The Fuse

FedEx CEO: U.S. in Urgent Need of Infrastructure Reform

by Matt Piotrowski | February 02, 2017

With the U.S. population set to rise sharply in coming decades, the amount of freight on the country’s roads and highways will also grow considerably. But in order to handle this growth in commerce, the U.S. will have to make overhaul in how it builds and maintains infrastructure. As a result of sorely needed investments to ease bottlenecks and congestion, the federal government will have to increase its funding to pay for the projects.

One way to handle the issue is to raise gasoline and diesel taxes to add more to the Highway Trust Fund, but this action would only go so far. With a growing number of motorists and companies moving to alternative vehicles such as EVs and NGVs, the government will have to look for ways to expand how it collects revenues for infrastructure. In order to capture revenues from those who use vehicles that don’t run on oil, the government could set up a user-fee system to broaden the mix.

Speaking before the House Transportation & Infrastructure Committee on Wednesday, Fred Smith, the CEO of FedEx, urged lawmakers to take up these reforms in order to support the country’s infrastructure.

“We must identify revenue sources that provide sufficient long-term funding for the Highway Trust Fund.”

“We must identify revenue sources that provide sufficient long-term funding for the Highway Trust Fund,” Smith said in his written testimony. “We must recognize that due to changes in vehicle technologies, fuel taxes cannot alone fund the system. Alternative vehicles such as electric and natural gas need to also pay a user fee. This can now be easily done through technology. Consequently, FedEx supports a broad mix of revenue sources in order to avoid over-reliance on a single option.”

As a percentage of GDP, spending on infrastructure is now at levels not seen in about 70 years, Smith pointed out.

With congestion worsening across the country and freight volume to rise by 45 percent through 2045, the need for dealing with bottlenecks is becoming more urgent.

The FedEx CEO said that the country has allowed the highway system to “atrophy” because of lack of investment, highlighting how there are now 20 urgently needed projects ready to go, but there’s no funding for them.

With congestion worsening across the country and freight volume to rise by 45 percent through 2045, the need for dealing with bottlenecks is becoming more urgent.

Throughout the hearing, issues such as tax reform, the possibility of public-private partnerships for investment, and autonomy in the transportation sector, came up for debate. In his opening remarks, Smith said the US needs “expanded” and “free” trade, arguing against recent proposals about tariffs and border taxes. Ludwig Willisch, the CEO of BMW of North America, urged lawmakers to consider infrastructure projects that will help with the rollout of autonomous vehicles when they are ready for commercial and private use. “We need to agree on how best to accommodate and then integrate AVs with the rest of our road users and infrastructure,” said Willisch. “This will require a balance between making the technologies available quickly, and ensuring they are validated to be safe in an evolving environment.”

Throughout the hearing, lawmakers were mostly in agreement that work has to be done in this area, given how aging infrastructure is negatively impacting all regions of the country and the potential to support job growth is robust, but how exactly to fund projects will be the sticking point going forward.

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