Op-Ed: Federal Transportation Policy’s Prerequisites

The future of the federal surface transportation program is uncertain and clouded by an ever-widening range of parallel and perhaps conflicting actions and negotiations. President Biden’s proposed American Jobs Program (originally over $2 trillion) includes funds for “hard” infrastructure, such as transportation, and “soft” or social infrastructure, such as grants for elder- and childcare.

There is, of course, dispute between the parties about the definition of “infrastructure,” as well as about the size of the overall program.  President Biden’s proposal calls for approximately $600 billion of “new” money for transportation, that is, funding on top of existing transportation programs (or so-called “baseline” spending). Recent proposals by the Republican Senators’ negotiating with the White House call for nearly $1 trillion in “core infrastructure” spending, including transportation.  However, most of that amount is spending under current federal programs, so that the gap between their proposal and the President’s, in terms of new money, remains quite large.

In addition, both Houses of Congress are concurrently moving forward with their own versions of legislation to re-authorize existing federal surface transportation programs.  It cannot be predicted how the differences in these initiatives will be negotiated, if at all.

Nevertheless, it is useful to identify several key issues that must be resolved for a single coherent transportation infrastructure investment program to emerge from the current efforts:

  • What should the transportation investment priorities be of whatever program emerges?
  • What should the “pay-fors” for the transportation program be?
  • What role should climate change play in the elements of the overall program?
  • What should the overall size of the transportation infrastructure program be, and how much of the total amount should be “new” (and non-repeating) funding on top of existing programs?

Some have argued that the Biden proposal is too large and will contribute to overheating the economy and to inflation.  Former Clinton Treasury Secretary and Obama economic advisor Larry Summers is one of the most persistent advocates of this view.  Traditionally a strong supporter of the need and value of significant infrastructure investment, Summers believes that the Biden program should be scaled back.   With little or no slack in the construction labor and materials markets substantial increases in demand could cause inflationary pressures and higher prices, rather than more jobs and projects.

It is fair to view the American Jobs Program (AJP) not as a short-term program to increase jobs (no matter how it is being marketed), but rather as a long-term investment in the economy, bringing significant economic benefits and improvements to the nation’s competitive position.  However, while the Biden program may be larger than it needs to be for this purpose, the political dynamics seem to require that more new money than has been proposed so far by Republican Senators, to be part of any bi-partisan compromise transportation program.

But it is not merely the size of the transportation infrastructure program that is crucial.  The Biden plan proposes that money authorized for highway purposes should be limited to “fix-it-first” projects.  The same principle should be applied to transit and intercity passenger and commuter rail projects. Since we have no idea what ridership, revenues, and needs will be on these modes as the nation emerges from the COVID pandemic, this is not the time to undertake any significant new capacity-expansion projects. The goal should be to bring the nation’s multi-modal transportation system to a state of good repair and, within that goal, to invest in those projects and programs that will bring the greatest economic, social, and environmental benefits.

Another source of disagreement is the source of revenues to support this greatly increased program of federal capital investment.  The Administration recommended increased corporate taxes, which Republicans have strongly rejected.  Almost certainly, however, the pay-fors will have to come from a mix of user fees and general taxes.

In the past 15 years Congress, on a bi-partisan basis, and without ever acknowledging it, has moved away from the principle that those who benefit from a networked system, like transportation, should pay for it.  Today about one-third of revenues into the Highway Trust Fund (HTF) comes from general revenues, that is, from federal borrowing. Federal motor fuels taxes have not been increased in almost thirty years.  These taxes, proxies for user fees, cannot adequately support the levels of funding for highways and transit authorized by Congress and have not been able to do so for more than a decade.

I believe that whatever level of “new” federal transportation funding that is enacted, user fees should significantly fund it.  It can come from an increase in federal gasoline and diesel taxes, a new program of mileage-based fees, or carbon taxes.  However, to the extent that user fees continue to be short of adequately funding HTF, it is perfectly appropriate for Congress, consistent with past actions (or failures go act), to look to general taxes, corporate or otherwise, to support transportation funding.

Finally, if there is to be a bi-partisan compromise on the transportation portions of AJP, it will have to include significant measures on climate change.  This includes support for the electrification of the vehicle fleet and for the enhancement of programs to make the nation’s transportation infrastructure more resilient to the ever-increasing and catastrophic risks of natural disasters related to climate change.

While the highway reauthorization bill approved unanimously by the Senate’s Committee on Environment and Public Works contained some climate measures, they are inadequate to the challenge and to the commitments that the nation and Biden have made on this issue.  Among other things, funding in both the reauthorization of existing surface transportation programs and new initiatives under the President’s proposal should condition grants and other federal assistance on the reduction of greenhouse gas emissions by the recipient state, regional, or local transportation agencies.

Given the current debate, it will be a challenge to include all of these elements in the final version of AJP, whether enacted as bipartisan compromise legislation or under the rules of budget reconciliation.  However, these should be considered prerequisites, if such an investment program is to achieve its national purposes.

The views expressed above are those of the author and do not necessarily reflect the views of the Eno Center for Transportation.

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