Photo: Getty Images/AFP
Congress Is Weighing Some Bafflingly Bad Ideas for Fixing Our Crumbling Bridges and Roads
infrastructure

Congress Is Weighing Some Bafflingly Bad Ideas for Fixing Our Crumbling Bridges and Roads

By Photo: Getty Images/AFP

America’s infrastructure is crumbling. And the problem is more severe than you probably realize. Yes, you know about all the unfilled potholes and bridges in disrepair. But there are things you can’t seelike a decades-old air traffic control system, and storm drains from the 1930sthat are in even worse shape.

In a rational political environment, Congress would respond by passing an infrastructure bill that allocated new money, even if meant deficit spending. There are still lots of construction workers looking for work, after all, and borrowing is cheap, thanks to low interest rates. But Republicans have blocked such proposals. The best lawmakers can do, it seems, is to keep funding infrastructure at current levels. To do that, they must come up with some way to replenish the federal Highway Trust Fund, which is running short on money.

Unfortunately, they can’t even get this part right. There are now three Highway Fund proposals under consideration in Congress. All of them are bad.

The Trust Fund provides money for road construction and mass transit. At the moment, it gets money from the federal gas tax. But the tax is not indexedin other words, it doesn’t rise automatically with inflation. For many years, that wasn’t such a big deal. Revenue from the gas tax outpaced spending, creating a surplus. But as inflation eroded the real value of the tax, that surplus became a deficit. Since 2008, lawmakers have transferred $54 billion from the Treasury’s general fund to the trust fund, just to keep it flush. But the fund is expected to run out sometime this summer. If Congress does not act, it will face a $12 billion shortfall in 2015 and $164 billion shortfall over the next decadeand those crumbling roads will crumble even more.

Finding that $164 billion won’t be easy. Republicans, who have no problem passing corporate tax breaks that increase the deficit, will surely insist that Congress find some way to offset the new spending. Similar demands scuttled proposals to extend unemployment insuranceand that $9.7 billion pricetag. That’s led to three bad ideas:

1. Let foreign companies bring profits back to the U.S.  Multinational firms are currently sitting on more than $2 trillion in foreign profits, but refuse to return it to the United States and pay the 35 percent corporate tax rate (less any taxes they paid on it in the foreign country). Harry Reid, the Senate Majority Leader, has proposed allowing companies to bring that money back into the U.S. while paying a lower rateand then using the money to close the funding gap in the Highway Trust Fund.

For once, Reid doesn’t have the White House on his side. The Administration opposes this idea and it’s not hard to see why. Initially, companies would react by bringing money back into the U.S., creating a revenue surge. But it’d be temporary. Pretty soon they would start moving investments overseas againand keeping profits abroadin anticipation of the next repatriation holiday.

This isn’t speculation. It’s how corporations reacted to a similar holiday in 2004, even though President George W. Bush declared it’d be a one-time occurrence. The Joint Committee on Taxation estimates that, over the next decade, another repatriation tax holiday would cost the government $96 billion over the next decade.

CBPP Repatriation Tax Holiday
Center for Budget and Policy Priorities

2. End Saturday mail delivery. House Republicans like this idea, because it’s a budget cut. But the savings would replenish the Highway Fund for only one year. And the Post Office already faces a cash shortfall, thanks to declining use of traditional mail and arcane rules that require the postal service to pre-fund its pension obligations. In fact, the Post Office already tried to end Saturday delivery in order to balance its booksuntil Congress, in March, passed a continuing resolution prohibiting the post office from doing so. Now, House Republicans want to allow that five-day delivery schedule, but to siphon off the funding for the highway trust fund. In effect, they’d be buying a one-year reprieve on the Highway Fund shortfall by taking away the money that the Postal Service needs to cover its operations.

3. Raise the Gas Tax. At first blush, this proposal seems most sensible. Legislation from senators Bob Corker and Chris Murphy would raise the gas tax by six cents in 2015 and 2016, and then index the tax to inflation in future years. It would bring $160 billion in new revenue over the next decadeand it would do so without accounting gimmicks or raiding other government programs.

But there’s a catch. And it’s a big one. Corker and Murphy have been looking for a way to offset the tax increase with tax breaks. These so-called “tax extenders,” which are mostly tax breaks for corporations, would cost the government $190 billion over ten years. The Corker-Murphy bill would also use the gas tax money to cover the cost of those extenders.

The problem, of course, is that they’re trying to use the same money twice. “To put it another way, it would be perfectly fine (in budget terms) if Congress used a gas tax hike to pay for restoring those expired tax cuts,” Howard Gleckman, a fellow at the Urban Institute, writes. “It would be excellent if it used a gas tax hike to pay for roads and mass transit. But it can’t use the same money to do both. Even in Washington, a dollar can only be spent once.”

Congress does not have to pass much legislation this year. There are no more debt ceiling votes. For the fiscal year 2015 budget, they must only pass appropriations bills. And they’ve already completed smaller items like the farm bill and doc fix. But they really can’t get away with letting the highway trust fund run short of funds. The $12 billion gap in 2015 would represent more than a 25 percent cut in federal resourcesone that would hit local communities in ways that few legislators, from either party, would tolerate for long.

Some way, some how, Congress will probably come up with the highway money. The question is whether they can do so in a way that makes for good policy. The early signs are not encouraging.

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