For Infrastructure, Stimulus Just a Patch Job
There’s not enough money for the big fixes. Watch for neglect to return quickly.
By Jim Ostroff, Associate Editor, The Kiplinger Letter
March 12, 2009
Advertisement
The federal stimulus spending will fill a lot of potholes around the country, but it won't go far in filling a very deep hole in U.S. infrastructure needs. The roughly $27 billion being doled out to states this year and next is actually less than the yearly gap between what the federal government would normally spend and what states need to maintain and repair infrastructure, such as crumbling highways, bridges and overpasses.
Stimulus funds won't help get projects started that are considered crucial to untangling traffic snarls that sap business productivity and stall motorists. Replacing New York's Tappan Zee Bridge across the Hudson River, for example, likely will cost up to $7 billion. But that entire state's road infrastructure stimulus payment will total just over $1 billion. In Oregon, funding will fall woefully short of what's needed to build bridges connecting the state to Washington via the I-5 or to build a 4,000-mile highway to Texas.
But once the stimulus funds are spent, previous neglect will return. Odds are lawmakers won't find a new funding mechanism to replace gas taxes in the next federal highway bill, which must be enacted before Oct. 1. Slammed by a drop in the number of miles driven by motorists and later, by lower gasoline prices, revenues from taxes at gas pumps that fund the federal highway trust fund are dwindling, which translates into funding shortfalls ahead.
The highway trust fund that foots the bill for road work ran out of money last fall. That deficit required Congress to approve another $8 billion to keep the fund from going bust, until the funds were OK'd. And the Obama administration's push to boost autos' average fuel efficiency to nearly 50 miles per gallon (mpg) from the current 27.5 mpg will slice the fed's take from the gas pump further.
There are options for solving the road mess, but they're politically unpalatable. Scrapping the fuel pump tax and replacing it with one that assesses a fee based on miles traveled by motorists would foot the bill for an expanded federal highway program. But it's unlikely to go anywhere because it would require vehicles be equipped with tracking devices.
Also in the political breakdown lane: a national infrastructure bank to fund large, multistate projects, such as interstate highways, bridges and tunnels. It would be seeded with Uncle Sam's money and chartered to borrow money at ultralow interest rates that only federal entities can obtain. But Washington lawmakers won't cotton to ceding control of several billion dollars of highway money each year to an independent agency.
The best bet is a few-cents hike in the federal gas pump tax. It's already at 18.4 cents a gallon. However, with all the other new taxes in the Obama budget and all the battles on Capitol Hill over the affordability of those taxes, it's hard to say when that one will be pushed through.
For weekly updates on topics to improve your business decisionmaking, click here.
Reader Comments (4)
Posted by: KJB at 03/12/2009 02:56:27 PM
Vehicles are already equipped with "tracking devices" that record mileage traveled, they're called odometers. It seems to me that it wouldn't be any big deal to make a note of vehicle mileage at each vehicle inspection and charge based on that, if a mileage-based system is a way to go. But raising the fuel tax would have the same effect in terms of revenue, plus the added bonus of rewarding fuel-efficiency, which lines up nicely with our national long-term goals. So, I'm a bit surprised that the article dismisses the current fuel tax in favor of a mileage-based system without explaining the rationale.
Posted by: Bob at 03/12/2009 05:11:55 PM
$27 billion IS just peanuts on a nationwide scale with most of it sopped up by the major cities. It would be nice if someone in Washington could think far enough ahead to start planning a new and more efficient interstate rail system. This could replace a lot of airline congestion between nearby major cities and in many cases be even faster. Computer controlled freight transfer could relieve a lot of the semi truck pounding and fuel usage on our nations roadways. If most of the future semis became short haul(rail to final destination) delivery vehicles that would also open up the possibility of many of them also becoming hybrid electrics. What stands in the way? Most of the railroad right of ways already exist and a mile of railroad track has to be much cheaper than a mile of interstate or even two lane highway. Is anyone really serious about energy independence and conservation? We'll see.
Posted by: JMM at 03/17/2009 10:22:56 AM
Yes the tax is at 18.4 cents, however it's been at that level since the last increase in 1993! The public needs to understand that to expect a quality product requires investment. It's up to us to step and invest in the nations infrastructure, otherwise we'll see alot more catastrophe's like the I-35 disaster. It's time to put up or shut up.
Posted by: DMB at 03/17/2009 11:34:28 AM
As we struggle with ways to bring the revenue in line with the nations needs for road improvement, I suggest that the federal fuel tax should be indexed to the CAFE standard. this would be done with out congress voting on it each time and could be retroactive to 1990 ( or pick a year)