Is Doing Nothing a Politically Acceptable Way to Pay For Transportation?

At current rates, revenue from fuel taxes, which have traditionally funded America's national transportation programs, is projected to lag far behind transportation spending.

This week marks the Transportation Research Board’s 91st annual meeting, a time when thousands of experts and professionals from across the country descend on the nation’s capital to share their ideas, discoveries, theories, and fears with their colleagues in the transportation field. This year, falling in line with political rhetoric from both parties that ties transportation to job creation, the conference’s theme is “putting innovation and people to work.” Presumably, “innovation” refers in part to the fact that there is little to no agreement on how to pay for transportation investments at the federal level.

Roy Kienitz, former Under Secretary for Policy at U.S. DOT, has doubts about the future of maintaining a transportation system exclusively with fuel taxes, VMT fees, or other sources tied to how much people drive. Photo: ##http://cms.ukintpress.com/UserFiles/Image/TTT%20images/2012/01%20january/03.01.12/Roy-Kienitz-PB.jpg##TrafficTechnologyToday##

At one session today, “Politically Acceptable Solutions to Pay for a Re-formed Federal Program,” the panel of experts proposed several ways to do so — and none directly involved expansion of offshore or Arctic drilling. Each speaker began with a nearly identical slide, showing lines for transportation spending and gas tax revenue growing farther and farther apart over time, accompanied by an explanation of how better gas mileage means less money for the Highway Trust Fund — the pool of money that has traditionally paid for the federal transportation program. Proceeding under the assumption that the federal gas tax will not be raised (a safe assumption, for now at least), the speakers proposed alternative strategies to fill that gap:

  • Martin Wachs, a Berkeley professor and researcher at the RAND Corporation, described mileage-based user fees, where a GPS tracker measures the distance a car travels in a given year so they can be charged accordingly. Transportation is supposed to be paid by user fees, Wachs said, so this is a good match philosophically, but he added that it raises questions about privacy. Also, he said, the administrative costs of such a system would be incredibly high.
  • David Burwell, director of the Carnegie Endowment for International Peace’s Energy and Climate Program, suggested combining the gas tax with an “upstream” fee on every barrel of oil imported and/or refined in the U.S. Naturally, this would run into opposition from the anti-tax crowd (not to mention the oil lobby).
  • Rich Little, director of the Keston Institute for Infrastructure at USC, suggested that pension funds could be encouraged to invest in transportation projects. However, Little admitted, that’s just using tomorrow’s money today, and the government would still need to raise additional money tomorrow to pay the pension funds back.

The session’s final speaker, former Under Secretary of Transportation Roy Kienitz, told the packed audience at the Washington Hilton: “I’m here to be the dream crusher.”

Even if any of these solutions could be made “politically acceptable,” Kienitz said, they aren’t really “solutions,” thanks to one major shift which occurred sometime in the last ten to twenty years. After the advent of the automobile, the number of American drivers generally grew each year, and each American drove more miles than the year before. But not anymore: Since 1994, America’s total vehicle-miles traveled started growing slower than the rate of inflation, and has actually been decreasing year-over-year since 2007 — since 2004 on a per-capita basis. “That’s before the recession,” Kienitz reminded the audience.

The upshot is that even if a “politically acceptable solution” can be agreed upon, the problem will not go away. Even after the economy recovers, gas consumption and vehicle travel will continue to decline, and the shortfall will remain.

“It’s Occam’s razor,” said Kienitz. “The simplest solution wins out, and the simplest solution is not to solve the problem.”

What this means in practical terms is that if no agreement can be found to make the House and Senate’s transportation bills pencil out, with gas taxes or tolls or oil drilling revenue, then that money will have to come from the general fund. Compared to the size of the entire federal budget, the $12 or $13 billion needed to fill in the Senate’s two-year bill amounts to a “rounding error” in Kienitz’s estimation. A precedent would then be set for transportation money coming from outside the Highway Trust Fund, and therefore from something other than fuel taxes or anything remotely resembling a user fee. Compared to what the other speakers suggested, this would be a far more dramatic change to the way this country pays for transportation.

If you attended other sessions at the TRB annual meeting and would like to share some of the insights you gained, please leave your reactions in the comments or email them to bgoldman@streetsblog.org.

  • Thanks for this. I would add that the general glibness of most of the panel was pretty infuriating, no less so given that it’s the X year in a row that preeminent scholars have addressed this issue at TRB, each time with the same shrug.  

  • RM

    “A precedent would then be set for transportation money coming from
    outside the Highway Trust Fund, and therefore from something other than
    fuel taxes or anything remotely resembling a user fee.”

    Um, a precedent was already set in 2008, 2009, and 2010.

  • Yes, Congress will likely follow the path of least pain and greatest chance of re-election.  They won’t raise taxes of any kind while continuing or increasing federal spending levels. The Treasury will issue debt; the Federal Reserve through one mechanism or another will buy it. This will continue until it no longer can. I doubt the end will come through American political will (the electorate seems just fine with ever-growing deficits.) More likely, either imported energy will grow too costly, causing social unrest, or the deleveraging of sovereign debt in Europe will set off enough world-wide deleveraging to create a depression so significant even the Fed pumping liquidity as fast as it can can’t counter it. 

    How soon or far away this date may be, I can’t say. We are living through a liquidity experiment unprecedented in economic history. In the meantime, the cost of imported oil will continue to rise, VMT will continue to fall, and federal gas tax revenue will continue to decline while repair and maintenance costs will continue to increase. When the day comes that Congress can only spend what it collects in taxes, the Federal budget will start to really skimp on roads and bridges because deferred maintenance implies it’s only temporary and of course we will do the right thing next year as soon as the economy improves. This will eventually lead to some major structural failure that will cause people to die. This will result in embarrassment and finger-pointing. After three or four incidents like this, Congress will be inspired to adopt the Texas model of toll roads because tolls are a user fee and not a tax. Except these tolls won’t be to pay for new roads, but to maintain and repair the present interstate highway system. (This will occur even though the Texas toll system has not entirely been successful, mostly because at present people still choose the free roads until they are completely congested rather than pay to drive on a toll road, especially if the free road is the most direct route.) Congress may very well contract out many major routes to private companies to administer and then extoll the creation of Public Private Partnerships. (Maybe they will actually sell the roads themselves.) Perhaps trucking companies will bid on routes with the hopes they can get private cars to subsidize their big rigs. (This will not be a successful model.) 

    Even with high gasoline prices (high, that is, relative to median American income), some routes will still have enough traffic to make the economics work, perhaps due to natural gas fleets or private electric cars. Those routes with too little paying traffic to fund their way will end up being closed down as they will be more pothole than road surface in just a few years. Some bridges will collapse entirely and be allowed to crumble into ruins. States will end up making many of their roads and highways toll as well, otherwise too much traffic would be diverted from the Interstates and over-burden state road maintenance and repair budgets. Then counties and even cities will either create tolls or put in lots of stops, making these lesser roads slow, undesirable, and a great source of revenue from traffic tickets. Low-use state and county roads will be returned to gravel. Those states with high prison populations may revert back to using prisoners as manual laborers in road crews but this will not fill the gap in state budgets. After less than a decade, states where most goods and people are transported on a well-developed rail network, reducing the cost of road maintenance and repair considerably, will still have a tolerable road network. States that didn’t invest in rail and can no longer afford roads will have limited mobility options. This will no doubt reduce their trade and economic opportunities, although coastal cities with access to shipping by boat may still do reasonably well if they can protect themselves from sea-level rise and storm surges.

    Is this the wisest, most efficient, most effective path for the nation to take? No, just the most likely.

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