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HIGHWAY TRUST FUND
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August 2012
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by Mike Howe
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Category: Driving Through DC
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George Bernard Shaw once said, "Hell is paved with good intentions, not with bad ones. All men mean well." Whether you believe all men mean well is one thing, but generally speaking most politicians mean well, at least at first. Unfortunately, that well-meaning approach often results in short-sightedness. New legislation and new regulation are often the result of an attempt to solve a problem, or a perceived problem. These good intentions make it easy for officials to support a solution even though they might be blinded by the unintended consequences.
In the trucking industry, we need look no further than the National Highway Traffic Safety Administration's (NHTSA) and the Environmental Protection Agency's (EPA) 2011 proposed rule to tighten the corporate average fuel economy (CAFE) standards for light-duty vehicles. This proposal would impact such vehicles manufactured between 2017 through 2025, with the intent of increased fuel economy. That increase in fuel economy is expected to move from about 34 mpg in 2016 to just under 50 mpg. The proposal also includes goals to reduce greenhouse emissions.
It is difficult to argue that improved fuel efficiency and reduced greenhouse gases is a negative. The assumption is these rules don't really affect the heavy-duty trucking industry. But therein lies the rub.
The trucking industry naturally relies on a dependable highway system. Highway infrastructure must be maintained and improved for the trucking industry to thrive.
As well-intentioned as the proposed CAFE standards are, they will have a detrimental effect on the Highway Trust Fund in its current form. According to the nonpartisan Congressional Budget Office's (CBO) May 2012 report, "The CBO estimates that the proposed CAFE standards would gradually lower gasoline tax revenues, eventually causing them to fall by 21 percent." That decline won't be fully realized until the year 2040, but the trend will start much earlier. Of course, it's the gasoline tax revenues that fund the Highway Trust Fund - the very fund the trucking industry relies upon to keep up the nation's highway infrastructure.
It should also come as no surprise that neither the NHTSA nor the EPA proposed a solution to this pending crisis should the CAFE standards be adopted. That's not to say they did not know about this issue, rather they just did not include a solution in their proposal. The CBO, whose job is not to make policy recommendations, offered suggestions in their May 2012 report on how to avoid the funding crisis: reduce spending on highways, transfer money from the general fund to the Highway Trust Fund, increase the gasoline tax or raise revenue from other sources.
While the CBO's recommendations might seem obvious, they are also fraught with problems. Imagine reducing spending on highways at a time when many argue the current funding levels are not adequate. Remember the report on the nation's transportation infrastructure that was released after the Interstate 35 bridge in Minneapolis collapsed? I doubt a reduction in spending is a wise move.
As for simply transferring money from the general fund to the highway fund, as the CBO also suggests, there are issues with that as well. Where do general fund monies come from? You guessed it: taxes that we all pay now. Is it just me or does it seem the federal government is already struggling to fund all of the programs from the general fund? So, what happens when more money is needed? Yes again: Taxes increase.
Among the CBO's recommendations are increasing the gasoline tax and raising revenue from other sources. There it is, folks, the call for increased taxes to help pay for the Highway Trust Fund. A fund that has been raided on numerous occasions. Perhaps using the gas tax for its intended use would help, but with the CAFE standards it likely won't be enough.
While the proposed CAFE standards might seem reasonable and nice on the front end, it is also important to consider the unintended consequences. The decreased funding of the Highway Trust Fund is just one of those unintended consequences we need to be aware of.
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