With the clock ticking on the current transportation funding legislation (which expires Sept. 30), the big question looming is how it will be replaced. There is no disagreement that the country's infrastructure has reached a critical state of disrepair. The debate is over how improvements will be funded, and so far, Congress has been unable to reach a consensus.
Part of the problem is the vast amount of money involved. The American Society of Civil Engineers has estimated that $2.7 trillion will be needed by 2020 in order for the country to stay competitive. While there is no way any plan can generate that kind of funding, at a minimum, $50 billion annually will be required to underwrite critical projects. In the meantime, the clock is ticking. The Highway Trust Fund, which provides the money for road construction projects, is projected to run dry by August of this year.
On Feb. 26, President Obama unveiled a $302 billion, four-year infrastructure improvement plan designed to fund many of the necessary modernization and repair projects as well as provide a much-needed boost in employment. Once again, however, he disappointed many with his vagueness on the major issue—how to fund these improvements. His plan is to overhaul business and corporate taxes, and he did not address the obvious, but politically charged, option of raising the federal fuel tax.
First levied in 1932, the federal fuel tax represents the primary source of revenue for the Highway Trust Fund. The tax, which currently stands at 18.4 cents per gallon on gasoline and 24.4 cents per gallon on diesel, has not been raised since 1993 and has lagged woefully behind the rate of inflation. The states also levy fuel taxes, averaging 33.5 cents per gallon on gas and 24.3 cents on diesel, and in the face of continued congressional inaction, they are enacting their own increases to pay for needed infrastructure improvements.
Though it may be a political football, the idea of raising the federal fuel tax has its backers, including some very powerful players. On Feb. 12, Tom Donohue, president of the U.S. Chamber of Commerce, recommended to Congress that the tax be increased by 15 cents per gallon over the next three years, urging the Senate committee to "for once ... do what is right, not what is politically expedient." The same day, Rep. Earl Blumenauer (D-Ore.) introduced a bill that would raise the gas tax to 33.4 cents and the tax on diesel to 42.8 cents. But the proposal seems unlikely to get much traction with his fellow lawmakers. The House Transportation & Infrastructure Committee chairman has already gone on record stating that he doesn't believe Congress will support a fuel tax increase this year.
In a speech to the chamber on Feb. 20, Secretary of Transportation Anthony Foxx applauded Donohue for taking a stand but stopped short of endorsing his solution. Instead, he laid out the framework for the administration's plan. Foxx also cited a recent McKinsey study that suggested countries can "obtain the same amount of infrastructure for 40 percent less" just by adopting best practices. This, however, is not an area where the government has demonstrated much prowess.
In fairness to the president, Secretary Foxx let it be known that the administration is open to other suggestions, but already congressional leaders are predicting that the Obama plan will go down to defeat in the House and possibly the Senate. Some members of Congress have suggested that they abdicate their responsibility and have the federal government turn the whole thing over to the states. Whatever the solution—private funding, tolls, or tax increases—it is absolutely critical that Congress avoid kicking the can any further down the road. It is past time to act responsibly in spite of the political pain.
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