Transportation

PRINCIPLES

In the United States, economic prosperity and individual freedom have been closely linked to the quality and vitality of a robust nationwide transportation system that connects diverse geographic regions and facilitates the efficient movement of people and goods, as well as the voluntary commercial and other exchanges inherent in a vibrant free enterprise system.

In the modern era, America’s Interstate Highway System constitutes the irreplaceable backbone of our nation’s transportation network, linking every state and major metropolitan region with streamlined freedom-of-access available to any citizen. Because of its national significance, the Interstate System was built, and is properly maintained, with significant federal government involvement in terms of both funding and uniform standards.

Such federal involvement is clearly justified under the Constitution. The Constitution grants to Congress the power:


“To lay and collect taxes, duties, imposts and excises…to provide for the…general welfare of the United States…To regulate Commerce…among the several states…To establish…post roads…[and] To make all laws which shall be necessary and proper for carrying into execution the foregoing powers.”

Pursuant to this authority, the federal Highway Trust Fund was enacted into law in 1956, promising motorists and truckers that proceeds from a federal excise tax on gasoline (and later on diesel fuel and other vehicle use taxes) (commonly dubbed highway “user fees”) would be spent exclusively on building the Interstate Highway System within a predominantly “pay-as-you-go” framework. The same law also reinforced a proven federal-state partnership in Interstate Highway development and construction, under which federal oversight and funding was complemented by state responsibility for program implementation and a percentage matching fund requirement.

Over the years, this federal-state partnership in highway transportation worked exceedingly well, for the most part. It also forms the broader basis under which other transportation programs have been gradually added to the realm of federal responsibility and Trust Fund eligibility. In 1982, for example, a percentage of highway user fees was dedicated to urban mass transit systems. Today, bike trails, pedestrian facilities, museums, multiple environmental, beautification and historic preservative initiatives, and a plethora of non-Interstate roads and highways have been made eligible by Congress for Highway Trust Fund dollars.

Arguably, while remaining true to the pay-as-you-go spending philosophy, on a strict fiscal basis, these highway user fees should be applied apriori to finance surface transportation maintenance and construction on America’s Interstate and National Highway System.

However, today the essentially completed Interstate System – with the exception of I-69 – and the larger National Highway System are in need of serious rehabilitation and repair, while other federal transportation spending demands, including diversionary spending, from the Trust Fund are combining to significantly strain and outpace the revenues produced by the current user fees, especially the current 18.4 cents per gallon federal gasoline tax, unchanged since 1993. Since 2008, with this expanded level of federal spending, billions of dollars in general fund bailouts have been needed to keep the Highway Trust Fund solvent. For example, the 2012 passage by Congress of the transportation reauthorization bill known as Moving Ahead for Progress in the 21st Century or MAP-21 spends in just over two years what will take ten years to pay for in collected tax revenue. Congress voted for a transportation bill that legislates another General Fund transfer and raids Wyoming’s Abandoned Mine Land Trust Fund of hundreds of millions of dollars. At this rate, the Congressional Budget Office (CBO) forecasts that the Highway Trust Fund will again go into the red by 2015.

As a result, federal transportation policy lingers at a seminal crossroads, awaiting the definitive political decision-making necessary to chart a sustainable and politically acceptable new course for the future. Within this broad context, a variety of important transportation-related issues demand attention.

GOALS

  1. Federal Role: There is a legitimate federal role in transportation that should be limited primarily to oversight and assistance in the rehabilitation and improvement of Interstate connectivity and commerce for the benefit of all citizens. There is merit in maintaining the federal-state partnership rooted in the Federal-aid highway program that built the Interstate System. It is an example of federalism that works.

    But what must be resisted by Congress is the constant trend of recent years to continue ever increasing the authority and decision-making for transportation at the federal level at the expense of the states. The proliferation of programs, regulations, and funding silos that usurp appropriate state and local responsibilities is currently serving not only to outpace available resources at the federal level, but it is also undermining public support for any federal role at all.

    As such, a growing chorus among some conservative elements is pushing for a wholesale devolution of all transportation oversight, funding and revenue raising responsibilities to the states and local governments. This latter trend, while appealing to some in the abstract, must also be resisted for both practical and philosophical reasons. On a practical level, it is a denial of a legitimate “limited federal role” – long recognized across the political spectrum – that serves to facilitate a basic measure of system uniformity and safety that enhances interstate transportation that is of benefit to all states and all citizens.

    Such a federal role based on user fee revenues was supported philosophically by President Reagan and all other presidents of the Interstate-era. It presupposes a certain state-to-state distribution of highway user fees in which some states will receive more in federal transportation expenditures than they raise, while other states will receive less. Those who complain about this supposed “inequity” fail to recognize that it is necessary in order to pay for those sections of interstate highways (often in sparsely populated and expansive Western states) that could never be paid for from the highway user fee revenues generated in those states alone.

  2. Gas Tax: To maintain reliable funding to pay for a limited federal role, the federal gasoline and diesel taxes and other existing “highway user fees” should be continued and strengthened in combination with changes that redefine and restrict the federal role to help bolster public support and confidence in the integrity and cost effectiveness of the federal highway programs. This will include returning to the states or to the General Fund responsibility for those programs that do not have a clear federal purpose or do not conform to the “user pays” framework.

    Recognizing the unique traditional purpose of the gas tax – to exclusively fund interstate highway transportation – we should resist efforts to divert such motor fuel tax receipts to non-highway and non-transportation purposes, as has widely been done resulting in the severe depletion of the Highway Trust Fund. At the same time, we should take steps to preserve the purchasing power provided by existing fuel tax rates. The best way to do this would be to index and cap for inflation gas and diesel taxes, particularly as road construction, repair and maintenance costs increase, while the rate remains static and the value of the pool of available funds decreases. The need for indexing is illustrated by the current situation in which the 18.4 cents per gallon gas tax —in place and unchanged since 1993 – has eroded significantly in the ensuing years in terms of its purchasing power, while efforts to raise the motor fuel tax have stalled for political reasons and in large part over the driving public’s justified distrust of the politicians’ misuse of the Highway Trust Fund primarily via diversions and earmarks. The gas tax has become the most reliable, direct and least costly application of the user fee and pay-as-you-go framework in existence that successfully brought Americans the Interstate Highway System.

    The last time the gas tax was raised expressly for transportation purposes was in 1982, when President Reagan – a former Governor who understood the merits of the federal transportation program – cited the erosion of the tax’s purchasing power over the preceding 20 years, the last time since it had been raised. But even then, Reagan ran into strong resistance from members of both parties. In the end, the fuel tax increase measure was only passed by Congress in return for applying 20 percent of the increase to a mass transit account that was then set up within the Highway Trust Fund, which big city Members of Congress from both political parties insisted upon. Reagan was philosophically opposed to this mass transit diversion as a departure from the “user fee concept,” but he signed the bill as the best he could get at the time, recognizing the imperative of shoring up necessary funding for the federal highway program. “Good tax policy,” Reagan declared in a November 1982 radio address, “decrees that wherever possible a fee for a service should be assessed against those who directly benefit from that service. Our highways were built largely with such a user fee – the gasoline tax. I think it makes sense to follow that principle.”

  3. Toll Policy: Longstanding popular opposition to Interstate tolling and tolling in general is reflective of the basic understandings and arrangements through which the federal highway program was established and has evolved over the years…and should be maintained. Interstate road connectivity for purposes of commerce and personal travel is a national asset, largely paid for through designated highway user fees – not through tolls or bonds or taxpayer subsidized “public-private partnerships.” As such, public expectation has been that major Interstate routes – with certain limited grandfathered exceptions — would remain free of tolls in perpetuity, since they had already been paid for by the driving public. Imposing tolls on such roads would be a form of double taxation and a violation of the spirit of existing law. It would also be ceding to the government (state or federal) a power virtually certain to be abused over the longer term in ways that diminish freedom and good government.

    But increasing demands to change existing laws to allow tolling on an ever wider array of roads including the Interstates have come forth in recent years at the state and national levels. This is being driven by a continuing scramble to find new sources of transportation funding to address what are seen as chronically underfunded system needs that cannot be accommodated under the existing levels of fuel tax inputs flowing into the Highway Trust Fund due to ever increasing demands for revenue diversion and the political failure to index the fuel tax. Under this scenario, tolls are viewed in many cases as a mechanism to provide steady reliable long-term revenue stream of increases that could attract both domestic and foreign private investors willing to make large up-front cash payments to states to jump-start new, yet questionable, non-Interstate infrastructure development.

    However, such arrangements – akin to buying infrastructure on a credit card and paying it off through minimum payments over a period of decades – creates the kind of long-term indebtedness that will irresponsibly tie the hands of future generations of elected officials and runs contrary to the pay-as-you-go model. Moreover, the creation of such an endless cycle of debt establishes the need for even more revenue generation and attendant schemes to pay for them reminiscent of fraudulent Ponzi schemes. Today, the taxpayer subsidized TIFIA federal credit program is used to encourage the financing of infrastructure projects, especially tolling facilities by foreign private investors.

    In an interrelated series of public policy moves, President George H.W. Bush initiated NAFTA negotiations in 1990 and brought the Interstate-era to an end by signing into law the Intermodal Surface Transportation Act (ISTEA) in 1991. This was followed by Executive Order 12803 in 1992 authorizing “Infrastructure Privatization” which paved the way for the future construction of private toll roads financed through public-private partnerships. Today, we find ourselves in an era of globalization with a European transportation philosophy that has permeated U.S. transportation policy.

    Subsequently, by way of the National Highway System Designation Act of 1995 and the 1998 Transportation Equity Act for the 21st Century known as TEA-21, President Clinton ushered in innovative transportation programs that included a State Infrastructure Bank pilot program (funding to be repaid by highway tolls), an Interstate Toll pilot program utilizing ‘Value Pricing,’ non-surface transportation ‘Enhancements,’ such as bicycle transportation and pedestrian walkways and the creation of the Transportation Infrastructure Finance and Innovation Act (TIFIA), also in 1998. A ‘National Corridor Planning and Development Program and Coordinated Border Infrastructure Program’ became part of TEA-21.

  4. Transit: A proper transportation program, based on a limited federal role paid for through highway user fees, should not be carrying major capital and operating costs for metropolitan transit systems that have no direct bearing on Interstate connectivity and commerce. This is not to say there is no federal interest in providing a measure of federal funding assistance to local governments for transit. But such assistance should come only after the locality has committed to a local funding formula and only when federal funding comes through the General Fund in competition with other federal priorities, not through the Highway Trust Fund, where transit users have provided no financial stake.

    Transit was never envisioned to be eligible for funding under the original Highway Trust Fund. But intense lobbying by powerful big-city transit advocates in Congress – from both political parties – succeeded in securing a place for transit in the Trust Fund as part of the 1982 surface transportation law eventually signed by President Reagan. Ever since, roughly 20 percent of Highway Trust Fund dollars have gone to transit, and so far no serious attempt to change it has been mounted for lack of necessary political support.

    President Reagan, while philosophically opposed to the transit diversion as a violation of the user fee underpinning of the Highway Trust Fund, nevertheless in 1982 accepted political reality that Congress would not approve any major transportation bill without transit. As a result, he was persuaded in the end to back the whole package of the 1982 bill that included new funding for both highways and transit and a 5-cent per gallon fuel tax increase to pay for it. It was an example of compromise on Reagan’s part that included acquiescing to some things he didn’t like in return for securing an accomplishment that was on balance the right thing to do for the country at that time.

    Today, the challenge of maintaining the integrity and viability of the user-fee-based Highway Trust Fund requires bold action to align the Fund more closely to its original purpose by jettisoning transit (and other inherently non-federal programs) to a separate funding source within the federal budget, freeing up the Trust Fund to align more directly with its own more limited and clearly defined logical federal role.

  5. Reauthorization Legislation: At the expiration of MAP-21, Congress should pass a new surface transportation law, providing renewed multi-year authorizations for federal highway transportation programs, that conforms to the goals discussed here: a limited federal role, paid for with existing user fees, under a Highway Trust Fund returned to its core national purpose, devoid of responsibilities for transit and other non-federal and non-user-fee-connected programs. Such legislation would restore the integrity, viability and sustainability of the Highway Trust Fund without the need for tolling (double taxation), instead, utilizing a pay-as-you-go framework in a way that fosters greater public support for, and confidence in, important necessary federal expenditures for national transportation purposes. The previous multi-year authorization bill – the Safe Affordable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) – expired in September 2009 and had been maintained in generally static form for over two years through a series of short-term stop-gap extensions passed by Congress unable to reach agreement on a longer term bill.

    A key threshold of credibility for any reauthorization proposal is whether its spending levels match the projected revenues necessary to cover such spending without leading the Trust Fund into bankruptcy or bailout. A proposal by the Obama Administration, unveiled in early 2011 – calling for a $556 billion six year bill (almost twice as large as SAFETEA-LU) covering highways, transit and high speed rail without a hint of how it would be paid for – did not, for example, meet such a realistic credibility threshold.

    The last authorization bill, MAP-21, spends in twenty-seven months what will require ten years of revenue to pay for and it taps the General Fund, along with Wyoming’s Abandoned Mine Trust Fund. This kind of irresponsible spending is unsustainable.

ON THE WEB


ISSUES LIBRARY

Recommended Reading