Don’t Raise that Gas Tax…Yet!

August 22, 2007

President Bush got it exactly right at his press conference earlier this month when, in the wake of the Minneapolis bridge collapse, he shot down a suggestion that the federal government increase the gas tax to raise more money for transportation. Instead, he rightly suggested Washington needs to reconsider how it is spending the billions of dollars that already go toward infrastructure.

As dreadful as the Minneapolis disaster is, there is no guarantee that raising the federal gas tax and pouring more money into the system will have any affect on our nation’s roads, bridges, or transit networks. The sad fact is that the national transportation program is fundamentally broken.

There are two critical problems.

The federal government lacks a theory of its role and is absent or agnostic when it comes to where highway funds are spent. The gas tax feeds the highway trust fund which is distributed to states without any kind of purpose, oversight or accountability. Nor are the funds tied to any goals such as keeping bridges in good repair, reducing congestion, improving air quality, or connecting workers to jobs and education. It is as close to sending states a blank check as you can get. Unfortunately, when it comes to transportation most states have not proven themselves to be good stewards of the public dollar.

The other problem with increasing federal revenues is that the states simply use the new federal money for funds they otherwise would have had to raise themselves. The U.S. Government Accountability Office found that this “substitution effect” means there may not actually be more money spent on transportation and the federal government, as a result, winds up funding a tax relief program for the states. Congress can dedicate funds for transportation but it cannot tell the states to do the same.

So what can be done? One thing is certain: billions and billions of dollars of additional federal investments, without significant reform, will do precious little to fix our rusting bridges, expand our overcrowded transit systems, or unclog our ports.

History has shown that, to be effective, significant increases in revenue should be tied to meaningful updates and upgrades of the federal program. During their times President Dwight Eisenhower and Senator Daniel Patrick Moynihan had both bold new visions for transportation as well as a revenue stream for implementation. Significant gas tax increases accompanied major transportation reforms in both 1956 and 1991.

This should be another one of those times. The federal gas tax has not been raised since 1993 even to keep pace with inflation. In order to not waste the opportunity for the federal government to get the most out of its enormous investment we should connect any gas tax increase to better programmatic responsibility. As President Bush said, if bridges are a national priority, let’s make sure funding is tied to addressing that priority. Transportation agencies should set annual performance objectives and consequences should be established for excellent and poor implementation.

There is substantial federal precedent for such an accountability framework in other sticky areas like education and welfare. Why recipients of federal transportation dollars should be exempt from such stewardship has not been fully explained. Yet the transportation system of governance and finance shares similarities with many other areas of domestic policy—and should operate under similar accountability.

There is hope. The President missed his opportunity to veto the $300 billion pork-laden transportation law two years ago this month but several of the aspirants for the Oval Office have already found their voice on infrastructure. Senator Clinton recently announced her Rebuild America Plan focusing on upgrading and modernization, Senators Dodd and Hagel just introduced a bill to prioritize funding through a National Infrastructure Bank, and former Governor Romney has been talking up the “fix-it-first” policy for public works projects he championed when he ran Massachusetts.

The Minneapolis bridge tragedy lifted the veil off transportation policy and decision making in this country. Although infrastructure is historically relegated to the dominion of engineers, policy wonks, and true believers, it should continue to get priority attention.

The nation deserves it, and the people demand it.