Three myths about the Highway Trust Fund
July 13, 2014
By Robert J. Samuelson
It’s time for a primer on the Highway Trust Fund, which looms as the next battle in Congress’ unending budget wars.
Created in 1956 to pay for the Interstate Highway System, the trust fund is both popular and controversial. To some, it’s a vast source of governmental “pork.” To others, it’s the foundation of a vital national transportation network. In 2013, the trust fund disbursed $50 billion to states — $43 billion for roads and $7 billion for mass transit, reports the Congressional Budget Office (CBO). For a typical project, the federal government covers 80 percent of the costs and states pick up the rest.
The trust fund has a problem: It’s running out of money. Spending is projected to exceed its dedicated revenues, which come mainly from an 18.4-cents-per-gallon gasoline tax and a 24.4-cents-per-gallon diesel fuel tax. In the past, Congress has closed the gap by moving money from the Treasury’s general revenues. From 2015 to 2024, the CBO estimates a $167 billion gap. The debate concerns whether and by how much the trust fund should be replenished.
Not surprisingly, some myths surround the debate. Here are three.
Myth: If Congress doesn’t act, all road construction would grind to a halt. Perhaps 700,000 jobs might be jeopardized.
Not so. For starters, the Highway Trust Fund finances only a portion of road and mass transit construction. At $110 billion in 2013, state and local spending on roads is about double the level of federal spending. All or most of this spending would continue. Next, spending on the trust fund’s existing projects would also continue, though the pace of construction might slow. The federal government is legally committed to completing what it’s started, says the Federal Highway Administration.
If Congress doesn’t add money for the trust fund — as in the past — then presumably construction (and employment) would fall to levels that could be financed by existing taxes. The CBO estimates spending would drop about 30 percent for highways and 65 percent for mass transit projects.
Myth: The shortfall in the trust fund’s tax revenues reflects unexpected declines in driving by Americans and improved vehicle fuel economy.
True — but the impact is overstated.
In 2012, the average car traveled 11,265 miles, says the Energy Information Administration. This was 10 percent less than in the peak year of 2005. It’s an amazing change for a car-addicted society. The theories to explain the shift include: the impact of the Great Recession; high gasoline prices; younger Americans’ alleged distaste for cars. Over the same period, cars’ fuel economy improved by 5 percent. (A doubling of fuel economy standards by 2025 will increase this.) Both trends blunted the effect of population growth on gasoline consumption.
But these fascinating trends aren’t the main cause of the trust fund’s revenue shortfall. That’s simple. The gasoline and diesel taxes were last raised in 1993. Since then, overall prices are up about 60 percent. The taxes’ revenues buy much less.
Myth: We’re massively underinvesting in aging highways and bridges.
This is debatable, though — superficially — it seems so. Take bridges as an example. The record looks grim. In 2012, about 67,000 bridges were rated “structurally deficient.” Moreover, there have been several calamities: the collapse of the I-35W bridge in Minnesota in 2007; and the failure of an I-5 bridge in 2013 in Washington state.
But the record needs context. With 607,000 U.S. bridges, those 67,000 represent 11 percent of the total — a share that’s down from about 25 percent in 1990. Also, “structurally deficient” does not automatically mean unsafe, notes a report from the Congressional Research Service. It may mean that weight restrictions need to be posted or some repairs done. Most bridges are supposed to be inspected every two years.
As for the adequacy of road spending, a Department of Transportation (DOT) report this year estimated that governments at all levels were spending at least $14 billion more a year than needed to maintain existing road conditions. This implies gradual improvement. By contrast, a 2012 DOT report concluded that governments were underspending to maintain prevailing conditions.
How much to spend on transportation is a judgment call, as is the means of payment. Sen. Bob Corker (R-Tenn.) and Chris Murphy (D-Conn.) propose raising the gasoline and diesel taxes by 12 cents a gallon over two years. The extra revenues, they say, would cover projected trust fund spending for a decade. The taxes would also be indexed to inflation, increasing with prices. Their proposal is the most straightforward solution. Its prospects are considered slim.
Highway spending epitomizes the larger budget dilemma. Many Americans like big government — but not the taxes to pay for it. Congress has previously cured the trust fund’s revenue shortfalls with deficit-financed transfers. Predictably, that’s the favorite now.
