As Deadline Nears, Highway Bill Still Stalled

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Senate Republicans have just under three weeks left to conjure something out of nothing.

That's the magic trick the majority is tasked with this week as it tees up a highway bill for floor votes with the current Highway Trust Fund authorization due to expire at the end of July. And so far, they are resisting pressure from Democrats and House Republicans to use international tax changes to pay for the measure.

The surface-transportation bill, which allows states to tap into the federal trust fund for highway and transit projects, is the next item on the Senate's agenda after the chamber completes work on an education bill. The only problem is that the bill isn't quite ready.

"Senator [Mitch] McConnell says we're going to go to a transportation bill next," said Chuck Schumer, the No. 3 Senate Democrat, last week. "Those of us here have just one question—what transportation bill?"

The House's outlook on highways is even less clear. Ways and Means Committee Chairman Paul Ryan said Friday that he wants to pass a five-month extension to allow time to put together a longer-term transportation bill that also changes the international tax code. It's unclear when a vote on that short-term patch will happen.

The Senate actually does have a broader transportation bill ready to go, but the measure only takes care of part of the problem. The Environment and Public Works Committee completed work last month on a bipartisan six-year highway bill that sets the policy for surface-transportation construction and maintenance. The only problem is that it doesn't include anything to offset the cost. What's more, lawmakers don't even know what the cost is. The Congressional Budget Office is still analyzing the bill to come up with an estimate of its impact on federal coffers.

Yet conversations with senior GOP lawmakers and aides make clear that Senate Republican leaders are hell-bent on two things when it comes to finding offsets: 1) Don't touch anything that could mess with broader tax reform, including international taxes. 2) Don't even think about raising the gas tax.

That doesn't leave many options for cobbling together the $90 to $100 billion that would be needed to fully implement the transportation bill. But Senate Republicans insist they can find a way.

"We are looking under every rock we can find," said Senate Majority Whip John Cornyn. "There has been an extensive search for pay-fors that we are now are going to have to consider. Not all of them people are going to be comfortable with, so we're going to have to figure out where the consensus is."

Aides say the details of those offsets are still coming together and will be unveiled as the highway bill comes to the floor. Democrats fear the plan will include cuts to other domestic programs, which they would oppose. At best, the package will be a mish-mash of tiny tax tweaks, with the possibility of niche items like the wind-production tax credit, according to Sen. John Thune, the No. 3 Senate Republican. "I'm told PTC is in," he said last week.

In an illustration of how fluid the situation is, Thune also queried reporters: "What have you heard?"

Republicans doubt that they can find enough spare change in the federal budget to fund a new transportation program for a full six years, but Thune said they hope than can at least get to two years. "It's going to be dialable. In other words, the length of the bill is going to be directly related to the pay-for," Cornyn concurred.

Meanwhile, Democrats and some Republicans are pushing for a reduction in the international tax rate on U.S. companies that, through those companies' profits from such a change, could generate enough money for a long-term transportation bill. Ryan is drafting such a plan, and Sens. Rob Portman and Schumer are putting together another version.

House GOP leaders seem to like Ryan's idea, at least according to him. "I can speak for our leadership, which is we want to do a six-year highway bill and we think there's a problem, international tax laws, that needs to be dealt with. And we think that these two could be married together as a solution," Ryan said last week.

But both Ryan and Portman acknowledge that the details of the international tax deal are too complicated to complete before July 31. "We have not introduced legislation. So we're not ready to have a vote in the next couple of weeks," Portman said.

McConnell is dismissive of the entire scheme. He said early last week that he was "skeptical" that it would work, and that negativity only escalated in subsequent days. Tax reform is really, really hard, GOP leadership aides said. Holding out the hope that Republicans and Democrats can come to a deal on a small but integral part of the tax code that President Obama can sign and that Republicans can accept is a pipe dream. There has to be another way.

There's another problem. Ryan's idea of a five-month extension doesn't help the current highway conundrum because it puts lawmakers right back where they started, scrounging for offsets. They would need to come up with roughly $8 billion to pay for an extension that would begin Aug. 1 and last through the end of the year. They tried that a few months ago and came up dry.

Up until late last week, Senate Democrats were threatening to block anything that looked like a short-term extension of highway authority. Senate Minority Leader Harry Reid said the idea was "disgusting."

But one day later, Schumer indicated that Democrats could, with caution, accept an extension through the end of the year if it included assurances that a long-term solution was in the works. "Is there going to be enough there for folks to feel confident?" he said. "Right now, it's the only viable solution."

That is, until the GOP leadership proves otherwise.

Alex Rogers contributed to this article.

(Image via JPL Designs/Shutterstock.com)

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