Post-Mortem on the Congressional Transportation Bill
July 9, 2012 Leave a comment
Capitol Hill was in a self-congratulatory mood at the end of June when they managed to pass a transportation bill right before the session came to an end. The bill was passed one day before current federal transportation funding was set to expire and it authorizes an additional 27 months of spending at current levels (about $120 billion). The bill’s authors claimed it will save approximately 3 million jobs that would have been lost if funding dried up.
Obviously, the bill is better than not continuing funding at all (which was a distinct possibility). But no one is pretending that this is an ideal bill.
The bill is pretty bare-bones. In negotiations to get the necessary votes from both sides, negotiators cut important reforms like giving new monies to aid mass-transit systems (which more and more Americans are utilizing), shifting more money to fixing existing roads rather than building new ones (analysts have long argued that it’s more cost-effective to repair the roads we already have) and establishing a new coordinated policy that linked up freight and ports. At the end of the day, all the bill does is extend current spending levels for another 27 months on mostly the same highway projects.
But that is where the real problem is. Congress could not bring themselves to lower federal transportation spending at a time when the construction sector is clamoring for jobs. But they cannot responsibly increase it either because the funding mechanism is broken. Revenue for the Highway Trust Fund is derived almost entirely from the federal gas tax and distributed to all 50 states. It covers nearly 80% of the capital costs of federally-funded transportation projects, with states carrying the remainder. But the gasoline tax isn’t what it used to be. The tax currently stands at 18.4 cents a gallon but it hasn’t been raised since 1993, which puts it at about 11 cents, adjusted for inflation. This, combined with the fact that cars are becoming more and more fuel-efficient, means that the source of revenue the federal government uses to pay for this kind of spending is disappearing. For this bill alone, the gas tax will only bring in $72 billion of the $120 billion allocated for the next two years of spending. The rest has to be taken from future revenues to fund current spending and other fiscal gimmicks such as collecting $2.8 billion that came from ending the tax deduction for “black liquor,” a byproduct of paper manufacturing.
Not only does funding transportation is such a way prevent any long-term bill that would give the states long-term infrastructure plans and long-term assurances to the manufacturing industry, but it also ignores the fact that the problem is only going to continue to get worse. Congress will have to eventually raise the gas tax — or, alternatively, index the current gas tax for inflation. A few senators, like Mike Enzi (R-Wyo.) tried to offer amendments to do just that. But those went nowhere.
Infrastructure spending is a key facet of economic competitiveness for the United States. More immediately, is also offers an area for strong job growth. The fact that federal funding for that sector is in such poor health is something that needs to be addressed sooner rather than later.
Posted by: Sean Norris
Sources: The Washington Post, CNN, The New York Times