Federal transportation funding got a much-needed reprieve last week when President Obama signed the Hiring Incentives to Restore Employment (HIRE) Act, which will ensure sufficient federal highway and transit funding for the near future. Specifically, the bill moves $19.5 billion from the General Fund into the Highway Trust Fund (to reimburse the HTF for interest payments not received since 1998) and allows the HTF to heretofore collect interest on its deposits. The General Fund transfer, when added to the projected revenue stream from the federal gas tax (which, as we all know, is still at an astoundingly low 18.4 cents per gallon), is expected to fully fund highway and transit programs through the end of 2012 and into 2013, according to the Congressional Budget Office.
All of which is a huge relief to just about everyone involved in the construction and transportation biz. But there’s still a large piece missing: We’re still in dire need of a long-term transportation bill that defines this administration’s goals and priorities for the future of U.S. transportation.
So what are our chances of getting one passed during this session of Congress? Not good. Not good at all.
What’s standing in the way? One word: cost. As Ken Orski put it in his Innovation Newsbrief:
To close the gap between the projected revenue into the Highway Trust Fund (estimated by CBO to be $234 billion from 2010 through 2015 ) and the program needs as estimated by Chairman James Oberstar ($450 billion for highways and transit) would require an extra $216 billion over the life of the next authorization… Adding a proposed $50 billion for the high-speed rail program would raise the total unfunded six-year shortfall to over $200 billion. Where is this money to come from? No one has yet found an answer.
Wait, hold on, we’ve found the answer! If the gas tax hasn’t been raised since 1993, we could…raise it! Except that’s not gonna happen, for the simple reason that voting for a gas tax increase is akin to political suicide. As such, the Obama administration is staunchly against raising the tax, as is every member of Congress who wants to get re-elected. Ray LaHood summed it up perfectly at a recent briefing: “It’s easy for people who are not elected to talk about raising the gas tax. They don’t have to face the voters.”
Ok, so how about using transfers from the General Fund to pay for the bill? It’s basically what we’ve been doing for the past two years, and seems t o have worked out fine. Except it’s not gonna happen, as Orski points out:
[T]here are some serious objections to expanding the use of General Funds to support the surface transportation program in the long run. The objections are threefold: their use (1) undermines the user-pays principle; (2) threatens a potential loss of contract authority, i.e. the ability to enter into multi-year funding commitments for large capital projects in advance of appropriations; and (3) opens the surface transportation program to competition for funds from other government programs.
All of which are sound objections. Which leads us back to that previous option: the gas tax. Perhaps a Lame Duck revolution is in order?
Image: Local4
March 24th, 2010 at 5:34 pm
This is why I suspect we will start to see a resurgence of toll roads and bridges. Not that I think that tolls are a good idea, but simply because nobody wants to raise gas taxes and it will eventually happen by default.
March 24th, 2010 at 5:51 pm
Tolls aren’t the answer. Adding tolls to existing highways would be more politically difficult as raising the gas tax (unlike a higher gas tax, nobody would forget about it next month), and building new toll roads doesn’t raise any money for other purposes.
March 24th, 2010 at 7:08 pm
Gas taxes could be set as a percentage rather than a flat rate, so that it isn’t a big political battle to raise the tax every few years. Even if it’s set so that it breaks even right now with current income levels, income would go up as gas prices rise, which is bound to happen.
March 24th, 2010 at 10:29 pm
“It’s easy for people who are not elected to talk about raising the gas tax. They don’t have to face the voters.””
And what if it’s the voter that elects the representatives that’s calling to raise the gas tax? I’d like to see the gas tax raised, and would vote for someone that promised that. Am I alone?
March 25th, 2010 at 12:26 am
JJ, you’re not alone, but you’re in a small minority. For changes that are considered against the dominant culture, you need a large majority for the government to do anything. Even ideas that poll at 60-40 may not be popular enough for Congress to act without overwhelming voter pressure.
March 25th, 2010 at 8:40 am
Alon: Very true. Just look what an extremely vocal minority is doing in the health care debate. Most people don’t want the gas tax to go up per se, they just want the roads to be maintained.
BeyondDC: What I suspect will happen is that maintenance will be deferred more and more and road conditions will become seriously degraded. Eventually the government will come up with a plan to institute tolls on existing roads in exchange for bringing them back up to a reasonable standard. And the existing roads will be in such a horrible condition that most people won’t object very much. Yes, it is true that retrofitting won’t be easy. Again - I don’t argue that this is anywhere near the best solution, but the political inability to find any other funding sources will eventually make this an attractive option to governments.
March 26th, 2010 at 3:25 pm
User fees are currently the simplest, fairest and most effective way to fund surface transportation infrastructure investment. The Americans for Transportation Mobility Coalition is calling for an increase in federal user fees to fund the critical projects and programs needed to fix America’s crumbling infrastructure, as well as policy and programmatic reforms to ensure dollars are spent wisely.
The ATM Coalition represents businesses, labor organizations, and transportation associations in calling on Congress to craft comprehensive, multi-year surface transportation legislation that addresses national priorities with national resources. More information on the current state of America’s infrastructure and help with contacting your Members of Congress can be found on the Coalition Web site, http://www.fasterbettersafer.com
March 26th, 2010 at 4:33 pm
[...] big obstacle to passing a new, comprehensive transportation bill is the lack of agreement over a source of financing. The traditional source of funding for federal transportation programs [...]
March 29th, 2010 at 6:50 pm
[...] big obstacle to passing a new, comprehensive transportation bill is the lack of agreement over a source of financing. The traditional source of funding for federal transportation programs [...]
March 30th, 2010 at 11:05 pm
First, Congress tends to percieve more problems with raising the tax than actually exisit. Second the gas tax can be raised if proberly presented. See
http://www.taxhistory.org/thp/readings.nsf/ArtWeb/5DDB79194769C2BF852574D5003C28D5?OpenDocument
for a blow by blow account of previous attempts to raise the tax. Third a gas tax is not perfect but is probaly the best current solution in terms of a combination of fairness, collection cost and feasibility. Fourth, there is a perception that the gas tax raises the cost of fuel by the cost of the tax. I do not believe this is true. The price of gas will rise to a level supported by consumers regardless of tax. When the price of gas spiked two summers ago, it rose pretty much to $4.00 regardless of the level of state tax. When it crashed, it crashed to about $1.80 regardles of varring state taxes. If you increase the gas tax, it is not so much that you will pay more, you will get more money back than giving to the oil interests. Forth, there are many studies that show that people will support a gas tax increase, if the money is spent on road improvement. Finally a 50 cent gas increase will cost the average consumer about $200 a year, which is less than what he spends to repair his car due to poor road conditions.
June 23rd, 2010 at 1:59 pm
[...] U.S. Congress, in stark contrast, hasn’t even started talking about a new surface transportation authorization bill, even though the last one expired in September 2009. The Department of Transportation is operating [...]
June 27th, 2010 at 3:00 am
[...] U.S. Congress, in stark contrast, hasn’t even started talking about a new surface transportation authorization bill, even though the last one expired in September 2009. The Department of Transportation is operating [...]
August 31st, 2010 at 3:01 am
[...] the near term, Granato said, foreign markets may be “better economically,” for Proterra. If passage of a U.S. surface transportation bill is “delayed much further,” he said, it would hurt Proterra’s business and momentum, although he remains optimistic. [...]