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Reports US

US stock market daily report (July 30, 2014, Wednesday)

July 31, 2014, Thursday, 07:00 GMT | 02:00 EST | 10:30 IST | 13:00 SGT
Contributed by Millennium Traders

The U.S. Senate voted on a temporary fix for the multibillion-dollar shortfall in federal highway and transit programs, approving $11 billion in funding on Wednesday.

On Tuesday, the Senate rejected the House's reliance on what lawmakers called a funding gimmick, forcing a post-election debate on whether to raise gasoline taxes, after voting to keep federal highway money flowing to states into December.

Just last week, the House passed a $10.8 billion bill that would have kept the federal Highway Trust Fund (HTF) solvent through May 2015 with a vote of 66-31 to strip out controversial funding provisions, leaving $8.1 billion. Since 2008, Congress has shored up the trust fund four times and lawmakers don't want another short-term patch in 2015. Federal aid pays nearly 52% of the cost of road and bridge capital projects undertaken every year. Without action from Congress, the balance in the HTF is expected to drop to zero by late August or early September.

Over half of the $10.8 billion approved by the House was raised by allowing companies to defer required contributions to their pension plans - increasing taxes those companies pay - to help fund the HFT. Senate lawmakers said "pension smoothing" will cost the government money in the long run and undermine the financial stability of pension funds. Senators promised to raise equivalent revenue by making it more difficult for people to claim tax deductions and credits, they don't qualify for.

The Transportation Department says that the HTF will not have enough money by Friday, to cover already promised financial aid to states. States have already been warned to expect an average reduction by 28% in financial aid payments. Some states have already cut back on construction projects because of the uncertainty over federal funding. President Obama as well as state and local officials have complained that the uncertainty over funding, is costing jobs.

The HTF's main source of revenue - federal gas tax - has not increased in over 20 years even though the cost of maintaining and expanding the nation's aging infrastructure continues to rise. With cars and trucks being more efficient, less tax is collected. Lawmakers - especially Republicans for whom a vote in favor of any tax increase could trigger a backlash from their party's base - are reluctant to increase the fuel tax during an election year. Lawmakers are anxious to avert widespread layoffs for construction workers as well as the shutdown of road and bridge projects this close to the November elections.

Sponsors for the bill, Tom Carper (D-Delaware, Barbara Boxer (D-California) and Bob Corker (R-Tennessee) said they want Congress to reach a long-term funding solution this year in hopes of an easier solution after the November election when partisan tempers will presumably have cooled. A highway funding bill is expected to clear Congress before lawmakers adjourn for the summer, later this week. Carper said, "I remain deeply concerned that if we kick this can into next year that the next Congress — like so many Congresses before it — will be unable to summon the courage necessary to write a long-term plan for our nation's infrastructure." Corker, who has bucked his party by introducing a bill to raise the gas tax said, "I haven't heard of a single person that doesn't realize this issue has got to be dealt with, and the way we've been dealing with it is totally irresponsible."

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