WITH THE CLOCK TICKING ON THE CURRENT TRANSPORtation funding legislation (which expires Sept. 30), the big question
looming is how it will be replaced. There is no disagreement that
the country’s infrastructure has reached a critical state of disrepair.
The debate is over how improvements will be funded, and so far,
Congress has been unable to reach a consensus.
Part of the problem is the vast amount of money involved. The
American Society of Civil Engineers has estimated that $2.7 trillion
will be needed by 2020 in order for the country to stay competitive.
While there is no way any plan can generate that kind of funding, at
a minimum, $50 billion annually will be required
to underwrite critical projects. In the meantime,
the clock is ticking. The Highway Trust Fund,
which provides the money for road construction
projects, is projected to run dry by August of this
year.
On Feb. 26, President Obama unveiled a $302
billion, four-year infrastructure improvement
plan designed to fund many of the necessary
modernization and repair projects as well as provide a much-needed boost in employment. Once
again, however, he disappointed many with his
vagueness on the major issue—how to fund these
improvements. His plan is to overhaul business and corporate taxes,
and he did not address the obvious, but politically charged, option
of raising the federal fuel tax.
First levied in 1932, the federal fuel tax represents the primary
source of revenue for the Highway Trust Fund. The tax, which
currently stands at 18. 4 cents per gallon on gasoline and 24. 4 cents
per gallon on diesel, has not been raised since 1993 and has lagged
woefully behind the rate of inflation. The states also levy fuel taxes,
averaging 33. 5 cents per gallon on gas and 24. 3 cents on diesel, and
in the face of continued congressional inaction, they are enacting
their own increases to pay for needed infrastructure improvements.
Though it may be a political football, the idea of raising the federal fuel tax has its backers, including some very powerful players.
On Feb. 12, Tom Donohue, president of the U.S. Chamber of
Commerce, recommended to Congress that the tax be increased by
15 cents per gallon over the next three years, urging the Senate committee to “for once … do what is right, not what is politically expedient.” The same day, Rep. Earl Blumenauer (D-Ore.) introduced
a bill that would raise the gas tax to 33. 4 cents and the tax on diesel
BY CLIFFORD F. LYNCH fastlane
The continuing infrastructure drama
to 42. 8 cents. But the proposal seems unlikely
to get much traction with his fellow lawmakers.
The House Transportation & Infrastructure
Committee chairman has already gone on
record stating that he doesn’t believe Congress
will support a fuel tax increase this year.
In a speech to the chamber on Feb. 20,
Secretary of Transportation Anthony Foxx
applauded Donohue for taking a stand but
stopped short of endorsing his solution.
Instead, he laid out the
framework for the administration’s plan. Foxx also cited
a recent McKinsey study
that suggested countries can
“obtain the same amount of
infrastructure for 40 percent
less” just by adopting best
practices. This, however, is
not an area where the government has demonstrated
much prowess.
In fairness to the president, Secretary Foxx let it be known that the
administration is open to other suggestions,
but already congressional leaders are predicting
that the Obama plan will go down to defeat
in the House and possibly the Senate. Some
members of Congress have suggested that they
abdicate their responsibility and have the federal government turn the whole thing over to the
states. Whatever the solution—private funding,
tolls, or tax increases—it is absolutely critical
that Congress avoid kicking the can any further
down the road. It is past time to act responsibly
in spite of the political pain.
Clifford F. Lynch is principal of C.F. Lynch & Associates, a provider
of logistics management advisory services, and author of Logistics
Outsourcing – A Management Guide and co-author of The Role of
Transportation in the Supply Chain. He can be reached at cliff@
cflynch.com.
