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WHY ELIMINATING THE FEDERAL HIGHWAY PROGRAM IS A BAD IDEA

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As the national debate continues to focus on cutting federal spending, reducing the national debt, and balancing the budget, some have begun asking whether it makes sense for the federal government to continue investing in the nation’s highways, bridges, and transit programs. After all, they say, the highway system has been built and the states can surely handle what little maintenance is needed to keep the system running. Right?

Wrong. To begin with, the federal surface transportation program is a self-funded program—meaning it has zero impact on our federal deficit and the size of our national debt. But beyond this obvious point, it is also worth noting that few things would be as economically devastating, fiscally irresponsible, or politically unsound as eliminating the federal surface transportation program.

Eliminating the federal surface transportation program would harm our economy. The federal transportation program covers 80 percent of the cost of maintaining and building all aspects of the National Highway System and up to 50 percent of the cost of many transit construction programs. Even if it were politically feasible for some states to raise their gas tax to compensate for the lack of federal funds, most wouldn’t. As a result, state transportation departments would fall further behind in maintaining and repairing aging roads and bridges, and most likely would have to abandon most of their new capacity projects. This would stifle economic growth for decades by undermining U.S. businesses’ ability to efficiently and affordably ship goods and supplies.

Allowing the program to end would also increase the federal deficit. The federal government has already committed to funding tens of thousands of highway projects being undertaken by the states. Eliminating the federal program would end the collection of federal transportation revenue, but it wouldn’t eliminate the government’s obligation to reimburse states for work scheduled to take place over the next several years. Instead of paying those reimbursements out of the self-funded Highway Trust Fund, the federal government would have to pay for that work out of the general fund, increasing the federal deficit by tens of billions of dollars.

Meanwhile, devolving the federal program back to the states would be politically disastrous, especially for conservatives who are most likely to embrace the idea. That is because the states that most heavily rely on the federal transportation program tend to be large, have high concentrations of agriculture and commodities development, and more often than not vote conservative. The end of the federal program would devastate these states’ transportation budgets, make it difficult for farmers, miners, and refiners to ship their products, which would generate significant local political backlash. Helping bankrupt your state government, forcing unpopular increases in local gas taxes, and making it harder for employers to earn money and hire people is never a winning formula for winning reelection.

Of course, the reason some are attacking the federal highway program is there are some very clear problems with our current approach. There are too many programs being funded with gas tax dollars that do nothing for highway users. Federal red tape is forcing years-long delays in building key projects. And too many earmarks are sending too much money to projects that benefit too few people. But instead of causing the economic havoc that would come with killing the program, we need to fix it. The best way to do that is for Congress and the administration to act on the suggestions we provided in “The Case for Infrastructure & Reform”1 we released earlier this year.

That report identifies a number of key reforms that would ensure that federal funds for highway, bridge and transit construction are used as effectively as possible. Those reforms include cutting federal red tape, streamlining the federal program, refocusing on core functions like building and maintaining highways and bridges, and giving state officials greater flexibility. In other words, we can fix the problems with the federal transportation program without causing significant harm to our economy or our public finances.



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