Despite controlling both houses of Congress, Republicans haven’t been able to agree on a highway-and-transit bill. Instead, when the previous law expired on May31, they passed a short-term extension that expires at the end of this month, when they’ll probably pass another short-term extension.
Traditionally, transportation laws sunset and must be renewed every six years. But since the 2005 bill expired in 2011, Congress has passed more than thirty short-term extensions. The result is uncertainty for state transportation agencies, unsustainable deficit spending, and a continuation of some programs that probably do more harm than good.
The source of the deadlock is a provision in the 2005 bill requiring that spending on highways and transit grow each year even if revenues to the highway trust fund fail to cover that growth. After 2007, high oil prices and a depressed economy reduced gasoline sales, with the result that Congress is now spending $52 billion per year on highways and transit when it collects only $40 billion in highway user fees. This has led to three factions in Congress. A tax-and-spend group wants to increase fuel taxes by at least ten cents per gallon, which would cover the deficit, and preferably even more to allow increased infrastructure spending.
The solution is to distribute both highway and transit funds using simple formulas, not as political grants.
This approach has the support of businesses that expect to profit from that spending. However, most members of Congress are reluctant to support a tax increase that voters will see almost every day.
Second are fiscal conservatives who want to reduce spending to be no more than revenues. This approach is strongly opposed by numerous special interest groups who will fight any cuts to their portions of transportation funds.
The third group, which includes both President Obama and many Republican leaders in Congress, might be called fiscal liberals, as they oppose a tax increase but want to keep spending at the current excessive levels. This may be the largest faction because it minimizes potential criticisms from either voters who pay gas taxes or special interest groups that profit from transportation dollars.
To break the deadlock, we need to go back to the first principles that Congress used when it created the Highway Trust Fund in 1956 and built the Interstate Highway System, the largest and most successful public works project in history.
The most important principle was pay as you go. Congress neither borrowed nor allowed the states to borrow against future federal highway revenues. This saved on interest payments but also insured that the highways really were worth building; if no one used them, there wouldn’t have been enough money to finish them.
Applying this principle means either reducing spending or raising gas taxes. The fiscally liberal, spend-like-there’s-no-tomorrow policy must stop.
The second principle was user pays. The interstates were built entirely with user fees. In fact, the gas taxes people paid to drive on the interstates more than paid for them.
While federal transit funding is not a user-pay system, Congress can at least reinforce the user-pay principle by handing out federal dollars as matching funds to the fares agencies collect. Transit fares in 2013 were a little less than twice as much as federal support to transit, so Congress could simply give transit agencies about 54 cents for every dollar collected in fares. This would encourage agencies to cater to transit riders, not to contractors or unions.
The third principle was to depoliticize spending. Rather than build interstates in the states with the most powerful members of Congress, funding was distributed using a formula based on each state’s population, land area, and road miles.
This minimized debate and allowed Congress to pass six-year renewals without rancor until the system was complete. Today, too much money is allocated politically, which means a lot of it is wasted on urban monuments that provide little transportation benefit. The solution is to distribute both highway and transit funds using simple formulas, not as political grants.
Passing a six-year bill that follows these principles will do more to stabilize and improve America’s transportation infrastructure than a bill that opens the floodgates to increased spending on new projects that few people will use and states can’t afford to maintain. Both Republicans and Democrats should be able to get behind such a principled bill.