The Highway Trust Fund: Passing the ($8 Billion) Buck

Yesterday the House approved legislation transferring $8.017 billion from the general treasury into the near-bankrupt Highway Trust Fund.  President Bush is expected to sign it quickly and thus temporarily fix what could have been a crisis in highway funding nationwide.

Although Congress has justified the transfer based on the fact that interest was owed to the highway trust fund from years past, the reality is that we probably need to accept two things about this turn of events:  1) This solution is terrible and 2) This solution was better than the alternative.

The solution is terrible because it fundamentally destroys whatever was left of the user pay principle in highway funding.  Sure, the fuel tax is a poor substitute for a user fee as it fails to take into account key externalities.  But general fund revenue is way worse, as it leaves almost no connection between who pays and who benefits, thus worsening the continued perception among the driving public that roads are “free.”  Moreover, given the lack of any actual general fund surplus, this “transfer” is really just increasing the national debt at a precarious time.

The solution is better than the alternative because without it, states would have begun to receive less than anticipated highway funding, causing project delays across the country.  These delays would have a substantial economic consequence that is probably much worse than an increased debt or people paying for roads through their income taxes.

In the end this lesser of two evils stems from an inability amongst leadership of both Congress and the Executive to convince Americans that they should pay explicitly for their transportation infrastructure.  There is a reason why no increase in trust fund revenue has been proposed despite this long-anticipated shortfall – a complete lack of vision for transportation policy.  Rather than confront this problem, federal leadership has chosen to pass the buck for the past six years.  This buck-passing will keep going into the next administration for sure, but at some point it will become unsustainable.  We can only hope that perhaps then a new vision will be welcomed and spearheaded by the leaders we need so desperately to do so.

-Joshua Schank