The Wonk Room

GAO Recommends Raising Gas Tax, Starting Congestion And Pollution Pricing

Today, Transportation Secretary Ray LaHood officially revealed how much money the administration thinks it needs to infuse into the Highway Trust Fund (HTF). Over the next 18 months, the Fund will run about $20 billion short, with $5-7 billion of that needed before October 1. “There are a lot of people putting their heads together right now on how to get $20 billion and how to pay for it,” LaHood said.

It’s great that the administration is trying to come up with a creative solution to the immediate problem. Letting projects funded by the Trust (which are separate from those funded by the economic recovery package) would be a blast of anti-stimulus right when we don’t need one. But as I’ve noted before, we’re going to have to keep coming up with creative ways to keep the fund solvent unless we change the way in which it raises revenue. But don’t just take my word for it. Here’s the Government Accountability Office (GAO), in a report sent to Congress today:

While infusing more money into the HTF would help keep the Highway Account solvent, such action would not ensure the long-term sustainability of the HTF nor address the need for improved performance of our nation’s surface transportation programs. We have previously reported that current surface transportation programs—authorized in SAFETEA-LU—do not effectively address the transportation challenges the nation faces. As a result, we have called for a fundamental reexamination of the nation’s surface transportation programs

The problem here is that the HTF is overwhelmingly funded by gas taxes, of which we keep collecting less and less.

The GAO endorses a few solutions which make complete sense to me. First, raise the gas tax and index it to inflation (the tax hasn’t moved since 1993, despite inflation and an effort to fund more transport projects). Second, finding new sources of revenue through congestion and pollution pricing. Of course, the administration seems adamantly opposed to raising the gas tax — and Congress can’t even stomach someone bringing up the idea — but until some serious steps are taken we’re going to be right back here, with an insolvent Trust Fund, time and time again.

Congress Has Another Chance To Make The Right Choice On Transit Stimulus Dollars

Back during the stimulus debate, I had an item about how it’d be a good idea to let cities put their stimulus money toward operating costs for transit systems. Well, it didn’t happen. Currently, “areas with populations of more than 200,000 are prohibited from using their federal transit funding for operating costs,” and are forced to put the money toward new capital projects.

Today, Rep. Peter DeFazio (D-OR) and 26 other House members urged Congress to seize an opportunity to change the policy:

Passenger rail and bus advocates are pressing conferees on the war supplemental bill to include a Senate-passed provision that would allow public transit agencies to spend some of their stimulus dollars on operating expenses, instead of capital improvements. The language in the Senate version of the bill (HR 2346) would let transit agencies use as much as 10 percent of their funding from the economic recovery law (PL 111-5) to fend off personnel and service cuts. Transit received $8.4 billion total in the stimulus.

As Congressional Quarterly reported, “many transit agencies are facing budget deficits that leave them unable to keep up with dramatic increases in ridership. As a result, service and personnel cuts are being proposed in cities across the country.” The Washington Metropolitan Area Transit Authority, for example, is getting ready to lay off 292 employees.

Since one of the goals of the stimulus was to preserve jobs, it makes little sense to prevent cities from saving the jobs of transit employees, particularly as more and more people are turning towards public transportation. Hopefully, Congress makes a better decision this time around.

Congressional Democrats ‘Blanching At The Idea’ Of Raising The Gas Tax

According to a report today in The Hill, Democrats in the House are “biting their nails” and “blanching at the idea that the House could take up a gas tax”:

Democratic leaders have tried to assure them that the proposals of House Transportation and Infrastructure Committee Chairman Jim Oberstar (D-Minn.) won’t be coming to the floor. But Democratic members from conservative districts are watching warily….The budget Congress passed earlier this year included $324 billion for transportation, but Oberstar will soon roll out a transportation bill that could require revenue beyond what the 18.4-cent gas tax can provide.

While the political implications of raising the gas tax are probably very real for the Democrats expressing concern, we found out this week that the Highway Trust Fund (which is funded by the gas tax) is about to go broke for the second consecutive year. If the Fund were to flop, that would mean scaling back or canceling infrastructure projects. It’s not often that I find myself agreeing with Sen. James Inhofe (R-OK), but he had it right in saying that canceling projects “would have a detrimental effect on the economy and will negate any gains made by the stimulus.”

Matthew Yglesias, Ryan Avent, and the Christian Science Monitor’s editorial board have all made compelling cases for raising the gas tax now. As Avent put it, “given the various externalities associated with driving and burning gas, it should be clear that reduced driving and gas consumption are good things, to be encouraged. Given the economic damage sustained by high oil prices last year, it again seems clear that reduced gas consumption is a good thing.”

But the Monitor points out that “eventually government –- both federal and state –- will need to find other revenues from transport users.” Indeed, with new CAFE standards and a greater emphasis on fuel efficient vehicles (hopefully) coming down the turnpike, it makes no sense to think that we can rely on the gas tax as a steady source of revenue indefinitely.

Whether it’s through congestion pricing, changing toll structures “so that different classes of vehicles would pay their respective costs,” or a vehicle miles traveled (VMT) tax, a new revenue stream needs to be found. Whatever the ultimate decision, Oberstar spokesman Jim Berard had it right in saying that a failure to find a new source of revenue “simply kicks the problem down the road.”

Highway Trust Fund Going Broke…Again

Just like last year, it seems that the federal Highway Trust Fund is going broke:

The federal Highway Trust Fund will run out of cash this summer, marking the second year in a row that gasoline tax revenues have failed to meet prior projections and federal spending commitments. Congress will need to add between $5 billion and $7 billion to keep the trust fund solvent for now, Sen. Barbara Boxer , D-Calif., announced Tuesday.

As Reuters noted, “rising gasoline prices, along with more Americans driving fuel-efficient cars, have pushed down gas purchases, and with them, gas tax collections.” And since the Highway Trust Fund is funded by gas tax collections, it’s now in a state of perpetual shortfalls.

This then, would seem like an opportune time to examine what purpose the fund is going to serve going forward and where its money is going to come from, particularly because its spending guidelines need to be reauthorized by this fall.

Currently, 81 percent of the fund’s money is dedicated to highways, while 19 goes toward mass transit. Sens. John Rockefeller (D-WV) and Frank Lautenberg (D-NJ) have submitted legislation stipulating that the next incarnation of the spending plan aim to “reduce per capita motor vehicle miles traveled on an annual basis, reduce national surface transportation-generated carbon dioxide levels by 40 percent by 2030, and increase the proportion of national freight provided by means other than trucks by 10 percent by 2020,” which would likely mean shuffling this ratio, with more emphasis on transit.

This has been met with stiff opposition from lobbyists (Congressional Quarterly calls them “highway groups“), who say that they won’t support any effort to raise the gas tax to cover the fund’s deficit unless the spending ratios stay as they are. But just like during the stimulus debate, if we’re trying to move toward a green economy, giving highways a much higher priority than mass transit seems misguided.

In any case, in light of new CAFE standards and a growing emphasis on fuel efficient vehicles, raising the gas tax is not a permanent fix for the fund’s woes. Two congressionally mandated commissions have recommended that “Congress find a new revenue source to pay for highway and transit programs,” and “their top recommendation was to tax motorists based on how many miles they drive.”

Obama: The Days Of ‘Building Sprawl Forever’ Are Over

Here at The Wonk Room, we’ve been arguing that building new highways with stimulus dollars would be a counterproductive use of the funding. Today, President Barack Obama agreed:

I’d like to see high-speed rail where it can be constructed. I would like for us to invest in mass transit because, potentially, that’s energy efficient, and I think people are a lot more open now to thinking regionally in terms of how we plan our transportation infrastructure. The day’s where we’re just building sprawl forever, those days are over. I think that Republicans, Democrats, everybody recognizes that that’s not a smart way to design communities.

Watch it:

Not everybody recognizes it, though. The Senate trimmed $3.6 billion — almost a third — of the mass transit funding out of the stimulus bill, relative to the House’s version. Of course, the House started by pairing $30 billion for highways with just $12 for transit. While some of this could be legitimately used to fix old and imperiled roads, it shows the extent to which Congress has equated “job” with “highway construction worker.”

Reversing The ‘Transit Paradox’

The New York Times reported today on the “transit paradox” — rising transit demand that is being met with service cuts:

Transit systems across the country are raising fares and cutting service even when demand is up with record numbers of riders last year, many of whom fled $4-a-gallon gas prices and stop-and-go traffic for seats on buses and trains. Their problem is that fare-box revenue accounts for only a fifth to a half of the operating revenue of most transit systems — and the sputtering economy has eroded the state and local tax collections that the systems depend on to keep running.

Furthermore, the Times noted that the stimulus bill currently before the Senate does not address these issues. Instead, the mass transit money is “devoted to big capital projects, like buying train cars and buses and building or repairing tracks and stations. Money that some lawmakers had proposed to help transit systems pay operating costs, and avoid layoffs and service cuts, was not included in the latest version.”

There is a definite case to be made for including operational aid for transit systems in the stimulus package, and it’s a shame that Congress has forsaken it. As John Kaehny wrote at the Streetsblog:

It will take time for the economy and local government to digest and contract out billions in infrastructure spending. In contrast, local transit agencies can spend billions in stimulus aid quickly just by keeping existing bus and subway service operating. If the true intent of the stimulus is to inject money into the economy as quickly and efficiently as possible, and do so in an environmentally friendly and socially just manner, then transit operating assistance is an obvious choice.

The stimulus package has two aims: creating new jobs and preserving existing jobs. There are currently 59 transit systems in America that are facing budget shortfalls, and transit workers being laid off constitutes a drag on the economy, aside from the obvious trouble it will cause many others who rely on transit to get to work. Thus, the use of stimulus dollars is justified.

In an editorial, the Minneapolis Star-Tribune highlighted this quote, which sums up why transit funding needs to be in the stimulus bill: As Met Council Chair Peter Bell points out, “I’m not sure how much sense it makes hiring a construction worker at the same time you’re laying off a bus driver.”

Widespread Highway Funding: ‘Stimulus That We Better Do Without’

The Senate is planning to vote on amendments to the economic stimulus package today. As CQ reported:

The first amendment scheduled for debate is a proposal from Patty Murray, D‑Wash., and Dianne Feinstein, D-Calif., that would boost the bill’s highway funding from $27 billion to $40 billion and its transit funding from $8.4 billion to $13.4 billion.

While it would be great to boost transit funding by $5 billion, the simultaneous $13 billion boost in highway funding would exacerbate the already terrible ratio of transit to highway funds in the stimulus package.

There are legitimate repairs to troubled roads that should be made. But widespread spending on new highways will come back to bite us — down the line, the ramifications of encouraging more urban sprawl and gas consumption will hardly be worth the stimulus gained now. When the same stimulus dollars could be used to create construction jobs that lay the foundation for a green economy, it would be tragic to blow them buildings roads just for the sake of building roads.

As Dean Baker wrote, “some infrastructure spending will actually be harmful to the environment and the economy over the long-term. This is stimulus that we better do without.”

Schumer To Introduce Mass Transit Boost To Stimulus

According to TPMDC, “the fight to add mass transit money to the stimulus bill is far from over“:

Senate Democratic Vice Chairman Chuck Schumer (NY) just mentioned on a conference call with reporters that he’ll be introducing a version of Rep. Jerrold Nadler’s (D-NY) amendment to add $3 billion in public transportation cash to the economic recovery pot.

While this would be a solid addition to the stimulus — bringing the total amount dedicated to transit to more than $15 billion — there would still be only “half as much money for mass transit as for highways.” This is a terrible ratio, as we’ve noted at The Wonk Room before.

The stimulus needs to provide a boost to the economy, but not at the expense of creating urban sprawl and encouraging more gas-guzzling driving habits. A concurrent goal to economic stimulus is working towards a green economy, and thus, as Matthew Yglesias wrote, “insofar as some of the highway projects envisioned in the bill can’t fit within the two-year stimulus window, we ought to drop the projects.”

Rep. Oberstar: In Stimulus, Mass Transit Got Nixed For Tax Cuts

Yesterday, TPMDC highlighted a speech given by Rep. Jim Oberstar (D-MN) before the U.S. Conference of Mayors. During the speech, Oberstar explained that investments in mass transit were removed from the economic recovery plan kicking around Congress in order to make room for tax cuts:

[W]e set forth this $85-billion initiative from our committee. It’s been reduced in the final going. We expect that it’ll come out somewhere around $63 billion, but $30 billion for highways. The reason for the reduction in overall funding — we took money out of Amtrak and out of aviation; we took money out of the Corps of Engineers [...] — was the tax cut initiative that had to be paid for in some way.

Infrastructure investment provides a far more effective stimulus than tax cuts, so this seems to be a step in the wrong direction. Furthermore, devoting almost half of the money appropriated for transportation initiatives to highways would be a troublesome development.

There is an undeniable need to repair “truly imperiled” roads and bridges, but widespread spending on highways is something that will come back to haunt us later. As Dean Baker wrote in the Guardian, “While not all highways are bad, highways that promote the pattern of sprawl that we have seen in many metropolitan areas over the last 30 years are bad”:

We should not be making it easier for people to live long distances from their jobs, so that they have lengthy commutes each day. This would directly counteract efforts in other areas to reduce energy consumption and greenhouse gas emissions…[I]t doesn’t make sense to pay money to develop more fuel-efficient cars so that they can go further on each gallon of gas, and then go out spend tens of billions of dollars building highways that encourage people to drive more.

A much better way to spend stimulus dollars would be on light-rail, commuter rail, and other mass transportation projects. Also, as Matthew Yglesias pointed out, “there are plenty of ways to do mass transit stimulus funding that have nothing to do with breaking new ground on projects,” such as financing “fare cuts or service expansions.” Indeed, investing in transportation should not be code for simply building more roads to nowhere.