IT’S THAT TIME AGAIN

In only six weeks, the 10 month extension of last year’s proposed Grow America Act will expire. Rather than approve the White House’s $302 billion four year bill, Congress simply extended the existing legislation until May 31 of this year. Now once again, it is decision time – a decision Congress has avoided over 25 times by extending whatever legislation was in place at the time. Hopefully, because of growing pressure and an almost totally diluted Highway Trust Fund, our legislators will enact some comprehensive legislation. Don’t be surprised however, to see another short term fix.

On March 30, Secretary of Transportation Foxx sent to Congress a new Grow America Act which would allocate $478 billion over a six year period. This proposed legislation gives a wide berth to an increase in fuel taxes, something that has not been done since 1993. Although this would seem to be a logical solution, it is a political “hot potato” that few members of Congress are eager to handle – even when they are called “user fees”, as suggested by the U.S. Chamber of Commerce. Instead, about half the funding for the President’s proposal would come from a one-time 14% tax on earnings that U.S. firms hold overseas. In addition, a new 19% tax on foreign earnings would be established. Obviously, this will not be too popular with some of the major, and powerful, companies that fall into this category. More importantly, it does not place the burden where it belongs – with the users of the highways and bridges through reasonable fuel taxes, or “user fees”, if you prefer.

Another provision of the bill that will generate some controversy would authorize the states, with Federal approval, to establish tolls on interstate highways. This has been banned for several decades and no doubt will not receive a warm welcome by the users of the roads. Toll roads however, in spite of their unpopularity do provide a funding mechanism that has proven quite successful in states such as Texas and Illinois.

As Congress moves into its debate, the idea of devolution will no doubt come up again. Under devolution, Congress would simply turn highway funding over to the states, thus putting an end to the recurring firestorms that the subject of funds for highways always ignites in Washington.

In the meantime, a number of states, because of Congress’ failure to provide funding, have increased their own fuel taxes and are using the funds for highway and bridge construction and repair. Although this probably will help the states, these projects may or may not facilitate a national system.  The state of Tennessee has discontinued work on its 156 mile segment of Interstate 69, the so called NAFTA highway providing a direct connection with Canada and Mexico. On the other hand, the state just spent a whopping $753 million on a Nashville by-pass. So far its highest and best use seems to be easing traffic flow between Memphis and Knoxville on University of Tennessee football game days.

The risk in leaving the decisions to the states is that their idea of highway additions and improvements may not be in the best interest of the nation as a whole. What we continue to need is a national blueprint to which any improvements should conform. The current interstate system was a result of a national plan that would meet the needs of the country’s commerce and defense. The states cannot (or should not) do this on their own. Their individual needs are only a piece of the puzzle.

It will be interesting to see if any of the rapidly growing group of presidential candidates views this subject as a major issue for the country.

Written By: Clifford F. Lynch