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The Transportation “Fiscal Cliff”


Every few months in Washington, D.C., there is some perceived crisis that headlines newspapers for a few weeks before fading away or being overcome by the next crisis. They are generally crises of the government’s own making and are due to its reckless spending and continued operation of unconstitutional agencies and programs.

This time it is the transportation “fiscal cliff.”

The original “fiscal cliff” referred to the combination of expiring tax cuts and unemployment benefits, spending cuts, and tax increases that were all scheduled to go into effect on January 1, 2013. The American Taxpayer Relief Act of 2012, passed by the lame-duck Congress to avert this “fiscal cliff,” made permanent the so-called Bush tax cuts, raised the top marginal tax rate, increased the estate tax, and delayed the start of the “sequester” until March 1, 2013.

It seems that the federal Highway Trust Fund, 72 percent of which is funded by an 18.4 cent-per-gallon federal excise tax on gasoline, is running out of money. Because of the downturn in the economy, the federal government isn’t collecting enough money from the gas tax. The trust-fund balance has shrunk from $10.5 billion in October 2013 to $8.1 billion on June 1, 2014. It could be down to zero by late August. That has led the American Association of State Highway and Transportation Officials to predict “that as many as 6,000 projects across the country could be halted this summer.”

“If the trust fund is not replenished, the gridlock in Washington is going to reach Main Street America,” said U.S. Transportation Secretary Anthony Foxx in an interview with Bloomberg News. Explained Foxx, “We do have an infrastructure crisis. I would define it as an infrastructure deficit. It’s been estimated in the trillions of dollars. Even when we are our most aggressive, we’re talking about just trying to get the funding levels back where they were last year.”

Foxx expects that “by late June, maybe middle July, some of the states will already start to pull back projects and slow other projects down and even stop some.” In a letter to all 50 state departments of transportation, he relayed, “The situation remains dire. If the trust fund becomes insolvent, DOT will likely need to delay some reimbursements to your agency.”

Why is the secretary of the federal Department of Transportation (DOT) mentioning “some of the states” and “state departments of transportation”? It is because 32 states received most of their transportation funding from the federal DOT, according to an analysis of state transportation budgets from 2001 to 2012 by Transportation for America. Regarding the amount of funding received by the states from the federal DOT,

  • The median amount received was 52.6 percent of the state’s transportation budget.
  • No state received less than one-third of its transportation budget.
  • Only six states received below 40 percent of their transportation budget.
  • Four states received more than 80 percent of their transportation budget.

What that means is that the federal government takes money in the form of taxes from residents of the 50 states, funnels the money through the bureaucracy of the federal Department of Transportation, and redistributes it to state departments of transportation for various transportation projects.

There are a number of problems with this approach.

1. The federal DOT, like almost every agency of the federal government, is a bloated bureaucracy. For example, within 18 months after the current recession began in late 2007, the number of employees at the federal DOT earning a salary of $170,000 went from 1 to 1,690.

2. It is a pervasive and persistent myth that if the federal government did not fund transportation projects, we would have only a limited number of inferior state and county roads. Americans had been trekking across the country long before the country had an Interstate Highway System. Before the monopolization of transportation by government in the 20th century, private turnpike companies built thousands of miles of toll roads throughout the United States. Even urban transit services in America used to be virtually all private.

3. There is no crisis in the nation’s infrastructure. According to David Stockman, former congressman and director of the Office of Management and Budget for Ronald Reagan, “nowhere is the stark distinction between the crumbling infrastructure myth and the factual reality more evident than in the case of the so-called deficient and obsolete bridges.” Says Stockman,

It seems that after 32 years and tens of billions of Federal funding the nation’s bridges are still crumbling and in grave disrepair.

The overwhelming bulk of the 600,000 so-called “bridges” in America are so little used that they are more often crossed by dogs, cows, cats, and tractors than they are by passenger motorists. They are essentially no different than local playgrounds and municipal parks. They have nothing to do with interstate commerce, GDP growth, or national public infrastructure.

At the end of the day, the ballyhooed national infrastructure crisis is a Beltway racket of the first order. It has been for decades.

4. President Obama’s fiscal year 2015 budget request for the Department of Transportation is $90.9 billion. It costs approximately $1 million to keep one U.S. solider in Afghanistan for one year. Do the math. If there really were a transportation fiscal cliff, then ending the unnecessary and destructive war in Afghanistan and bringing all U.S. troops there home would certainly avert it. Doing that would probably save enough money to replace every dilapidated or aging bridge, widen every congested road, and resurface every mile of the Interstate Highway System.

5. On a practical level, federal aid programs for highways and transit have many shortcomings. As Chris Edwards, director of tax policy studies at the Cato Institute, recently testified before the Senate Finance Committee,

Aid redistributes transportation funds between the states in ways that are unfair and inefficient. Aid can get misallocated to low-value projects, and it distorts efficient decision making by state and local governments. Also, federally funded projects are known for mismanagement and cost overruns.

The Highway Trust Fund “tends to redistribute money from lower-income to higher-income states.” Also, states which are “better represented on the four key congressional committees generally benefit from redistribution” in the federal highway program.

6. The existence of a federal Department of Transportation can only barely be justified by the Constitution. In Article I of said document, Congress is given the power “to establish Post Offices and post Roads.” But that would mean that the Department of Transportation should be limited to just “post Roads,” not interstate highways and mass transit projects. Under the American federal system of government, the existence of any government-built roads in the states is fully the responsibility of the states. Additionally, devolution of responsibility to states would free them from federal laws, rules, and regulations that add years and expense to transportation projects.

The federal gas tax doesn’t need to be raised, no money needs to be transferred to the Highway Trust Fund from the general fund, and no additional source of revenue for transportation and infrastructure needs to be found. The gas tax needs to be done away with, the trust fund abolished, and the Transportation Department eliminated. All transportation and infrastructure projects outside of the federally owned land in the District of Columbia should henceforth and forever be the responsibility of the states in which they are found.

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