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Prospectus Blog Conservatives Versus Innovators On Transportation Funding

The bridge collapse in Minneapolis stressed the precarious state of the nation’s infrastructure, and has made infrastructure financing a tempting subject for an election-year policy debate. First to react publicly was Rep. James Oberstar (D-MN), chairman of the powerful House Transportation and Infrastructure Committee. He said a temporary 5-cent/gallon gas tax extending over 3 years might be necessary to finance his proposed trust fund to repair structurally deficient bridges in the National Highway System; that would raise roughly $28-30 billion. He’ll hold a hearing on the state of the nation’s bridges on September 5.
Ranking Member John Mica (R-FL) was next to react. He called the chairman’s proposal inadequate, “a band-aid solution” which ignores the larger problem of the deteriorated condition of other transportation modes, for which dramatic investment in all is required. Toward that end, national columnist Neal Pierce offers a provocative proposal for a new weight-based federal excise tax on every new vehicle sold in the U.S.
President Bush, at a press conference on August 9, threw cold water on the congressional talk. He rejected the idea of a gas tax increase, saying that Congress should first look at how it spends existing funds before calling for more money. He said, “if bridges are a priority, let’s make sure they get funded first” in an obvious allusion to the congressional penchant for earmarking transportation funds for pet local projects ($24 billion or approximately 8 percent of the total SAFETEA-LU authorization.) It is clear from Mr. Bush’s remarks that any congressional proposal to raise gas taxes during this session of Congress will invite a presidential veto.
Senator Max Baucus (D-MT), chairman of the Senate Finance Committee, also came out against an increase in the federal gasoline tax, further dimming the hopes of Rep. Oberstar and other tax proponents. In an interview, Baucus said continuing to rely on gas tax revenue is not practical. “There are better alternatives,” he said, “I don’t think an increase in the gasoline tax is needed.” Baucus’ opposition is particularly significant since his Senate Finance Committee (along with the House Ways and Means Committee), would have to pass upon any tax increase.
That is how the lines were drawn as Congress adjourned for the summer recess.
With national elections 15 months away, the state of public infrastructure and how to pay for its upkeep and reconstruction could become the subject of a lively policy debate.
The Conservatives vs. The Innovators
At the risk of oversimplification, we shall call the advocates of the opposing perspectives, the Conservatives and the Innovators. Both the Conservatives and the Innovators see a need to increase transportation funding. And both condemn the excessive use of congressional earmarks. Where they differ is how to finance the funding shortfall.
The Conservatives (in the Adam Smith sense of the word) look upon the gas tax as the mainstay of the surface transportation program and favor a fuel tax increase (plus indexing) as the principal means of dealing with the funding shortfall. They cite ease of collection and proven revenue raising capacity of the gas tax as compelling reasons for retaining it as the main source of highway funding. They acknowledge the value of tolling, private capital and public-private partnerships but tend to dismiss them as minor contributors to the transportation program. Nor are they convinced that congestion pricing can be a serious source of revenue.
The Conservatives favor maintaining a strong federal role in the surface transportation program and oppose any movement toward devolution. Rep. Oberstar and Jack Schenendorf, vice chairman of the National Surface Transportation Policy and Revenue Commission appear as the most prominent spokesmen for this point of view.
The Innovators, on the other hand, tend to think that the time has come for a fundamental rethinking of how the nation’s surface transportation system should be financed and managed. They question whether the gasoline tax alone can continue to fund the nation’s growing transportation needs. They point to the likely trend of rising vehicle fuel efficiency, increasing cost of road construction and eroding value of the tax dollar as reasons why we need to diversify the funding sources.
They do not suggest doing away with the Highway Trust Fund, for its resources will be vitally needed to help preserve, rehabilitate and upgrade existing highways and bridges. But they think that funding new infrastructure will require a fresh approach. They see tolling, congestion pricing, private capital, private road concessions and public-private partnerships becoming vital elements of highway financing and management.
With financial responsibility for new infrastructure shifted to the states, Innovators see the federal role in surface transportation diminishing. They think inflation-indexed tolling may become a significant source of revenue to the states and they assume that toll roads will become a sound investment for the private sector. Finally, they believe that the surface transportation program should become more targeted. Federal funding, they contend, should be focused on the most pressing problems such as traffic congestion and freight movement and not dissipated on a large number of unrelated projects of local interest.
The most prominent spokesmen for this point of view are Transportation Secretary Mary Peters, certain members of the National Surface Transportation Infrastructure Finance Commission and several governors, notably Mitch Daniels (IN), Rick Perry (TX) and Charlie Crist (FL). Secretary Peters summarized the Innovators’ philosophy succinctly when she said, in announcing the winners of the USDOT Urban Partnership grants: “We must stop relying on yesterday’s ideas to fight today’s traffic jams.”
Public opinion and the mood of the times seem to be on the side of the Innovators. Voters are reluctant to accept gas tax increases in the face of $3 per gallon gasoline. Even in Minnesota, 57% of respondents in a recent Survey USA poll said they oppose higher gas taxes to fix infrastructure. Equally important, the public is skeptical that new taxes would be used to improve roads and bridges.
Secretary Peters agrees: “When you or I pay our gas taxes today we don’t really know where that money is going to go or whether or not it’s going to benefit us directly in our communities,” she remarked in a PBS interview. “People are reluctant to spend more money [in taxes] unless they know that money is going to actually make an improvement in the transportation infrastructure,”
Nevertheless, a modest increase in the federal gas tax seems inevitable– if not during this congressional session then in the next Congress. The Highway Trust Fund is expected to reach a negative balance in FY 2009 and needs an injection of fresh revenue simply to maintain current levels of expenditure. However, it seems equally inevitable that tolling, private capital and public-private partnerships, rather than new taxes, should become the primary means of expanding the surface transportation system. This conclusion does not stem from an ideological conviction. Rather, it is grounded in the reality that every last cent we can raise through the gas tax will be needed to maintain and reconstruct our aging infrastructure.