Our Crisis Is One of Infrastructure, So Let's Roll Out the Gas Tax
The biggest reason to be concerned about polarization in the nation's capital is that much of the public's business lies dormant. Most observers believe that there are public benefits to be had by enacting new trade authority, an immigration bill, debt-reduction, Medicare reform, and many other improvements. But one of the most important opportunities relates to the nation's infrastructure - its roads, bridges, ports, airports, and other investments that help the the private sector and government to conduct its business. We have a lot to gain by maintaining or even improving these public goods, and a lot to lose if we don't.
The case for infrastructure investment could hardly be stronger. First, we have under-invested in infrastructure for decades. As Bill Galston and Korin Davis of Brookings have pointed out, the American Society of Civil Engineers gives the nation's infrastructure a grade of "D." The World Economic Forum ranks American infrastructure as 16th in the world, down from 7th four years ago. The Congressional Budget Office estimates that the U.S. spends about 2.4 percent of GDP on federal, state, and local public investments as compared with 5 percent for financially-strapped Europe and 9 percent for China. Many of our airports are a joke, not just because of their appearance and crowding but because of our antiquated air traffic control system. And who can forget I-35W in Minneapolis falling into the Mississippi River in 2007, taking 13 lives with it and disrupting traffic for the next year while the bridge span was replaced?
The problem is financing. Here I want to focus attention on a modest action by Congress that should be doable; namely, fix the Highway Trust Fund, which provides funding for roughly a quarter of the $215 billion or so that all levels of government have spent annually on highways and transit in recent years. The Trust Fund cannot meet its obligations because too little money flows into it. The primary source of Trust Fund money is taxes on gasoline and diesel fuel. But fuel taxes are producing less and less revenue, as cars become more efficient and Americans drive less.
This revenue shortfall isn't a new problem. Since 2008, Congress has transferred $54 billion into the Trust Fund, usually from the Treasury's general fund. In 2015, the Fund could fall to a point at which the Department of Transportation would delay payments to the states for the costs of construction. The Congressional Budget Office projects that the Fund will have shortfalls every year between now and 2024. Unless Congress takes action to permanently increase revenue flowing into the Trust Fund, it will either have to stop making payments to states or continue to scrounge around for revenue to transfer into the account, often at the last minute. This is no way to run a government.
The simplest (though not necessarily the best) solution is to increase the gas tax. According to CBO, the gas tax has lost about 40 percent of its value since it was last increased in 1993. The Joint Tax Committee estimates that it would require an increase in the tax of 10 to 15 cents per gallon to meet the Trust Fund's obligations.
Even for those opposed to tax increases, the reasons to increase the gas tax are legion. First, the gas tax isn't really a tax, but a user fee, since it places the burden of paying for roads and bridges only on those who use them. Further, in terms of purchasing power, an increase of 10 to 15 cents per gallon would restore the tax to more or less the same value as in 1993. In addition, the dramatic fall in gas prices, which have declined by nearly half since reaching over $4 a gallon in in the summer of 2008, means that Americans could pay the 10 to 15 cents taxincrease and still enjoy a much lower price at the pump than they have been paying for many years. But the biggest reason of all is that investments in transportation-made wisely-pay for themselves through increased employment, safety, and efficiency. These benefits will steadily decline unless the Highway Trust Fund is maintained.
It's disappointing that this straightforward solution has been blocked by Congressional gridlock and the general reluctance of Republicans to deal forthrightly with financial issues thatrequire new revenues. "No new taxes," may be a winning political strategy (even when we're talking about "old user fees"), but it's not a strategy that will preserve the competitiveness, efficiency, or safety of the nation's infrastructure.