After nearly three months of debate, Congress has agreed to extend federal highway and transit spending for three weeks. Authority to spend federal dollars (mostly from gas taxes) on highways and transit was set to expire tomorrow. The three-week extension means that authority will expire on November 20.
Many members in Congress hope that the three-week delay will allow them to reconcile the House and Senate versions of a six-year bill. Among other things, the Senate version spends about $16.5 billion more than the House bill, $12.0 billion on highways and $4.5 billion on transit. The two bills also use different sources of revenue to cover the difference between gas tax revenues and the amounts many members of Congress want to spend.
To cover this difference, the Senate bill, known as the "Developing a Reliable and Innovative Vision for the Economy Act" or DRIVE Act, provides three years of funding by supplementing gas taxes with new customs, air travel, and mortgage-backed securities guarantee fees. The House bill, called the Surface Transportation Reauthorization and Reform Act, doesn't offer any source of funds; instead, House Transportation & Infrastructure Committee Chair Bill Shuster merely expressed hope that the House Ways & Means Committee would find a source of funds.
Despite the use of the word "reform," the House bill doesn't reform much other than to streamline environmental review, thus making it easier for cities and states to waste money faster. However, the bill does create new competitive grant programs, including a $4.5 billion program for "freight and highway projects" and a return to using competitive grants for buses and bus facilities. The Senate bill, meanwhile, creates a new "competitive grant" program aimed at "funding major projects."
Competitive grant programs invariably turn into pork barrel programs, with either the most powerful members of Congress or the president designating where the money will be spent, usually to the benefit of the party in power. As revealed by a Cato paper, for example, spending under the New Starts program has strongly favored the districts of Democrats who were on the House Transportation & Infrastructure Committee, while a Reason Foundation paper reached similar conclusions regarding the TIGER grant program.
The 2012 reauthorization bill, MAP-21, converted most competitive grant programs, including the bus & bus facility program, to formula funds so neither Congress nor the president could tinker with how the money was spent to favor their friends. This left many members of Congress frankly disappointed that they could no longer "take credit" for bringing home the bacon. Both the House and Senate bills would remedy this by sliding backwards into pork.
Given the $16.5 billion difference in spending and the lack of funding beyond the first three years, it seems unlikely that the two houses could reach agreement by November 20. However, the November deadline will keep the issue at the forefront of Congressional minds, so even if they have to extend it another four weeks, it is possible that they could reach agreement before the end of the year. Staffers say that, unless they pass a six-year bill this year, the Senate at least won't want to pass a bill next year because it is an election year.
Until a few years ago, Congress had a pay-as-you-go policy in which highway and transit spending was no more than actual highway revenues. But then Congress decided to increase spending every year whether or not revenues covered those expenses, and since gas tax revenues leveled off in 2007, deficits have averaged about $10 billion a year. Unfortunately, few in Congress are willing to either cut spending or raise gas taxes to make up the difference. Without the discipline that comes from staying within a budget, transportation spending has become a free-for-all.
In a nutshell, the House bill is marginally better than the Senate bill, but both are worse than the current federal law regarding highway and transit spending. Members of Congress should avoid being stampeded into passing a big-spending bill based on false claims of an infrastructure crisis or a supposed economic boost created by such a bill. Instead, they should curb transportation spending to be no more than actual transportation revenues and eliminate, rather than create, pork-barrel programs.