With MAP-21 scheduled to expire on September 30 this year and mid-term elections looming, the rhetoric is starting to heat up on infrastructure “spending” or “investment” depending on your perspective. While you would be hard pressed to find anyone who does not believe our nation’s highways and bridges are in terrible shape, that is where the agreement ends. How much to spend, how to fund the expenditures, what to spend the money on, and the role of the federal government versus the states are all major points of disagreement.
President Obama’s budget calls for $73.61 billion in surface transportation spending for fiscal 2015, a 1.7 percent increase over 2014 funding, and requests $302.3 billion in spending in a new 4-year highway bill. Since current federal highway user fees (primarily fuel taxes) generate only $38 billion per year that leaves a significant shortfall in revenue (taxes). The administration proposes to use an imagined $150 billion in extra revenue from corporate tax reform to plug the gap. That is not the kind of corporate tax reform most business leaders have in mind.
Meanwhile the American Trucking Associations (ATA) was not impressed with the Obama proposal as its president Bill Graves commented, “Today’s proposed budget misses the mark when it comes to the transportation needs of the U.S. economy. It provides no real funding solutions for the long-term health of our infrastructure and proposes massive new subsidies for a mode that moves a small proportion of America’s freight and passengers,” a reference to rail transportation. The ATA has formed a team under the leadership of Dan England to consider alternatives to raising the federal fuel tax, which has not been increased since 1993.
House Transportation Committee chairman, Rep. Bill Shuster (R-Pa.), said he opposes an increase in the fuel tax, which funds highways and helps subsidize public transit. The U. S. Chamber of Commerce, the American Automobile Association, and the ATA all want Congress to increase the gas tax. In the House, Rep. Earl Blumenauer (D-Ore.) announced the proposal (H.R. 3636) in December to increase federal fuel taxes by 15 cents over the next three years. Whether he can convince his fellow democrat and committee chair remains to be seen.
Public opinion polls come out fairly strongly against fuel tax hikes, not because people believe the roads are in good shape, but because they don’t trust the government to spend the extra money wisely. As Robert Poole of the Reason Foundation points out, “That isn’t surprising, considering the federal Highway Trust Fund has been tapped in the past to pay for things like "bridges to nowhere," mass transit, recreational trails and museums, in addition to highway construction and repair.”
Gallop reports that a record high percentage of Americans believe that Big Government is a greater threat to the future of the country than Big Business or Big Labor. Several groups, including Cato, believe that the federal government has outlived its usefulness in highway funding. Gabriel Roth of The Independent Institute summed it up pretty well, “The purpose of federal financing — completion of the Interstate Highway System — has been virtually achieved, and it is difficult to identify other advantages from federal financing. The disadvantages of federal financing — increased costs and intrusive regulation — are evident and substantial.”
The alternative of more tolling or a vehicle miles travelled (VMT) tax are also problematic. In theory, with greater fuel economy, fewer miles driven per capita, and more hybrid and electric vehicles, the federal fuel tax may not be the best long-term solution to highway funding, and electric vehicles are getting a free ride today. But that long term is a long way off and highway funding is needed now. The trucking industry is already required to track and report miles driven by state and thus is not terribly concerned about a VMT. But for passenger vehicles, the cost, complexity, and opportunity for fraud and abuse in requiring every U.S. motorist to report miles driven and pay a tax on those miles is mind boggling.
So what is likely to happen? Keep in mind that the prior highway bill SAFETEA-LU was originally set to expire September 30, 2009 but was extended 10 times for a total of 3 years before the 2-year MAP-21 bill was passed. In an election year, I think it is highly likely that MAP-21 will be extended, fuel taxes will not be increased, and we will transfer more money from the General Fund to the Federal Highway Trust Fund to keep it solvent. Everyone wins, except those concerned about $17 trillion dollars in federal debt that continues to rise and those who believe that the fuel tax user-fee system that built our fantastic Interstate Highway system can surely be modified in a manner that keeps it well maintained.