Featured, National, Randal O'Toole, Transportation

Obama's transportation plan is fiscal fantasy

President Obama’s latest transportation “vision” is as unrealistic as California Governor Brown’s plan to pay for high-speed rail with cap-and-trade revenues. Obama proposes that Congress spend $302 billion on surface transportation over the next four years, or $75.5 billion a year. This is nearly $25 billion more per year than Congress is spending today, which is already $10 billion more per year than federal surface transportation revenues.

In the 2012 round of transportation reauthorization, the debate was whether to limit spending to actual revenues of about $40 billion a year or continue spending at historic rates of about $50 billion a year. Senate Democrats prevailed at the $50 billion rate, but only by agreeing to limit the bill to just two years instead of the usual six. That compromise expires this year just before the Highway Trust Fund runs out of money due to overspending.

icon_op_edIn 2012, revenues (mainly from fuel taxes but also excise taxes on truck tires, trucks, buses, and trailers) in 2012 were $40.2 billion. By law, $5.0 billion of this was dedicated to transit. Congress actually spent $8.2 billion on transit while $41.1 billion nominally went to highways (but in fact some of this also went for transit and other non-highway programs). Spending increased by more than revenues in 2013 and 2014.

In fact, Congress has been spending more than revenues since at least 2001, draining the Highway Trust Fund’s reserves which were once well over $20 billion. Between 2008 and 2012, Congress supplemented the fund with $41 billion in general funds. In 2013, it added another $12.6 billion, and if spending continues at current rates it will have to add $15 billion more in 2015. Despite claims that these represent subsidies to highways, no supplements would have been necessary had Congress not diverted billions of dollars to transit each year and mandated that spending exceed revenues.

Given the Republican’s animosity to deficit spending combined with both parties’ reluctance to raise taxes, Obama’s plan to increase deficit spending by 250 percent, from $10 billion to $35 billion a year, is no more than a fantasy. His proposal to rescue the Highway Trust Fund with another $63 billion supplement from a “one-time transition revenue” resulting from his proposedPro-Growth Tax Reform is equally unrealistic, both because Congress is unlikely to pass Obama’s proposal unaltered and because there are better things to do with the money should reforms produce any one-time transition revenues.

What the president really wants is more grant programs like TIGER, which allow the Department of Transportation to both reward the president’s political supporters and support social-engineering projects such as streetcars and transit-oriented development. TIGER and similar grant making programs are not about transportation; they are about political pork barrel.

What fiscal conservatives should want instead is a plan that limits expenditures to be no greater than revenues; ties expenditures to the source of those revenues (i.e., fuel taxes to highways); and eliminates porkish competitive grant programs. Even in the unlikely event that Congress raises gas taxes rather than transitions to vehicle-mile fees, that platform will improve transportation at all levels because it will give transport agencies incentives to respond to users rather than politicians and crony capitalists. The best would be for Congress to not increase taxes, thus forcing state highway agencies and local transit agencies to rely more on user fees than taxes.

Randal O’Toole is transportation policy center director at the Independence Institute, a free market think tank in Denver.  This pieced originally appeared in his blog, the Antiplanner.

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