Election, Economy and the Environment

Housing starts having slipped followed by the sub-prime mortgage folly and seesawing stock indexes and interest rates may make 2008 a tumultuous year economically ...

by Carlos David Mogóllon

Housing starts having slipped followed by the sub-prime mortgage folly and seesawing stock indexes and interest rates may make 2008 a tumultuous year economically, accentuated moreso only by the war in Iraq and Afghanistan and, of course, presidential election year politics.

Please note:

  • December privately owned housing starts fell 14.2% from November and were 38.2% below December 2006 rates, whereas total 2007 starts dropped 24.8% with completions down 24.2%, U.S. Census Bureau figures show.
  • New orders for manufactured durable goods, the U.S. Department of Commerce reports, rose 5.2% to $226.6 billion in December – compared to a basically flat November. Still, shipments, down four of the prior five months, decreased 0.1% to $212.6 billion for the month.

Quite a stark turnaround from early last fall when we heard a sustained low value of the dollar was driving a revival in U.S. industrial activity, this on top of an ongoing flurry in petrochemical markets due to continued high oil prices. Now, we’re hearing gasoline may shoot up to about $4 a gallon at the pump, likely crimping materials costs broadly and pushing inflationary pressures. Meanwhile, the Federal Reserve dropped interest rates 1.25% in two cuts in January for a 2.25% drop since August 2007 to combat economic woes. Needless to say, I don’t envy Fed Chief Ben Bernanke his job.

States across the country also have signaled stark shortfalls in expected 2008 tax revenues as a result of the problems, which will likely cut into state and local capital improvement budgets that may include water and wastewater infrastructure. Recall also that Congress overrode President Bush’s veto of the $23.2 billion water projects bill in November but left appropriations to spending bills, so whether money is funneled into the pipeline remains in question

New “Regulatory Reports” correspondent, Patrick Crow, who also writes the “Washington Update” column for our municipal sister publication WaterWorld, notes: “In Washington, the Holy Grail for the drinking water/wastewater community has been reliable funding for the federal wastewater and drinking water financing programs.”

Even so, appropriations for the Clean Water and Drinking Water state revolving funds (SRF) are reliably erratic. Federal funds for water infrastructure plummeted nearly 50% since 2001. Congress approved $689 million in funding for the Clean Water SRF in FY2008, down $395 million from FY2007, and maintained the Drinking Water SRF at $842 million.

The Water Infrastructure Network (WIN), a coalition of industry associations, has been trying to “win” steady funding, Crow said. Its first choice would be for an earmarked revenue source – like the gasoline tax used to fill the highway trust coffers. In lieu of that, WIN has pushed the Water Quality Financing Act, which would allocate $14 billion for the Clean Water SRF over four years. Last March, the House of Representatives approved the bill in a 303-108 vote, with a “veto proof” majority of more than two thirds.

That was provident, since the Bush Administration quickly threatened a veto, complaining $14 billion was “excessive” and the bill would expand Davis-Bacon Act wage provisions to some state wastewater projects. Presidential election years normally are anathema for all but must-pass bills, Crow said. It could be different for the Clean Water SRF bill, though, which has strong support in the Senate Environment & Public Works Committee.

Finally, our former “Regulatory Reports” columnist Jay Collert, of the Aarcher Institute of Environmental Training LLC, will continue to write for Industrial WaterWorld as author of its new “Environmental Compliance” column, which focuses largely on stormwater, watershed and NPDES permit and related issues.

Carlos David Mogóllon,
Managing Editor

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