Who Will Build the Roads? States, If We Let Them
When politicians from both parties can actually agree on an issue, that’s often a good sign that something is about to go horribly wrong. This time is no different.
In the wake of a recent Congressional Budget Office (CBO) report that revealed that federal highway spending could face a 30 percent cut after 2021, Democrats and Republicans are rallying together around infrastructure. Many members of Congress now agree on raising the gas tax or indebting the nation to pay for increased infrastructure spending. Meanwhile, President Trump has endorsed a gas tax increase to pay for his $200 billion infrastructure plan. But Congress should not pass some massive spending bill to try and solve America’s infrastructure problem — it should empower states to fix it themselves, and drastically reduce the federal role in highway funding.
The Federal Highway Trust Fund was created in 1956 to fund the expansion of the interstate highway system. Instead of opting to fund the program annually, Congress imposed gasoline and diesel taxes which are deposited in the trust fund. In principle, drivers would fund the roads they use. But while this system was intended to run on auto-pilot and fully fund itself, Congress has bailed out the trust fund with more than $140 billion just in the last decade.
Many analysts have correctly noted that the federal gas tax has not been raised since 1993 while highway spending has increased due to inflation, creating a budget imbalance. To solve this, they say, Congress should raise the gas tax, because America’s infrastructure is in such poor condition that lower federal spending is not an option. Even though the trust fund revenues are stagnant, its true problem is not due to low taxes — it is simply the result of technological changes and an oversized federal role in infrastructure funding.
The real reason for the highway trust fund’s low revenue problem is that cars are more fuel efficient than ever, which lowers gasoline consumption — and gas tax revenue. After all, the total number of miles traveled has increased by more than 40 percent since 1993, while gasoline consumption only rose by roughly 25 percent over the same period. The rise of electric cars will only further reduce gas tax revenue in the future.
As appealing as it may be to stem this budget crisis, raising the gas tax will only further accelerate the decline in gasoline consumption, and therefore, tax revenue. The federal government should instead rely on levies on miles traveled and tolls to pay for highways.
On the other hand, bipartisan proponents are right that American infrastructure does need greater investment, but the federal government is not well-positioned to make a $200 billion local investment decision. More federal infrastructure spending would be rapidly consumed by lobbyists and congressmen hungry to finance their pet projects. A 2015 Mercatus Center study concluded that “Legislators embrace inefficient transportation projects because district or state voters do not pay the full cost.” The history of the Federal Highway Trust Fund confirms this conclusion.
In 1982, Congress created a “Mass Transit Account” within the Federal Highway Trust Fund to pay for local public transportation programs. Today, 2.86 cents out of 18.4 cents per gallon of gasoline tax go to this separate account within the trust fund. In 2016 alone, this separate account spent $4 billion more than it collected in taxes, fueling the trust fund’s budget crisis.
Eliminating the Mass Transit Account would go a long way in making America’s federal infrastructure spending sustainable and letting states fund and manage their own projects. Citizens who use mass transit should not be able to send the bill to the rest of Americans.
Another example of federal overreach is the current requirement that states use trust-fund money to pay for local roads. Right now, states must spend at least 15 percent of the trust-fund money they receive on local bridges not connected to an interstate road. This one-size-fits-all scheme results in unnecessary spending and stops states from determining where funding is actually needed.
Both liberal and conservative states can benefit from a reduced federal role in transportation. If Congress eliminates federal limitations on states, dedicates federal funds only to interstate highways, and reduces taxes as much as possible, states will have finally have the flexibility to design and fund their own transportation plans. A liberal state like California could raise its gas tax to pay for its beloved high-speed railway system. Likewise, conservative states like Texas could stop taxing gasoline and diesel, and instead, opt to tax drivers on based miles traveled or give more flexibility to counties.
There is no one quick fix for America’s infrastructure problem. But one thing is clear: Any solution will come from local communities — not the federal government.
Daniel Di Martino (@DanielDiMartino) is an economics student at Indiana University-Purdue University Indianapolis and a contributor to Young Voices. He is originally from Venezuela.