U.S. Transportation Infrastructure Threatened by Fiscal Cliff

RailroadRatings and research firm Fitch Ratings reckons that if U.S. policy makers should fail to reach an agreement and the country should plunge over the fiscal cliff, U.S. GDP growth will fall by 2% in 2013 to a nearly flat growth rate of 0.4% and that unemployment would rise to 10% by 2014. If that scenario comes to pass, one sector of the economy that will get pounded is the transportation industry.

The Fitch report focuses on debt financing issued to public transportation-related facilities like airports and shipping terminals. For publicly financed roads, bridges, and tunnels the agency sees a relatively small loss (compared with the recession of 2008-2009), but does see challenges to "completely offset" lower traffic or to meet debt service obligations that will be growing.

Regarding airports, Fitch says:

In general, Fitch would expect that passenger volumes would range from roughly flat to a 5% decline as a consequence (of the fiscal cliff) … . In contrast, Fitch's base case expectation for U.S. economic growth in 2013 would produce growth between approximately 1% and 4% in the airport sector.

At U.S. ports, imports would fall as consumer confidence and spending fall, and exports would also be expected to decline as a result of a U.S.-led recession that would contribute to lower growth in export markets.

It's not too difficult to see how the impact of the fiscal cliff on publicly-owned transportation facilities would affect private companies like airlines, shipping firms, railroads, and trucking. If financing becomes harder to get, facilities could be forced to cut back on various services and defer expansion because it will be difficult to muster political support for increasing tariffs yet again.

The Fitch Ratings report is available here.

Paul Ausick


Filed under: 24/7 Wall St. Wire, Economy, Research, Transportation Tagged: featured

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