable housing.
So what does it all mean?

There is a strong nexus between highway investment and equipment sales. A 2008 AED study found that each dollar spent on roads created 6.4 cents in market opportunity for equipment distributors (sales, rental, product support, etc.). That is why highway reauthorization has been AED's top legislative priority for several years.

AED has been disappointed by the administration's failure up until this point to focus on long-term infrastructure investment. The construction industry would almost certainly have been worse off without last year's stimulus bill. But, a one-time infusion of cash is like giving a sick patient a pain killer: it makes them feel better for a short time, but it doesn't address the underlying problem.

The collapse of the housing market and the general economic slowdown have wreaked havoc on the equipment industry. Unfortunately, inaction in Washington and the uncertainty surrounding future federal highway investment have made matters worse. Without a clear sense of how money will be coming through the pipeline, states can't plan major projects and contactors don't know how much work they'll have. As a result, they're sitting on their hands and not buying new machines. That's part of the reason that the equipment industry has lost 37 percent of its workforce since the recession started.

For more than a year, AED has been working with the Association of Equipment Manufacturers (AEM) through our Start Us Up USA! campaign to aggressively lobby Congress and the administration about the urgent need to reauthorize the highway program. We're also working with other organizations, including the U.S. Chamber of Commerce, the American Road and Transportation Builders Association, and the Associated General Contractors through various other coalitions. In a time when construction unemployment has been pulling up the national jobless rate, we've all been scratching our heads about why the administration hasn't made construction industry recovery a higher priority.

Obama's announcement suggests that the message has gotten through. The White House has finally connected jobs, long-term economic growth, and infrastructure investment. In the administration fact sheet announcing the new effort, the Obama administration is now acknowledging the need for a long-term reauthorization and the need to shore up the Highway Trust Fund (HTF).

That's great news; assuming it's paired with action on a long-term investment plan, another $50 billion infusion of infrastructure money could make a big difference for the industry as stimulus project money starts to run out. Also, some of the reforms the president is proposing could improve public perceptions about the road program. Creating more transparency and efficiency may help restore public confidence, which could make the public more willing to support user fee increases in the future. Further, streamlining the distribution of money could help get projects underway more quickly.

But the details released to-date suggest the plan has some shortcomings:

First, while acknowledging the need to strengthen the HTF, the administration has so far said nothing about how to create new sustainable revenue streams. This will inevitably lead to more uncertainty down the line. AED supports significant increases in infrastructure investment, but we've long said it should be done in a fiscally responsible manner. Given the current economic situation, deficit financing in the immediate term makes sense. We understand that the White House has done what's politically feasible at the moment. But ultimately we can't borrow our way to better roads.

Second, the White House proposal suggests the need to increase investment in "livability." That's political shorthand for transit and pedestrian-programs that channel highway money away from highways. Urban mobility and transit must be part of the comprehensive transportation plan, but we also need to be mindful of the fact that rural economic development – not to mention personal and freight mobility and national security – depends on roads that go through sparsely populated areas. If the new investment is truly going to lay the foundation for America's future economic growth, it needs to be carefully balanced.

Third, the president has proposed changing how the money is distributed and allocated between the states. Basing investment on performance sounds good in the abstract, but does that mean we won't be building roads in rural areas just because they'll have fewer users?

Finally, we're disappointed that water infrastructure isn't part of the package. Our nation has hundreds of billions of dollars in sewer and drinking water needs that are largely ignored because the systems are underground. Recent House votes demonstrate there is a strong, bipartisan consensus on Capitol Hill that we need to increase water investment. Adding water infrastructure to the plan could make it a more attractive overall package.

So where is it all going?

There are significant barriers to getting any legislation through Congress before the end of the year, not to mention dramatic new tax and infrastructure proposals. First, there's a matter of time. Congress only recently reconvened after the August recess and is scheduled to adjourn in late September to give lawmakers plenty of time to campaign. Although Congress will likely return briefly after the elections, lame duck sessions rarely accomplish much.

Then there's the question of getting enough votes to pass a bill. With the political winds strongly at their backs, Republicans have no incentive to cooperate with the White House or Democratic leadership on this or any other legislation. GOP leaders have already started hammering the president's new infrastructure proposal.

While there is general level of support for infrastructure in the Democratic caucus, the electorate's mood tempers such support. Many members of the party are reluctant to vote for anything that will add to the deficit or raise taxes on industries and individuals.

All that being said, the current extension of the last multiyear highway law expires at the end of 2010. Another extension is inevitable. That, plus the legislation that Congress will have to pass to keep money flowing to government programs in the absence of normal appropriations bills, will provide potential vehicles for aggressive near-term action on infrastructure.

In the final analysis, we're glad the president is making the connection between infrastructure and jobs. But, whether the new initiatives mark a real shift in White House focus or just last-minute election year posturing remains to be seen. Ultimately, actions will speak louder than words or fact sheets.

Rest assured that AED will continue working with the administration and Congress to get long-term highway, airport, and water authorization bills done as quickly as possible to restore stability to construction markets and get the equipment industry back on the road to recovery. Stay tuned for action as this story unfolds.



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Small Business Bill Sails through Senate with Depreciation Bonus

The saga of the Small Business Lending Fund Act (H.R. 5297) finally ended Sept. 16 as the Senate approved the long-stalled legislation, 61-38. Retiring Republican Sens. George Voinovich (R-OH) and George LeMieux (R-FL) broke ranks with the GOP and supported the measure's passage, which included a top AED priority, reinstatement of the 50 percent depreciation bonus for 2010.

The legislation also creates a lending fund to provide capital for small business. Many of its provisions have traditionally enjoyed bipartisan support. However, in the face of the upcoming elections, the bill has been caught up in the political posturing of Democrats and Republicans.

Extending the popular 50 percent depreciation bonus for 2010 has been a top priority and AED has led an ad-hoc coalition of business groups in support of the measure. In recent weeks, AED intensified our lobbying efforts to remind our friends on the Hill in both parties about the importance of this issue. We are going to continue to push the House until final passage occurs.

As Insights went to press, the House was expected to approve the measure and send it to President Obama within the next few days, thus making it law in the very near future.

Section 1099 Reform Unsuccessful

Unfortunately, attempts to repeal the IRS 1099 requirement from the health care law failed. The provision, which goes into effect in 2012, would subject businesses to data collection and IRS filing burdens on virtually all non-credit card purchases totaling $600 or more with any vendor in a tax year. AED recently joined hundreds of businesses and associations encouraging the repeal of the tedious requirements.

The Senate held votes on amendments offered by Sen. Mike Johanns (R-NE) to repeal the 1099 mandate and one offered by Sen. Ben Nelson (D-NE) that would have increased the reporting threshold to $5,000 and eliminated the new filing requirement for businesses with fewer than 25 employees. Both amendments failed to garner the 60 votes needed for adoption.



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AED ImPACting Key Races

From coast to coast, AED PAC continues to engage pro-growth and pro-infrastructure candidates in competitive electoral races. In the face of a possible sea change in the composition and leadership of the next Congress, engagement is critical to advancing the long-term needs of the equipment industry.

PAC checks have been delivered by equipment distributors to candidates at ImPACt 2010 events across the country, including:
  • Colorado House Majority Whip Cory Gardner, Republican congressional candidate in the state's fourth congressional district by the Colorado AED local group (Gardner's family owns a Case dealership in Colorado)
  • House Transportation & Infrastructure Committee Ranking Member John Mica (R-FL)
  • Finance Committee Ranking Member Charles Grassley (R-IA) by the Iowa-Nebraska Equipment Distributors
  • House Ways & Means Committee member Geoff Davis (R-KY) by the Kentucky AED local group
  • Richard Hanna (R-NY), a former highway contractor running in New York's 24th congressional district
  • House Transportation & Infrastructure Committee member Tim Holden (D-PA)
  • Senate Commerce, Science, & Transportation and Small Business & Entrepreneurship Committees member Johnny Isakson (R-GA) by the Georgia AED local group
  • Sean Duffy (R-WI), running for the open seat in Wisconsin's 7th congressional district
  • Senate Finance and Energy & Natural Resources Committees member Blanche Lincoln (D-AR)
  • Former Rep. Mike Fitzpatrick (R-PA), running for his old seat in Pennsylvania's 8th congressional district
  • Candidate Steve Stivers, frontrunner in Ohio's 15th congressional district, by the Ohio AED local group
Several other ImPACt events will take place in the weeks ahead.

The list below shows AED members who have contributed to AED PAC this year. Only executives and owners of AED distributor member companies that have given solicitation consent in accordance with the Federal Election Campaign Act are eligible to support AED PAC. For more information, contact AED Vice President of Government Affairs Christian Klein at 703.739.9513 or caklein@aednet.org.

2010 PAC Contributors

President's Circle ($5,000)
James E. Stephenson, Yancey Bros. Co.
Donna Y. Stephenson, Yancey Bros. Co.
Kenneth E. Taylor, Ohio CAT

Chairman's Caucus ($2,500)
Donald Chambers, D.C. Consulting
Tom Kirchhoff, Cleveland Brothers Equipment Co., Inc.
Lucinda Leppo, Leppo Rents/Bobcat of Akron
Wes Stowers, Stowers Machinery Corporation
Gerald W. Tracey, Tracey Road Equipment
James Cowin, Cowin Equipment Company Inc.
Robert Henderson, Associated Equipment Distributors

Capitol Club ($1,000)
Diane M. Benck, West Side Tractor
Walter Berry, Berry Companies, Inc.
Craig Burkert, ROMCO Equipment
Paul Campbell, Wheeler Machinery
Robert B. Campbell, Wheeler Machinery
Charles F. Clarkson, ROMCO Equipment
C.E. Thomas Cleveland, H.O. Penn Machinery & Supply Co.
Rick Dahl, Metrolift, Inc.
R. Christopher Gaylor, Power Equipment Co.
Lawrence F. Glynn, CMW Equipment
Dennis J. Heller, Stephenson Equipment, Inc.
A. Roy Kern, Jr., Equipment Corporation of America
Dennis E. Kruepke, McCann Industries, Inc.
Chris MacAllister, MacAllister Machinery Co., Inc.
Robert G. Mullins, ROMCO Equipment Co.
Robert O. Mullins, ROMCO Equipment Co.
Joseph A. Paradis, III, Brandeis Machinery & Supply Co.
Rick (Candace) Piper, Unified Equipment Resources
Michael Quirk, Wagner Equipment Co.
William Reardon, Unified Equipment Resources
Alvin Richer, Arnold Machinery Co.
John Riggs, IV, J. A. Riggs Tractor Co.

Washington Team ($500)
Michael Brennan, Brandeis Machinery & Supply Co.
Gayle Humphries, Unified Equipment Resources
Ed I. Weisiger, Jr., Carolina CAT

Other
Becky Partin, Unified Equipment Resources
Fred Berry, Berry Companies, Inc.




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Fame Awaits the 2010 "Pundit of Year"

If it's election season then it's time to test your political prognostication skills. Here's your chance to try to out-pick (or out-guess) AED's Washington team about the outcome of this year's hottest Senate races.

We have picked 10 tough races in battleground states with the balance of power in the Senate at stake.

If you choose more winners than the Washington team and all our other contestants, you'll become AED's "Pundit of the Year." Not only will you get to brag that you're the equipment industry's shrewdest politico, but you'll also receive a great "Pundit of the Year" award at the AED Summit in January. Only one entry per person is allowed. All entries must be received by Oct. 1.

Our analysis of the hot contests appears below. To enter the contest, click here: http://www.aednet.org/government/pundit/

Hot Senate Races
  1. California

    Three-term Democratic Sen. Barbara Boxer faces the toughest challenge of her career from Republican Carly Fiorina, a former CEO at Hewlett Packard. The fact that Boxer is in serious trouble highlights the difficult climate for Democrats and incumbents; California has been reliably Democratic in statewide federal elections since 1988. The struggling economy has hit the Golden State hard and economic concerns have taken center place in this race.

  2. Colorado

    Democratic Sen. Michael Bennet faces a serious challenge from Republican Ken Buck. Both Bennet and Buck faced serious primary challenges. Bennet enjoyed the backing of President Obama against his primary challenger, while Buck overcame the GOP establishment's favored candidate with the backing of the tea party movement. National economic issues are dominating the race's dialogue as both candidates try to sell voters on their qualifications for restoring fiscal order.

  3. Florida

    Voters in the Sunshine State have three Senate candidates to choose from: Democrat U.S. Rep. Kendrick Meek, former state House speaker Republican Marco Rubio, and Independent Gov. Charlie Crist. Gov. Crist, who left the Republican Party as tea party-backed Rubio surged in the primary polls, is the wild card in this race dominated by national economic concerns. Meek has thus far failed to rally Democrats, some of whom have migrated to Crist's camp. However, Crist is threatened by charges of political flip-flopping and opportunism. Crist's ability to stitch together a coalition of support from Republicans, Democrats, and Independents will determine the outcome of this race.

  4. Illinois

    The race to fill the seat formerly held by President Obama remains a tossup between Democratic State Treasurer Alexander Giannoulias and Republican Rep. Mark Kirk. The Prairie State has been increasingly trending Democratic and the fact that the seat is in play highlights the troubles facing Democrats this election cycle. Mudslinging and personal attacks have dominated the race's discourse. Giannoulias has faced ethics questions about past business deals while Kirk has faced criticisms over embellishments to his military record. Turnout will likely be a key factor in this race.

  5. Kentucky

    The race in the Bluegrass State to fill the seat of retiring Sen. Jim Bunning features Democratic Attorney General Jack Conway and Republican Dr. Rand Paul. The libertarian-leaning Paul secured the Republican nomination with the backing of the tea party movement. Paul has been somewhat of a firebrand, with his libertarian positions on issues such as civil rights garnering national attention. Conway has attempted to cast Paul as an extremist with waffling positions while Paul has sought to tie Conway to an unpopular President Obama. Economic concerns remain the top issues for Kentucky voters and recent polls indicate the race may be breaking Paul's way.

  6. Missouri

    The race for the seat left open by the retirement of Sen. Kit Bond pits the Show-Me State's most influential political families against one another. Democratic Secretary of State Robin Carnahan faces Republican Rep. Roy Blunt. The Missouri electorate largely reflects the angry and dissatisfied national mood. The challenge for Blunt will be shedding his Washington-insider image in an anti-incumbent environment. Carnahan's challenge will lie in bringing together a statewide coalition of support beyond the Democratic strongholds of St. Louis and Kansas City. True to its bellwether status, Missouri will likely mirror the dominant national trend at the time of elections.

  7. Nevada

    Despite his power as Senate Majority Leader, Democrat Harry Reid is an unpopular figure in his home state and was a Republican target early on in the election cycle. Republicans had hoped to find a top-tier candidate to challenge Reid; instead they got tea party-backed former Assemblywoman Sharron Angle. Since winning the primary Angle's campaign has suffered a series of gaffes and missteps. Reid's campaign has cast her far-right positions as too extreme for the Silver State, possibly an effort to drive the anti-Reid vote away from Angle to the other option on the ballot, "none of the above." This strategy seems to have worked as Angle's lead in the polls has steadily declined. However, Reid remains unpopular with Nevadans, for whom the economic crisis has been particularly tough. While the race seems to be breaking Reid's way, his high unpopularity and the toxic national mood could produce a close finish.

  8. Pennsylvania

    Rep. Joe Sestak defeated party-switching Sen. Arlen Specter in the Democratic primary to take on former Rep. Patrick Toomey in the November election. The economy has dominated the Keystone State campaign and Sestak's incumbency and support for President Obama's legislative agenda is the albatross around his neck. Democrats meanwhile have tried to paint Toomey as too far right for Pennsylvania, pointing to his leadership of the conservative anti-tax Club for Growth.

  9. Washington

    Democratic Sen. Patty Murray and Republican businessman and two-time Gubernatorial candidate Dino Rossi are locked in a nail-biter in the Evergreen State. National economic issues have so far dominated the race. Murray has been attacking Rossi as a supporter of Wall Street greed, while Rossi has portrayed Murray as a symbol of a broken Washington. In a year when voters are expressing high levels of frustration with politics as usual, Murray's incumbency poses a threat in this Democratic-leaning state. As a former state senator from the Puget Sound area, Rossi hopes to break into the Democrat hold on votes west of the Cascade Mountains. The outcome will likely depend on which candidate is able to best define the other in the run up to Election Day.

  10. Wisconsin

    In his quest for a fourth term, Democratic Sen. Russ Feingold has been running even with Republican Ronald Johnson. Once considered a safe seat for Democrats, Johnson, a political newcomer, has presented Feingold with the biggest challenge of his career. Johnson has proven adept on the campaign trail and is helped by the anti-Washington mood and a willingness to spend millions of his own dollars to secure a win. With the electorate focused on jobs and the economy, Johnson has worked to position himself as the candidate best equipped to restore fiscal order in Washington. Feingold meanwhile has sought to cast himself as an independent and experienced voice in Washington while painting Johnson as a far-right extremist. In a state known for its retail politics, this battle will likely come down to who turns out their supporters on Nov. 2.
Make your predictions on the layout of the 112th Congress here: http://www.aednet.org/government/pundit/



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Engage Candidates Using the Start Us Up USA! Infrastructure Pledge

With campaign season in full swing, politicians across the country are reaching out to voters to understand what issues are on the electorate's mind. It is critical that they hear from you that infrastructure investment is a top priority.

One easy way to reach out to your elected official is to ask them to sign the Start Us Up USA! Campaign Infrastructure Pledge. U.S. House and Senate candidates are committing to make surface transportation and water infrastructure investment a top priority in the next Congress.

More than 50 candidates have signed the pledge. Has yours? Asking your candidates to sign the pledge is easy. Just visit AEDaction.org and send a quick note requesting their commitment to investment in our future.

Visit StartUsUpUSA.com for more information about the joint grassroots venture between AED and the Association of Equipment Manufacturers to urge substantial and sustained investment in our nation's infrastructure.



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Administration Appointees Advance Labor Agenda

With many of organized labor's policy priorities stalled, the Obama administration is using the regulatory process to circumvent congressional action to benefit unions. The appointment of union-friendly administration officials, such as Craig Becker, a former attorney for the Service Employees International Union, to the National Labor Relations Board (NLRB), only makes it easier.

In the June edition of CED, we warned that as Becker "settles in [to the NLRB] and more cases come before him, major change could be on the way." That change is happening now. The NLRB has voted to reexamine a 2007 ruling that protected the right to a secret ballot in union organizing elections. In the Dana Corp. decision, the NLRB found that a secret ballot held more sway than an organizing decision reached via card check. After a decision to organize was reached by card check, the NLRB concluded employees could immediately force a vote by secret ballot.

Becker's strong support to re-examine the Dana decision will force a reconsideration of the primacy of the secret ballot. It is possible that the Dana case will be overturned, fundamentally changing the way union elections are conducted.

The board has requested that interested parties file briefs on the matter and will rehear the decision. AED will continue to monitor this and other attempts by the administration to implement policies beneficial to labor unions at the detriment of employers and employees.



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Final Rule Issued on Recovery Act "Buy America" Mandate

On Aug. 30, the Defense and Civilian Agency Acquisition Councils issued a final rule on implementation of the "Buy American" provision of the American Recovery and Reinvestment Act (ARRA). The law requires that "all of the iron, steel, and manufactured goods used in projects funded by ARRA must be "produced in the United States."

The final rule exempts products only when the materials are not wholly or predominantly made of steel or iron; domestic material production is inadequate; or, if the requirement increases costs by more than 25 percent or is not in the public interest. The rule applies to materials purchased by contractors and the government.

The law specifically required that the Buy American provision comply with international trade obligations. As such, the rule does not restrict the country of origin for steel or iron, but all manufacturing processes are required to take place in the United States.

Importantly, the final rule does not apply to equipment used on ARRA projects. During debate, AED aggressively lobbied Congress to prevent construction equipment from being covered by the Buy American requirements. Since ARRA's enactment, AED has worked with the Department of Transportation and the Environmental Protection Agency to ensure that the law is not misinterpreted to apply to the equipment industry.

The rule is effective Oct. 1, 2010. Any existing contracts for future work will have to comply with the rule's requirements.

View the final rule here.



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The Condition of American Highways

Two national organizations recently released conflicting reports detailing the condition of our nation's roads and highways.

The Road Information Program, better known as "TRIP," is a nonpartisan, national transportation research group. The organization recently updated its national database highlighting the country's highway needs. TRIP's findings detail the deteriorating condition of our transportation infrastructure and the costs it imposes. AED is a strong supporter of TRIP and its activities.

Meanwhile, The Reason Foundation, a libertarian think tank, released its 19th Annual Highway Report, which found state roads to be in their best conditions in nearly 20 years.

While on their face the two reports appear dissimilar, they actually lead to similar conclusions. TRIP's report details the condition of all roads in the country while the Reason report looks just at state roads. In its conclusion, Reason attributed the improvement in state roads to the large influx of federal cash from stimulus legislation. Without this increase in funding, it is unlikely that many of the gains would have been realized. Additionally, Reason includes multiple factors into their calculus that go beyond road conditions, such as accident data, state administrative costs, and maintenance costs, among other considerations.

It is also noteworthy that the Reason report sounds several notes of caution about the future of the nation's roads. The report warned that declining fuel tax revenues have the potential to limit continued growth, noting that the expiration of the federal highway bill and the transfer of general fund dollars to the highway trust fund constitute a "de-facto weaning of the highway program from dependence on gasoline revenues."

The Reason report, therefore, does not invalidate TRIP's data about the overhaul deplorable condition of our highways. If the gains cited by the Reason Foundation are to continue, increased investment in our national infrastructure is both wise and prudent.

What these reports show is that congressional leadership is necessary for the future of our roads. Our highways are literally the paths of economic future; we cannot afford to let them crumble under our wheels.

AED members are encouraged to use their state's TRIP fact sheet to make the case for highway infrastructure investment.

TRIP's state figures and facts are available at: http://www.tripnet.org/TRIP_State_Facts.htm

View the full report from the Reason Foundation here.



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