A $54 Billion Bailout
This week, House Republicans are cobbling together a series of bills to complete a 5-year, $262.8 billion transportation reauthorization. The main question facing Republican lawmakers is how to pay for the bill. The Congressional Budget Office (CBO) projects that revenue over that 5-year period to come in at $193.2 billion. That is a significant budget shortfall!
Before we can understand the numbers, we have to understand the principle of road users paying the cost of the federal highway program. According to Congressional Research Service (CRS):
Historically, the trust fund-based revenue collection system was a reliably growing source of funding for surface transportation, as the trust funds collected more than was expended to implement the program defined by Congress. This situation has changed under SAFETEA as spending on highways and transit has exceeded both highway and transit account revenues on a regular basis.
SAFETA was the 2005 highway bill that now-Speaker Boehner opposed, along with just seven other Republicans. Not only was the bill too large, but it was underfunded. Again, from CRS:
The financial estimates associated with SAFETEA have proved to be overly optimistic. The highway account has already required three transfers from the general fund totaling $29.7 billion…
Unfortunately, House Republicans are now on the verge of repeating history, only on a much larger scale. It was just last year that these same Republicans embraced the principle of returning to balance within the Highway Trust Fund (HTF).
Now that we understand the principle, let’s dissect the numbers. As CRS explains, the HTF is funded “primarily” by “the 18.4 cent-per-gallon tax on gasoline and a 24.4 cent-per-gallon tax on diesel fuel.” They note that other sources such as truck registrations, truck tires, etc, also contribute to the fund. That additional funding is broken down into two categories: highways and mass transit. According to CBO, the two funds combined will bring in $193.2 billion over the next five years.
In addition to that $193.2 billion in revenue, there is another $15.6 billion (estimate) available in the HTF. That $15 billion is a bit of creative Washington accounting, though. Even if you use those somewhat dubious funds, you can reduce H.R.7’s funding gap (read, future bailout) to about $54 billion over the next five years.
Now, let’s figure out how House Republicans want to spend that mysterious $54 billion and where they will find the funding.
A flat $40 billion will go toward a new Alternative Transportation Account, funded from the general fund. H.R.7 rightly stops diverting revenues from the HTF to alternative transit, meaning transit projects now have to compete for funding. Conservatives should applaud that step, but as Transportation Weekly noted:
“This leaves a gigantic ($40 billion) hole in the revenue package. Given the lengths to which the Republican leadership has gone to placate fiscal conservatives, it seems certain that the cost of this $40 billion transfer to the Trust Fund will have to be offset with savings from elsewhere in the budget, but the bill as introduced does not contain any such offset.”
Various other highway and safety programs account for the remaining $14 billion. Perhaps Congressman Don Young (R-AK) was right when he observed some in Congress “think there’s going to be a magic wand to create funds.”
Here is the thing: new revenues, however they are derived, take us in the wrong direction. It sends the absolute wrong message to voters, who believe Washington spends far too much. Figuring out how to pay for elevated levels of spending is not a conservative principle, and no one should pretend otherwise.