Congress Funds Infrastructure the Dumbest Way Possible

Writing in Fortune in January 2004, my View colleague Justin Fox wrote that the Interstate System…

“was heralded as the greatest public works project ever. That it was. And it did, as promised, lead to an America that is more mobile, less plagued by regional differences, and vastly wealthier than before.”

 If you’ve been reading my rants, you know I have not been very happy about the decrepit state of our roads, highways and bridges. (See thisthisthisthisthisthisthis and this). Especially when you consider that the cost of financing all of this is the lowest it has been in our lifetimes. It is perplexing to me that the nation that developed the world’s first interstate highway system cannot seem to find an adequate way to finance basic maintenance, repairs and improvements.

Today, I bring you the proverbial good news and bad news on this issue.

The good news: Congressional negotiators have agreed on a bipartisan deal for a five-year, $300 billion transportation bill. It earmarks badly needed money for the maintenance of the deteriorating transportation infrastructure. The deal also reopens the Export-Import Bank, but let’s save that bit of congressional stupidity for another column.

The bad news is how bereft of intelligence and long-term thinking this congressional infrastructure funding deal actually is. TheHighway Bill — cobbled together as a monument to poor planning — is such a hodgepodge of funding that it is far more of a testimony to Congress’ incompetence than it is a victory for those who would get something done.

When President Dwight D. Eisenhower (and Congress) built the nation’s Interstate Highway System, he also created a way to fund the maintenance of its now 47,856 miles of roads: A simple user fee, collected through the sale of gasoline to automobiles, paid to the Highway Trust Fund.

The system should have been self-funding, without the need for any of the gimmicks we see today. But that federal excise tax on gas has not been increased since 1993 and it is not indexed to inflation. Given that 22-year freeze, plus the increased fuel efficiency of cars in general and the rise of the Prius, Tesla and Volt specifically, the Highway Trust Fund has accumulated a shortfall of more than $70 billion since 2008.

Rather than raising the 18.4 cents per-gallon gas tax, Congress keeps coming up with short-term funding mechanisms and other sleights of hand that make no sense. The absurdity du jour is a 100-year-old program the Federal Reserve used to attract member banks: The 6 percent, tax-free dividend paid to its members and primary dealers on the capital reserves the Fed required. (See Big Banks Suffer Rare Fail as Congressional Deal Cuts Nearly $1 Billion a Year in Handouts). This anachronism certainly deserved to be reviewed — the 6 percent dividend will be cut down to 1.5 percent — but not as part of the highway funding bill. Nor should sales of the Strategic Petroleum Reserve be used to pay for highway maintenance; nor should “capturing” the Federal Reserve’s “rainy day fund” go into the Highway Trust Fund — but that was how this $300 billion, five-year deal was assembled.

It is Dr. Frankenstein’s creature, built from disparate parts of different government bodies to create what resembles a normal bill but really is an ungodly monster. Making matters worse, this deal puts me in the rare situation of being on the same side of the argument as the big Wall Street banks and their overpaid lobbyists. That is a place I never enjoy.

Blame Grover Norquist, of Americans for Tax Reform. He has so terrified congressional Republicans about raising any tax, no matter how appropriate, that Congress can only do its work in these absurd, backward ways. As an aside, any time you get a flat tire or break an axle on an unmaintained road, I suggest you file a suit in Small Claims Court against Norquist personally for the cost of repairs.

Despite the good this bill can do, it stands as an admission of political failure. We still have a “chronic shortfall in financing for the Federal Highway Trust Fund,” we still rely on a variety of short-term financing provisions for long-term investments, and we still have a Congress that is more concerned with getting re-elected than doing the people’s business.

As Mark Twain observed, “Suppose you were an idiot, and suppose you were a member of Congress; but I repeat myself …”

Originally: The Dumbest Way to Fund America’s Infrastructure

 

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  1. guadas commented on Dec 2

    Congress must have funded the link to your article “The Dumbest Way……” as it links to a completely different article.

    ~~~

    ADMIN: Fixed (sorry my bad)

  2. rd commented on Dec 2

    Bad link to the rest of your piece.

    Its the dumbest possible way to fund it except for the normal way they fund these things today with tax cuts which will raise revenue in the future (it worked so well in Kansas that I expect the new Republican governor in Kentucky will try it there).

    It is clear that the GOP dislike of the Fed and the Democratic dislike of the big banks teamed up so that the diversion of the Fed dividend is a “subsidy reduction” instead of a tax. I’m sure Grover Norquist had to sign off on it.

    • rd commented on Dec 2

      I read Barney Frank’s memoir over the past couple of weeks. It is a fascinating read that is the clearest exposition I have seen to date of how to get things done in US politics with solid advice to the people sitting at home on how to influence your legislators. It is mandatory reading for a do-it-yourself civics class, regardless of what side of the political or social values spectrum you are on.

      In it he was very clear that you need to take your legislative victories as they come. An imperfect deal that accomplishes key objectives is much better than no deal at all in most cases. He gives numerous examples of this over the years and how eventually much greater advances get made. He also gives examples of legislation that was imperfect and rejected, and the rejection set the cause back a decade or more in achieving any goals at all. This transportation bill is one such imperfect piece of legislation that needs to move forward.

      Despite daunting headwinds, the funding was cobbled together for a 5-year bill that will allow for much better planning and efficient execution of projects. It keeps existing public transportation systems functioning, instead of achieving the objective of many anti-government folks of simply letting them fail and decay. Hopefully we can move past this era of refusing to govern soon, but at least this bill buys 5 years to get some decent transportation work done to prevent the system from falling further into ruin.

  3. VennData commented on Dec 2

    Congrats ​Congressional Republicans​.

    Clown Car or Clown Roads financed by Clown subsidy redux.

  4. KDawg commented on Dec 2

    Shouldn’t we be thanking Grover Norquist for the stimulus effect of automotive repair? People love to talk about how great WWII was for the economy. Remember why we didn’t fund the Iraq War? i.e. It would more than pay for itself! So, how can the damage and lives lost on our roads be a bad thing? Surely, the problem is that our infrastructure isn’t decrepit enough. Let’s let it fall apart a bit more so we can have a booming economy. Kill the bill!

    ~~~

    ADMIN: Look up “Broken Windows”

  5. willid3 commented on Dec 2

    seems like we have those who want toll roads (not sure why that is), all that really does is make it do that people stop using those roads, and businesses there die off from lack of customers. and to me, that sounds like some want to go back to 18th or 19th century, while we are in the 21st. guess they also want to have a much smaller economy than today. with some of their favorites sky rocketing in price (if they can even get them).

    and in this case, the gas tax is really a use fee. as most dont buy gas to just sit at home in their drive way.

    course then maybe they are from the south, which is more of a 3rd world country, than a modern one

    • rd commented on Dec 2

      In NYS there is one major toll road, the NYS Thruway from NYC north through Albany and then east through Buffalo and Erie. The NYC garbage is often trucked to an upstate landfill that is about 1 mile off the Thruway, but much of that truck traffic takes a different combination of other highways and local roads to get to the landfill to avoid the tollroad.

      Many states have some form of vehicle inspection program for emissions and/or safety. Those inspections generally involve getting an oedometer reading. Annual certified oedometer readings can be used to get a mileage based tax that could be used in conjunction with the highway gas tax. That would permit electric or NG vehicles to share some of the burden. Since gasoline tends to emit pollution, taxing both fuel and and mileage would likely get a balance where electric vehicles get some favor but not a free ride.

    • Whammer commented on Dec 3

      @rd, you’re right that there needs to be a mechanism for linking future electric/NG/whatever car use to road fees. That will require people to actually work on something resembling governance, so I’m hoping your comment earlier about how someday we may move past this era of refusing to govern comes true.

      Unfortunately, we always get the government we deserve, and those of us who like to consider ourselves sane appear to have surrendered the playing field.

  6. dvdpenn commented on Dec 2

    Earmarks > ideological whims. Bring back Pork!

  7. Expat commented on Dec 3

    Congress needed to fix some roads as well as funnel a few hundred billion to friends and family so this bill was put together. Congressmen and Senators don’t drive on highways or roads; they are driven around and are usually drunk or getting blown in the back of the limo so they don’t notice the pot holes.

    But slightly more seriously, ignoring the general greed and incompetence of our elected officials, why should this hinge on raising taxes? Three hundred billion is nothing…a drop in the bucket hardly sufficient to even repaint America’s bridges let alone fix them. But why raise taxes?

    How about cutting the DHS and Pentagon budgets? Cutting off aid to Israel? Stopping off in Lebanon and recovering the hundreds of millions in fresh bills that were stolen from Iraq and squirreled away there?

    Our elected officials are corrupt, venal whores who live to get re-elected and serve their corporate masters. I don’t want to give them any more of my money.

  8. intlacct commented on Dec 4

    re: funding when it is cheapest in our lifetimes: seems to be of a piece with repurchasing shares when they are expensive. People have a short term rationality vs. long term.

  9. tigerlilac commented on Dec 5

    Grover Norquist lives in Weston (not Western) Massachusetts, a wealthy suburb of Boston that is bisected by the Massachusetts Turnpike (extended from Weston to Boston in the mid sixties). Yes, the Norquist family benefited from a public highway project (and a toll road) that turned an hour drive into Boston into 15 minutes max if it isn’t rush hour. Just another example of do as we say not as we do.

Read this next.

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