Executive Briefings

Transport Funding 2: Gridlock on the Congressional Gridiron

The holidays are supposed to be a time of joy, but given the state of the economy and other recent events, it's hard to feel positive about much of anything right now - least of all the outlook for transportation policy reform. So why is Joshua Schank, president and chief executive officer of the Eno Center for Transportation, "more optimistic than I have been in a long time" about the prospects for funding critical infrastructure improvements?

Maybe it's because people function best in a crisis. "The opportunity for government to make a deal of some kind around the deficit is greater than it has been in the last two years by far," says Schank. "Both parties agree that this is the priority issue that needs to be tackled." And in the course of that tackling, he adds, transportation policy will definitely be on the field.

Granted, the political posturing that brought us to the edge of the "fiscal cliff" is hardly a sign of best intentions. And Schank believes that some of the biggest decisions on spending cuts will be put off until this year. Apparently congressional coaches favor punting over tackling.

Still, rhetoric and ideology seem to be slowly giving way to reality - specifically, the need for some kind of tax increase, coupled with serious spending cuts, to clean up the budget mess. President Obama's reelection means that a solution based partly on higher taxes will be part of any deal. "If that happens," says Schank, "then transportation stands to gain - most likely with bipartisan support."

Just how soon that sector gets Congress and the Administration's full attention is another question. Lawmakers can't deal with every aspect of the massive federal budget deficit at once. And transportation, tied as it is to the federal gas tax and the Highway Trust Fund (HTF), is a painfully complex issue that wins legislators few political points for solving. (Unless, of course, it leads to massive construction projects in their home states.) Finally, with the passage in 2012 of the two-year funding measure known as MAP-21, Congress might feel that it's done enough in that area for the time being. "You've got to figure out that transportation is later on the list," Schank says.

Much of the lack of progress to date can be chalked up to congressional obstructionism, but President Obama shares some of the blame as well, to the extent that he put off dealing squarely with transportation matters early in his first term. "He talked about transportation," says Schank, "but he spent political capital on healthcare." The stimulus of 2008 included some investment in transportation projects, but the question of raising the gas tax to pay for it all was shunted aside. (MAP-21 doesn't address it.)

It's a question, however, that won't go away, despite the fact that the tax has held at 18.4 cents per gallon since 1993. And the last boost was more of a move to cut the federal budget deficit than it was a serious bid to fund infrastructure.

Things are different today. The HTF is in desperate need of saving. According to Schank, it's time for Congress and the president to spend some political capital on reauthorizing transportation funding for its own sake. How many more bridges must collapse before the urgency of the issue becomes clear?

I'm wondering how optimistic Schank really is, however, when he calls the chances of Washington increasing a tax dedicated solely to transportation "unlikely." As reasons for his outlook, he cites the bitterly partisan nature of politics today, particularly when it comes to taxation and entitlements. Yet he also wonders whether there isn't another way to generate the money needed to address our nation's infrastructure crisis.

There might be an alternative to the periodic bailing out of the HTF, a process marked by acrimonious debate over raising the gas tax. Instead, Schank says in a recent article, Congress could "commit to relying on general fund revenues for an increasing portion of transportation spending going forward."

What would that mean for surface transportation? In its current form, the HTF helps to protect funding levels because it relies on user fees. Without it, transportation would be subjected to the annual appropriations process, possibly becoming even more of a political football (if I can continue that metaphor for a moment).

Interestingly, though, most developed nations don't pay for their transportation projects through trust funds. "Yet they tend to spend a greater percentage of GDP on transportation investment than we do," says Schank. So the failure to reach agreement on increasing the gas tax could serve to place a cap on investment. "This is not necessarily a benefit," he observes.

The nation's reliance on the gas tax for transportation funding has even longer-term implications, Schank argues. In pushing for greater fuel efficiency and alternative energy sources, government and industry are out to cut gas usage. Their success, of course, would mean less money for the HTF. "It is shaky ground to depend on funding from the taxing of a commodity when we ultimately want to discourage consumption of that commodity," he writes.

Maybe the use of dedicated general funds is a better idea than user fees, but I've yet to be convinced. If anything, it will make transportation even more vulnerable to political posturing. And the sector will have to compete head-to-head with countless other spending priorities in the endless appropriations battle. Nevertheless, it's a debate worth having, especially if Congress remains stuck in gridlock over the future of the HTF. We need to get legislators talking about the topic, before we can start to fix a broken system.

- Robert J. Bowman, SupplyChainBrain

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Maybe it's because people function best in a crisis. "The opportunity for government to make a deal of some kind around the deficit is greater than it has been in the last two years by far," says Schank. "Both parties agree that this is the priority issue that needs to be tackled." And in the course of that tackling, he adds, transportation policy will definitely be on the field.

Granted, the political posturing that brought us to the edge of the "fiscal cliff" is hardly a sign of best intentions. And Schank believes that some of the biggest decisions on spending cuts will be put off until this year. Apparently congressional coaches favor punting over tackling.

Still, rhetoric and ideology seem to be slowly giving way to reality - specifically, the need for some kind of tax increase, coupled with serious spending cuts, to clean up the budget mess. President Obama's reelection means that a solution based partly on higher taxes will be part of any deal. "If that happens," says Schank, "then transportation stands to gain - most likely with bipartisan support."

Just how soon that sector gets Congress and the Administration's full attention is another question. Lawmakers can't deal with every aspect of the massive federal budget deficit at once. And transportation, tied as it is to the federal gas tax and the Highway Trust Fund (HTF), is a painfully complex issue that wins legislators few political points for solving. (Unless, of course, it leads to massive construction projects in their home states.) Finally, with the passage in 2012 of the two-year funding measure known as MAP-21, Congress might feel that it's done enough in that area for the time being. "You've got to figure out that transportation is later on the list," Schank says.

Much of the lack of progress to date can be chalked up to congressional obstructionism, but President Obama shares some of the blame as well, to the extent that he put off dealing squarely with transportation matters early in his first term. "He talked about transportation," says Schank, "but he spent political capital on healthcare." The stimulus of 2008 included some investment in transportation projects, but the question of raising the gas tax to pay for it all was shunted aside. (MAP-21 doesn't address it.)

It's a question, however, that won't go away, despite the fact that the tax has held at 18.4 cents per gallon since 1993. And the last boost was more of a move to cut the federal budget deficit than it was a serious bid to fund infrastructure.

Things are different today. The HTF is in desperate need of saving. According to Schank, it's time for Congress and the president to spend some political capital on reauthorizing transportation funding for its own sake. How many more bridges must collapse before the urgency of the issue becomes clear?

I'm wondering how optimistic Schank really is, however, when he calls the chances of Washington increasing a tax dedicated solely to transportation "unlikely." As reasons for his outlook, he cites the bitterly partisan nature of politics today, particularly when it comes to taxation and entitlements. Yet he also wonders whether there isn't another way to generate the money needed to address our nation's infrastructure crisis.

There might be an alternative to the periodic bailing out of the HTF, a process marked by acrimonious debate over raising the gas tax. Instead, Schank says in a recent article, Congress could "commit to relying on general fund revenues for an increasing portion of transportation spending going forward."

What would that mean for surface transportation? In its current form, the HTF helps to protect funding levels because it relies on user fees. Without it, transportation would be subjected to the annual appropriations process, possibly becoming even more of a political football (if I can continue that metaphor for a moment).

Interestingly, though, most developed nations don't pay for their transportation projects through trust funds. "Yet they tend to spend a greater percentage of GDP on transportation investment than we do," says Schank. So the failure to reach agreement on increasing the gas tax could serve to place a cap on investment. "This is not necessarily a benefit," he observes.

The nation's reliance on the gas tax for transportation funding has even longer-term implications, Schank argues. In pushing for greater fuel efficiency and alternative energy sources, government and industry are out to cut gas usage. Their success, of course, would mean less money for the HTF. "It is shaky ground to depend on funding from the taxing of a commodity when we ultimately want to discourage consumption of that commodity," he writes.

Maybe the use of dedicated general funds is a better idea than user fees, but I've yet to be convinced. If anything, it will make transportation even more vulnerable to political posturing. And the sector will have to compete head-to-head with countless other spending priorities in the endless appropriations battle. Nevertheless, it's a debate worth having, especially if Congress remains stuck in gridlock over the future of the HTF. We need to get legislators talking about the topic, before we can start to fix a broken system.

- Robert J. Bowman, SupplyChainBrain

Comment on This Article