What's Wrong With the Transportation Bill

Today the House of Representatives passed the mammoth $284 billion transportation bill, or the Transportation Equity Act: A Legacy For Users. The transportation bill has long been one of the favorite bills of lobbyists and congressmen. As I noted in an earlier post entitled “Pork & Beans: A Look at the Transportation Bill,” profligate spending is just one problem with the bill. Despite the record size of the bill and a 42% increase from the previous bill, Chairman Don Young (R-AK), still claims it’s not enough. Amazingly, he says that $284 billion is inadequate to make inroads at the congestion problem. "We probably need $500 billion to make sure this country keeps moving," he said. (At least with his Bridge to Nowhere project in Alaska, traffic will be flowing from Ketchikan to Gravina Island.)

In a recent essay, Ronald Ott of the Heritage Foundation points out many of the problems in the Transporation Bill, including “billions of dollars of trust fund money diverted to non-transportation purposes, high spending on costly but underutilized programs, and the preservation of a Washington-based command and control system at a time when transportation problems are increasingly local in nature.”

Part of the problem is that there is no clear direction or mandate anymore. As Ott explains,

For the first several decades of the federal highway program’s existence, virtually all of its energy and resources were devoted to the task it was created to fulfill: to build a 42,000 mile high-speed, limited-access interstate highway system from coast to coast and border to border, connecting all of the cities in between. That task was largely completed by the early 1980s, and with no similarly compelling and clear objective to guide it, successive Congresses began the process of diverting the trust fund’s resources to other purposes. While the diversions initially focused on non-road, transportation-related investments such as transit, over time non-transportation projects such as nature trails, museums, flower plantings, and historic renovation became eligible for trust fund spending.

As a result, Congress now diverts approximately 42 percent of federal fuel tax revenues paid by motorists to projects that are unrelated to general-purpose roads.

Another problem is the distribution of federal funds to states. Federal spending on highways and transit is currently distributed among states according to a complicated mathematical formula derived several decades ago. The formula rewards some states with more money than they pay in (“donee” states) while shortchanging others (“donors”). The donee states are located primarily in New England and the Middle Atlantic, while the donor states are mostly in the South and the Great Lakes region. Currently, Arizona gets the smallest benefit for its money, receiving 81 percent of the funds it contributes, while Alaska gets the highest benefit, receiving 518 percent of its revenue contribution (because of Chairman Don Young from Alaska).

One solution to the out-of-control transportation bill is to begin to place more decision-making at the state level by allowing each state to retain the federal fuel tax receipts collected within its borders. Because the interstate highway system is largely built and most surface transportation problems are largely local or regional in nature, there is now little need for a Washington-based, centrally planned program. Allowing states to keep its revenue would relieve the general unfairness of a system in which motorists in certain states subsidize the citizens of wealthier states (making an exception for those mountain and plains states with low population densities).

More importantly, keeping transportation funds within the decision-making of states rather than Washington would engender greater efficiencies on projects that are truly important to the voters of those states.

Ott suggests transfering funds to states by a program that reduces the federal fuel tax by annual increments—say 4 cents per gallon per year—and adding that amount to the gasoline tax that the state collects on its own.

This way, the total tax paid by the motorist would stay the same, but the allocation of that revenue would shift to the states year by year until the collection of all 18.3 cents of the federal fuel tax is shifted to the states and all federal collections cease. States would still be responsible for interstate maintenance and improvement, as they are today, but would now be free to do it in a way that best suits their interests, whether through tolls, partnerships, privatization, competitive contracting, or some combination.

Unfortunately, as attractive as this option might be to both states and the country as a whole, Ott believes that it is far too radical for Congress and would deny it the opportunity to dole out funds to its favorite lobbyists. Ott shows that, even as the amount of funds spent on “transportation projects” increases each year, there has been little improvement in adding capacity or reducing congestion. Further, Ott adds,

If H.R. 3 is enacted in its current form, this pattern of deterioration will accelerate because the proposal expands on the worst aspects of its predecessors.

The White House has thus far been silent about its views on the transportation bill, with the exception of a threatened veto if it raises fuel taxes and increases spending. As the transportation bill has become increasingly wasteful, now is the time for President Bush to build on his philosophy of an “ownership society” and support a transportation bill that actually does something other than provide handouts from Congress to lobbyists.