In two years, Congress won’t have any money for transportation
When it comes to transportation, we're facing a short-term crisis and a long-term disaster. The Senate’s two-year, $109 billion highway bill addresses the first. Unless it — or something like it — becomes law, all federal spending on roads, bridges, and transit will screech to a halt on March 31.
But what happens after those two years are up? It looks like the federal government will simply run out of money to fund the country’s transportation needs. The Highway Trust Fund, which is paid for by the federal gas tax, is rapidly dwindling. Americans are buying more fuel-efficient cars and driving less. And the 18.4-cents-per-gallon gas tax isn’t indexed to inflation. That means that, right now, there isn’t enough money to maintain transportation spending at current levels. The Senate bill, which passed on a 74-22 vote on Tuesday, had to resort to a bunch of side-measures to make up the shortfall. But the Senate could only stretch things out so far. When 2014 rolls around, the trust fund will be broke.
Here’s how the $109 billion Senate transportation bill will be paid for. The gas tax is set to raise $72 billion over the next two years, according to the Congressional Budget Office. That’s the biggest chunk of it. The bill would then also use future revenue over the next 10 years to fund current spending. That’s another big part of it. But there was a cost to all this gimmickry. According to the CBO, the Highway Trust Fund will be totally bankrupt by 2014.
And even then, there was still a $10 billion shortfall in the Senate bill. So they had to scrounge around for the rest. Some of the money, about $3.7 billion, came out of a separate trust fund intended to clean up leaking underground fuel tanks (which was originally paid for by part of the gas tax). Another $2.8 billion came from ending the tax deduction for “black liquor,” a byproduct of paper manufacturing. Another $743 million came from revoking passports for people who owe $50,000 in back taxes. The IRS was given more power to collect delinquent Medicare taxes and transfer some tariffs into the Highway Trust Fund.
The House, for its part, is struggling with this funding question. The Republican leadership knows it needs to pass a bill by March 31, or risk a horrific backlash. And the GOP doesn’t want to slash spending below existing levels — an early version of their transportation bill would’ve done just that and it faced a big outcry from state officials. But they’re not sure how to make up the difference. Conservatives are skeptical of the Senate’s gimmicks. And House Republicans don’t want to raise the gas tax. Originally they tried to get more money by earmarking revenue from expanded oil and gas drilling, but fiscal conservatives loathed the idea of bankrolling current spending with hypothetical future taxes.
All of this could be avoided, of course, if Congress would just raise the gas tax — or, alternatively, if it indexed the current gas tax for inflation. A few senators, like Mike Enzi (R-Wyo.) tried to offer amendments to do just that. But those went nowhere. Come 2014, however, Congress won’t be able to avoid this issue any longer.
If there's one bright spot, it’s that a few states are well aware of this looming fiasco and moving to take action. Here’s Robert Puentes of the Brookings Institution: “Maryland is looking at raising gas taxes. Chicago has put in place an Infrastructure Trust. Virginia is taking advantage of public/private partnerships. Los Angeles passed a referendum for transportation projects in the middle of the recession. So look outside of Washington for leadership on this issue.”