Investment Deferred is Growth Deferred…You Get What You Pay For

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 One of the greatest, and confusing, disappointments of the 111th Congress has been its inability to enact legislation to re-authorize a broad array of infrastructure programs. Due in large part to disagreement over how to generate a reliable source of revenue to pay for much needed investments, Congress will adjourn in six weeks without taking final action on long expired aviation, surface transportation and water resource infrastructure legislation.

CENTRAL TO RECOVERY

Since President Eisenhower first advanced the thesis that a modern interconnected system of highways was essential to the nation’s defense, there has been strong public acceptance of the user fees required for the construction and maintenance of that system. The public infrastructure investment made possible by such fees generated significant gains in economic activity and productivity. The importance of such spending during periods of national economic stress was recognized by Republican and Democratic Presidents alike. President’s Reagan, Bush, and Clinton all advocated increased surface transportation spending, and the fees required to support that spending, as a key component in their economic recovery programs.

A CHALLENGING SITUATION

In fairness to President Obama and the 111th Congress, the task of merely keeping surface transportation spending constant relative to inflation is daunting. Wracked by reduced economic activity and improved fuel efficiency, the revenue stream that once generated a huge surplus in the Highway Trust Fund is now insufficient, and sustaining the current program has occurred solely on the basis of appropriations from the general revenue fund.

In a rare example of business-labor partnership, both the Chamber of Commerce and the AFL-CIO have announced their support of a higher level of transportation funding and a concomitant increase in the fees to support that spending. Unfortunately, while raising federal highway excise taxes to support the current program may address the short term deficit in the Highway Trust Fund, the improved fuel efficiency of cars and trucks will quickly reduce the revenue stream required to sustain long term infrastructures investments.

THE WAY FORWARD

Press Secretary Gibbs uninformed critique notwithstanding, Transportation Secretary LaHood suggested that one option for putting the Highway Trust Fund back on stable financial ground is a weight-distance or vehicle miles travelled fee. While not a panacea for all of the challenges confronting the surface transportation program, a properly designed system could equitably generate a reliable revenue stream from all users of public infrastructure. With limited accommodations made for rural residents, intra and inter-city transit providers, and other special circumstances, such a system would enable policy makers to shift the public debate away from scarcity and disinvestment and back to a discussion of bringing our public infrastructure into the 21st century.

The fastest growing economies in the world are making dramatic infrastructure investments. If we want our economy to perform like theirs, we must invest like them….

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