House Republicans and Senate Democrats remain at loggerheads over the future of federal highway and transit funding. Although House Transportation & Infrastructure Committee Chair John Mica introduced a compromise transportation bill this week, few are pleased with his proposal. Secretary of Transportation Ray LaHood, for example, calls it "the worst transportation bill" he has ever seen.
Congress passes legislation defining how federal gasoline taxes and other highway user fees will be spent every six years, and the most recent bill lapsed in 2009. Although the revenues all come from highway users, public transit agencies and other interests have captured increasing shares of the funds in successive bills passed since 1982. To please the wide range of interest groups who benefitted from this spending, the 2005 bill (which itself was two years late) made spending mandatory, meaning annual appropriations bills could not refuse to spend the money even if gas taxes failed to cover the costs---which they did after 2008, forcing Congress to transfer general funds to the Highway Trust Fund. In addition, Congress added more and more earmarks to the bills, increasing from 10 earmarks in 1982 to more than 6,000 in the 2005 bill.
The struggle today is between the Democrats (and others) who want to keep spending like there is no tomorrow and the Tea Party Republicans who want to reduce spending to be no more than actual revenues and eliminate earmarks and other pork.
One major source of pork is so-called competitive grants, which are mainly for transit. Although most highway funds have been distributed to the states using formulas based on such things as population, land area, and road miles, competitive transit grants are handed out on a project-by-project basis. Though the money was supposed to be used for the best projects, in fact most of it was distributed based on political power.
Mica's compromise would keep spending at current levels---which are as much as $10 billion a year more than revenues---but include no earmarks and replace all competitive grants with formula funds. Instead of pleasing everyone, the compromise has simply ticked everyone off.
LaHood and various transit advocates are upset because they lose their funds dedicated to light-rail, streetcar, and other rail transit construction. Conservative groups hate the bill because it almost certainly will require deficit spending.
Mica could have compromised in the other direction: reducing spending to be no more than revenues, but maintaining competitive grants, earmarks, and other pork-barrel programs. This might have been more successful, as fiscal conservatives couldn't complain about deficit spending while pork-barrelers could point with pride to the earmarks they were funding.
The negative response to Mica's proposal makes it unlikely that Congress will pass a bill this year. Instead, it will have to once more extend the 2005 bill (which it has already done eight times), as the current extension expires on March 31, 2012. But the extensions maintain spending at current levels, which means the Highway Trust Fund is quickly running out of money.
Advocates of increased spending claim funds are needed to repair crumbling infrastructure. But America's highways and bridges are actually in pretty good shape, partly because they are largely paid for out of user fees. The infrastructure that is crumbling is mainly those things paid for out of taxes, such as urban transit systems, which have at least a $78 billion maintenance backlog. Even President Obama's head of the Federal Transit Administration complains that transit agencies are too eager to get federal funds to build new rail lines when they can't afford to maintain the ones they have.
The real question is why the federal government should be involved at all in highways, urban transit, bike paths, and other surface transportation projects. State and local governments, not to mention private transportation companies, are more likely to make wise transportation investments and less likely to be swayed by pork barrel. Congress should simply eliminate the federal gas tax or, as some have proposed, allow states to opt out of federal programs by raising their gas taxes by the amount of the federal 18.3-cent-per-gallon tax.
Such alternatives will be taken more seriously if Tea Party candidates win more Senate and House seats in the 2012 election. If they lose seats, however, Congress is more likely to raise gas taxes so the transit industry and other interests can continue to get their largely undeserved shares of highway user fees.