Comments on Sequestration could hurt Metro, other regional projects - Greater Greater Washington

Comment by Brian White

Sat, 29 Sep 2012 14:56:59 EDT

No level of deficit spending is sustainable when there is no plan to eventually pay down the debt. It's really no different than credit cards. Does it matter that your first year interest rate is low? Not unless you plan to pay off your debt in 1 year. We will be paying high interest rates on our debt once we have finished running it up to a ridiculous level. Even with low rates today the interest on the debt is the fastest growing part of the budget.

Comment by AA

Fri, 28 Sep 2012 16:53:17 EDT

Most of the nation's transit systems will be protected from this cut because they get formula grants from the Highway Trust Fund (HTF), which is immune from sequestration. WMATA, however (like Amtrak), receives a direct annual appropriation from general taxpayer funds, $150 million a year for 10 years to make needed repairs that was part of 2008's Passenger Rail Investment and Improvement Act, or PRIIA.

[Deleted for violating the comment policy.] Every urban transit system, INCLUDING WMATA, get funds from the Mass Transit Account of the Highway Trust Fund. You can go on the Federal Transit Administration's website and see (look at allocations for Section 5307 Urbanized Area Formula, which at about 5 billion dollars a year, is one of the largest funding pools ) WMATA gets an *extra* allocation from the General Fund of roughly 150 million a year, which NO other transit system in the country gets. You can argue whether this is appropriate or not, but it means that WMATA simply gets 12 million less. It gets an annual apportionment from 5307 and 5309 formula funds of roughly 300 million, even before the additional 150 million.

Comment by Kate W.

Thu, 27 Sep 2012 19:15:07 EDT

From what I've heard at work, massive layoffs of actual feds is unlikely to happen, even with sequestration. There would be lots of furloughs and we might have to start bring in our own pens and printer paper, but lay-offs have complicated rules and can actually be costly in the short run. Plus, since the sequestration is by program, project and activity, it's a blunt instrument that won't allow for the shifting of priorities in a rational manner.

Contractors are a different story. There could be massive contractor layoffs. Plus, starting Oct 1, I would imagine that if agencies can delay buying anything or starting new contracts they will until we see how this plays out.

Comment by H Street LL

Thu, 27 Sep 2012 16:48:27 EDT

I think across the board cuts (coupled with tax increases) make a lot of sense. Surely Metro can afford a 12 million cut.

Pension and health care costs seem to be driving a lot of the yearly Metro deficits.

Comment by Kyle-w

Thu, 27 Sep 2012 16:40:19 EDT

rational actors on both sides

Not really certain about this one. When we have roughly 1/2 of the legislators in this country who have deferred judgement on 1/2 of the equation, all to a conservative lobbyist who came (this close) to shutting down our goverment, I can't be certain I agree here.

What we need is a reallocation from "guns" to "butter". That is, shift money from defense spending to infrastructure investment.

I couldn't agree more. How much better off is our country right now, Bush had decided to sign us up for an additional 1 trillion is infrastructure spending, as opposed to a completely useless desert expedition?

Comment by Falls Church

Thu, 27 Sep 2012 15:03:22 EDT

Sequestration isnt going to happen.

Sequestration is a lot like nuclear war during the Cold War. There's a lot of saber rattling but since there are rational actors on both sides, it's unlikely to actually happen. But, then again, the Cuban Missile Crisis brought us one miscalculation away from WWIII.

We don't need cutbacks.

True. What we need is a reallocation from "guns" to "butter". That is, shift money from defense spending to infrastructure investment.

Comment by Soothsayer

Thu, 27 Sep 2012 13:53:34 EDT

Sequestration isnt going to happen. So you can take the duct tape off the windows and stop building the underground shelter now.

Comment by Metro

Thu, 27 Sep 2012 13:45:41 EDT

12 million? Really? The entire region is going to suffer because of 12 million dollars, or less than 1% of the 1.5 billion that was gifted to them is no longer available?

So Metro, a ~35 year old system is neglected like proverbial red headed step child the first 30 years of its life. WMATA’s budgets were borderline criminal, not making any allowances for maintenance.

So instead of forcing Metro to fix its self created issue, Uncle Sam plays the benevolent rich uncle and steps in with 1.5 billion in free money in 2008, spread over 10 years, completely excusing Metro and its management for decades of disturbingly poor management, many of the folks responsible still being there.

On top of that, Metro has raised fares nearly 35% since 2007, during a 5 year period of lowest sustained recorded inflation in the past 100 years.

They’ve done this because Metro, year after year, decade after decade refuses to make the minutely difficult decisions and go after the prodigious low hanging fruit on their tree, all of which has been discussed here in perpetuity.

If Metro can’t shake the cushions enough to get 12 million dollars, they will have simply reaffirmed all the reasons I stopped riding metro 18 months ago and took the $1100 a year I was paying them to provide me a horrible substandard transportation service and spent it on something else.

Comment by John

Thu, 27 Sep 2012 13:44:11 EDT

Minor correction. Having the CR go through March doesn't mean those funds are safe from sequestration in January. Sequestration would impose a roughly (depends on account) 8.2% cut on the CR appropriations.

Of course, as implied in the original article, sequestration being in effect when the CR expires would doubtless impact further appropriations.

Comment by fulgur

Thu, 27 Sep 2012 13:35:22 EDT

"This could spell trouble for an agency that has already had to raise fares to keep up with its significant capital needs."

Correction - passenger fares fund the operating budget, not the capital budget. The capital budget is funded by a combination of federal formula grants (5307, 5309, etc.), federal dedicated grants (PRIIA), and local matching funds and additional funds from the WMATA Compact jurisdictions. It would be more accurate to say that more local tax revenue from the jurisdictions have been promised to Metro to meet its capital needs. Rising fares have been the consequence of operating budget deficits that have been discussed at length in other posts by Michael Perkins, et al.

Comment by Bossi

Thu, 27 Sep 2012 13:32:50 EDT

Could the $12mil loss be covered by the $28mil surplus?

Comment by Ser Amantio di Nicolao

Thu, 27 Sep 2012 12:55:57 EDT

@Jasper:

As my Granddaddy would say, "An' ol' Bre'r Rabbit, he jes' lay low and didn't say nothin'." :-)

Comment by watcher

Thu, 27 Sep 2012 12:55:29 EDT

We are in such a slow economic recovery right now that spending cuts and deficit obsessions should NOT be a priority. Austerity is having disastrous results all over Europe, cuts in state and local spending are dragging down the national economy, and we managed to unnecessarily prolong the Great Depression when FDR reversed course in 1937 to focus on debt reduction. The track record is horrible (although Simpson-Bowles may be slightly better than the Ryan plan).

Now it the time to spend on infrastructure projects. Interest rates are very low and the economy as a whole desperately needs a boost.

Comment by Nick

Thu, 27 Sep 2012 12:55:04 EDT

@charlie

No, there are a lot of economists out there would argue that we do not need any cutbacks, and that cutbacks would only make things worse, as they had in Europe. Large deficits are sustainable when the interest burden is extremely low, as it is now, and will be into the medium run. Please see Dean Baker (a well respected economist) on this: http://www.cepr.net/index.php/blogs/beat-the-press/the-budget-deficit-and-the-mysterious-forces-that-determine-newspaper-headlines.

The recession and slow recovery have greatly extended the size of the deficit (which is supposed to happen) through stabilization policy. However, we haven't seen a pick-up in revenue because the recovery has been slow, there is extreme slack in demand and high unemployment. The last 4 years have seen pretty stable employment in the federal government, and extensive cutbacks in state and local government jobs, especially in the services we need most like education. We don't need cutbacks.

However, I totally agree that defense/homeland/intelligence cutbacks would hammer the regional economy.

Comment by charlie

Thu, 27 Sep 2012 12:28:23 EDT

@Nick; everyone is in agreement that trillion dollar deficits are not sustainable. The question is WHEN do you do a cutback, and whether you increase taxes as well.

And in terms of federal spending and employment, the biggest area is national defense/intelligence/homeland security. And if you think cutting that back to a rational level will NOT hurt the area's prospects, I've got a bridge to sell you.

(I've come to the view that sequestration could be the best thing for this country, as it is only way we're going to get increased taxes. 10% cuts in federal spending don't get to the waste I identified but won't do any damage naitonally. Locally is another matter.)

Comment by Jasper

Thu, 27 Sep 2012 12:17:12 EDT

Cue political flame war :-D
Moderated comments in 5..4..3..2..1..

Comment by Nick

Thu, 27 Sep 2012 12:12:28 EDT

Um, Charlie, why is a "massive cutback" in federal spending and employment needed?

Comment by charlie

Thu, 27 Sep 2012 12:09:43 EDT

Err, if the local projects aren't being funded by HTF money, how is increaing the gas tax going to help.

And I'd strongly guess a massive cutback in federal spending (and employment)-- which is needed -- is going to hurt the DC region far more than cutting a few infrastructure projects.

Comment by Steve Davis

Thu, 27 Sep 2012 12:05:21 EDT

Hey Malcolm, the transit formula grants are only safe for this year — next fiscal year the transit account of the trust fund will not be solvent and therefore subject to cuts based on the general funds within the account. And New Starts will definitely get a cut this year of about $156 million, which will definitely have an impact on grants — that's almost the exact cost of the Tucson Streetcar opening this year.

http://t4america.org/blog/2012/09/24/automatic-budget-cuts-looming-for-transportation-programs/