As explained by U.S. Transportation Secretary Mary Peters, "At current spending rates, we will start the new fiscal year on Oct. 1 with a zero balance in the [Federal Highway] Trust Fund, and will continue to spend more than we take in." If allowed to continue untreated, the consequences of this shortfall would be immense, as every state depends heavily on federal highway dollars to carry out transportation construction projects. Fortunately, a transfer of $8 billion of general revenues into the Highway Trust Fund (aptly described by one Senator as a "short term fix") appears as if it is about to be adopted. Regardless of the resolution of this immediate problem, however, this development brings with it a unique opportunity to discuss two important points related to transportation funding.
First, following the announcement that the Trust Fund would fall short, Arizona and Oklahoma each halted work on scheduled transportation projects, and numerous other states made it clear that they would be forced to follow suit if the problem is not quickly remedied. Such a development would not only have long-term consequences for the efficiency of the nation's transportation infrastructure, but would also have immediate consequences in terms of lost jobs and lost wages.
Members of Congress did not dispute these points in their overwhelming support of the $8 billion transfer to the Trust Fund. But for some reason, talk of how best to bolster the economy (especially the talk going on in the Presidential election) has been held hostage to the idea that tax cuts must be at the center of any wise economic policy. Spending on government employment (such as in the transportation sector) is more important to the nation's economic vitality, and should not be overlooked, despite the zeal with which all sides have professed the importance of tax cuts. (Although at least Democratic leaders in the House and Senate are now discussing a new stimulus bill without tax cuts.)
The second debate that needs to take place in the wake of this transportation funding scare is over what to do about the long-term sustainability of the nation's transportation finance system. The Highway Trust Fund consists mainly of revenue collected by the federal 18.4 cent-per-gallon gasoline tax. The federal gas tax has not been raised since 1994, despite the fact that 18.4 cents in 1994 is the equivalent of what would be about 27 cents in today's dollars, adjusting for inflation. While gas tax hikes aren't likely to be something you'll hear much about during the Presidential election, serious consideration will have to be given to such a plan soon (or at least to some kind of sustainable fix for our revenue shortage) should another eventual shortfall in the Trust Fund be averted.