Congress Fiddles While Bridges Crumble

By :: April 14th, 2014

It isn’t news that congressional Democrats and Republicans have agreed to spend the time between now and the November elections messaging, rather than legislating. When it comes to domestic policy it has only two real issues on its must-do list: Deciding the fate of 50+ tax breaks that expired last December and figuring out what to do about the Highway Trust Fund which is, not to put too fine a point on it, nearly broke.

The expired provisions have gotten most of the attention in recent weeks, but funding for roads, bridges and mass transit faces a more serious problem. The Congressional Budget Office estimates that the trust fund will run out of money within the next few months and projects it may be unable to pay all of its bills after July. This is how CBO put it on February 4:

Under CBO’s baseline projections, the highway and transit accounts of the Highway Trust Fund will have insufficient revenues to meet obligations starting in fiscal year 2015. Under current law, the Highway Trust Fund cannot incur negative balances and has no authority to borrow additional funds….As a result, under CBO's baseline projections, the highway account may have to delay some of its payments during the latter half of 2014.

Even though the message was buried in a footnote, that’s about as dramatic as CBO ever gets.

The problem: The trust fund is financed largely through motor fuels taxes. For years, spending has exceeded revenues from those levies, which Congress has not increased since the early days of the Clinton Administration.  The problem has gotten worse as greater fuel efficiency and recession-reduced travel have eaten into existing gas tax revenues. Advocates estimate that projected spending under the current highway bill will exceed current tax revenues by at least $100 billion over the next six years.

The story is even worse, however: The fund’s main revenue source is an 18.4 cent-per-gallon gasoline tax, but all but 4.3 cents of the levy is temporary and will expire in September unless Congress acts. You see where I'm going here.

How did we come to this? After all, just about every lawmaker gives speeches about needing to “maintain the nation’s infrastructure.”  Democrats love these projects because they create publicly-funded jobs. Pro-business Republicans love them because (some of them at least) enhance commerce. And nearly every pol, regardless of party, loves those ribbon cuttings.

What they don’t love, it seems, is paying for all that asphalt.

A few lawmakers have noticed. Last week, Senate Budget Committee Chair Patty Murray (D-WA) warned of the coming deadline.

And just before Congress left town for two weeks, four senators (two Democrats  and two Republicans) called for a long-term extension of the trust fund. Except they couldn’t agree on how to fund it.

A year ago, former Senate Finance Committee Chair Max Baucus (who since resigned to become ambassador to China) cobbled together a bill to continue the gas taxes at their current rate through 2015. But even that would have done nothing to cover the ongoing revenue shortfall, so he shifted other federal revenues and added a few modest revenue raisers (though no tax increases) to the pot.

President Obama has proposed filling the empty tank with corporate tax revenues—a non-starter in Congress.

House Republicans promise their own bill by summer but have yet to propose anything.

Thus, the problem remains. The trust fund is supposed to be financed mainly by motor fuels taxes. The taxes are not sufficient to keep the program going. But Congress is terrified of raising the levy. So the program stumbles on, held together with the fiscal equivalent of duct tape.

The only certainty is that the gas tax does not raise enough money to finance existing transportation programs.  States cannot plan for long-term projects. And an opportunity to maintain and expand roads, bridges, and mass transit--which nearly everyone claims to support—goes by the boards.

Where is this all headed? Most likely a temporary fix funded with largely fake money. Sort of a doc fix on wheels.  Something to keep in mind as you hit another pothole on the way to the post office to file your income tax return.

 

6Comments

  1. Ralph H  ::  3:09 pm on April 14th, 2014:

    This is a mess and will get worse due to changing buying habits and efficiency mandates. All gasoline and diesel powered vehicles use way less fuel per mile than previously, so logically the tax per gallon must increase. Making matters worse is the increase in hybrid, electric and LNG powered vehicles which we have to find a way to tax so they pay their fair share of road maintenance. On the face of it this should be something everyone should support, except that you want to feel you are only paying for your fair share. I certainly do not want my road taxes doubled while the driver of a $125K Tesla gets off free!

  2. AMTbuff  ::  4:15 pm on April 14th, 2014:

    “Advocates estimate that projected spending under the current highway bill will exceed current tax revenues by at least $100 billion over the next six years.”

    And $800 billion or more of stimulus spending was not able to cover a shortfall of less than $100 billion??

    Not to mention that the $100 billion is disproportionately spent on transit subsidies rather than actual construction and repair of roads. Road spending is only about 60%, and that portion is fully covered by the 18.4-cent fuel tax. Look at the data yourself at http://www.heritage.org/research/reports/2007/01/rush-hour-how-states-can-reduce-congestion-through-performance-based-transportation-programs

    Governments at all levels discovered decades ago the benefits of siphoning off road tax revenues and tolls to pay for pet projects called “transit” and to cover the huge operating losses of those projects once they were built. Voters have caught on to this shell game. The “Highway Trust Fund” would have much more support if it were actually used to build and repair highways.

    We deserve truth in labeling. If you want to use 40% of the money for spending other than roads, call it a Mass Transit and Roads Trust Fund. That will highlight that a small minority (transit users) is getting a disproportionate percentage of the spending. Call this Transit Spending Inequality and write academic papers about it, including a coefficient that expresses just how much taxpayer money is being spent per transit passenger.

    If transit cannot exist without massive subsidies, how is it that Google can pay for its own buses and in addition pay the city of San Francisco to subsidize other transit?

  3. Michael Bindner  ::  12:58 am on April 15th, 2014:

    We need to elect people who will vote to raise the tax – and not just for a temporary fix. The alternative is that nothing gets done until states raise their rates – which could lead to blue states with good highways and red states with bad ones. Frankly, it would serve them right. The other option is to shift from gas to electric cars with overhead power and control – possibly with a roof deck to hide the wires. This would end most car accidents, especially drunk driving and if you buried the roads the pedestrians would staff off of them – also a plus. Of course, the gas and auto industries would freak out at the prospect so it is not happening soon – but maybe if we threaten it they will lend their considerable influence (and money) toward getting things done on raising the federal gas tax. Aside from Ike, we have the road system we have because of Detroit and Standard Oil. Time to turn to them again.

  4. Michael Bindner  ::  12:59 am on April 15th, 2014:

    We can also threaten to bring back trolleys.

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