Going
Nowhere FAST: Highway Bill Exacerbates Major Transportation Funding Problems, by Michael Sargent,
12/3/15 Heritage
On December 1, a joint
House and Senate conference committee reported the Fixing America’s Surface
Transportation Act (FAST), a five-year, $305 billion surface transportation
authorization. The first multi-year transportation bill considered since 2012, FAST
stemmed from similar six-year transportation authorizations: The House’s
Surface Transportation Reauthorization and Reform Act (STRR), which it passed
in November, and the Senate’s Developing a Reliable and Innovative Vision for
the Economy Act (DRIVE), which it cleared in July.
While there has been
much bipartisan fanfare regarding this “long-term” bill, the proposal is
fiscally irresponsible and was dubiously crafted. The bill does not include any
meaningful reforms to address the structural problems in highway funding, while
making many of the problems worse by increasing spending out of the deeply
troubled Highway Trust Fund that has already required $73 billion in bailouts
since 2008.[1] FAST
should be regarded as yet another bailout of the Highway Trust Fund that would
leave federal highway financing even worse off when the bill’s money runs out.
The FAST Act: A
Funding Bait and Switch
Following an extensive
period of time in which House and Senate conferees worked out a compromise
between the STRR and DRIVE Acts, the conference reported FAST on December 1.
Rather than emerging as a compromise between the higher spending levels in
DRIVE (totaling $342 billion over six years) and the baseline levels in STRR
($325 billion over six years), the final product evolved into a five-year bill
that would spend more money annually than either of the original bills that passed
each chamber.
Fewer Years, More
Spending
Repurposed as a
five-year bill with more funding, the conferees pumped FAST’s HTF spending well
above previously agreed upon levels, up to $281 billion for five years compared
to just $268 billion for STRR (and $280 billion for DRIVE). Also, by shortening
the length of the window and increasing spending on the programs financed from
the HTF, FAST virtually guarantees higher annual spending in the future.
This additional
spending puts even more stress on the HTF’s already troubled finances. With its
inflated funding levels, the FAST Act would increase the HTF’s projected
deficit to $178 billion over the next 10 years—nearly $20 billion more than
current projections. Indeed, the Congressional Budget Office (CBO) estimates
that without reform, the trust fund would exhaust its reserves by 2021,
requiring an additional $100 billion just to keep it solvent through 2025.
Bailouts
Section 31201 of FAST
would transfer $70 billion from the general fund to the HTF ($51.9 billion for
the Highway Account and $18.1 billion into the Mass Transit Account).
Furthermore, Section 31203 transfers $300 million into the Highway Account from
the Leaking Underground Storage Tank Trust Fund, which is also funded by the
gas tax.[2]
The $70.3 billion
general fund transfer is nearly twice as high as the total general fund
transfers the HTF has received since 2008, setting a discouraging precedent of
replacing the HTF’s dedicated funding source en masse with
unrelated measures. These large injections of unrelated revenues continue to
erode the “user-pays” principle embodied in the gas tax, a concept that has
already been chipped away by the perpetuation of unrelated provisions and pet
projects in the HTF.
Pay-Fors: Using
Gimmicks and Unrelated Tax Hikes to Pay for More Spending
This fiscal negligence
is enabled by a number of budget gimmicks, notably the last-minute inclusion of
two controversial measures involving the Federal Reserve. These provisions are
used to offset the $70 billion in HTF transfers as well as various other
spending.
Doubling Up on the
Fed: $60.2 Billion. Controversially,
FAST contains both of the Federal Reserve offsets used in the House and the
Senate Bills with some minor modifications. The largest offset—capping the
Federal Reserve’s $29 billion surplus fund in Section 32202—was termed a
budgetary “sleight-of-hand” by former Federal Reserve Chairman Ben Bernanke,
because the gimmick simply shifts the timing of future cash flows between the
Treasury and the Fed.[3] This
offset would cap the Fed’s $29 billion surplus fund—which acts as a cushion for
Fed operations—at $10 billion and remits the remainder to the Treasury so that
it can be spent.
The second
offset—which the surplus fund was intended to replace—would cut the Fed’s
Dividend Rate that it pays to member banks, increasing the amount it can remit
to Treasury. Section 32203 reduces the dividend rate for banks with excess of
$10 billion from the current 6 percent to a rate tied to the high yield of the
10-year Treasury note (but no higher than 6 percent). The funds taken from
changes to the Fed account for 80 percent of the funding for FAST, making a
mockery of the concept of the Fed as an institution separate from the federal
government.
Strategic Petroleum
Sales: $6.2 Billion. Section
32204 instructs the Secretary of Energy to sell 66 million barrels of crude oil
from the U.S. Strategic Petroleum Reserve over 2023–2025. The CBO estimated
that the sales would reap $6.2 billion for the Treasury—an average of $94 per
barrel. The current market rate for crude oil is $40.35 per barrel, less than
half the price assumed in the score of the bill.[4]
Increase Customs User
Fees: $5.2 Billion. Section 32201
indexes certain Customs Services user fees to inflation, such as a $5 fee “for
each item of dutiable mail for which a document is prepared by a customs
officer.”[5] Use
of these designated user fees to fund unrelated highway spending—which is
intended to have its own user fee via the gas tax—is bad policy.
Contract Tax
Collection to Private Entities: $2.4 Billion. Section 32102 would authorize the Internal Revenue Service
to hire private “qualified tax collection contractors,” to collect outstanding
inactive tax receivables. Not only is this tax change wholly irrelevant to
transportation, but the federal government has attempted this twice in the past
two decades and has lost money each time.[6 ]
Increase Motor Vehicle
Safety Penalties: $423 Million. Section 24110 would lift the caps for maximum civil
penalties for various violations of motor vehicle safety, including those
imposed on auto manufacturers. These fine increases should not be repurposed
for a one-time spending increase.
Revoke Passports for
Tax Delinquencies: $395 Million. Section 32101 would give the IRS the discretion to prompt
the State Department to revoke or deny passports to persons with “seriously
delinquent tax debt.” Further empowering the IRS to harass and inconvenience
American citizens—especially those living abroad—would be ill-advised following
the service’s targeting of specific nonprofit groups and myriad other abuses.[7]
End Interest Payments on Royalty Overpayments: $320 Million. Section 32301 ends the requirement for
the Office of National Resources Revenue to pay interest on overpayments it
receives, which has led some lessees to deliberately overpay. While ending this
practice is good governance, its savings should not be used to fund additional
spending.
Other Measures
In addition to
spending increases for core Highway and Transit programs, FAST includes various
objectionable spending authorizations or inappropriate policies:
·
Amtrak. Despite Amtrak’s abysmal fiscal and business
record, Section 11101 includes five years of spending authority totaling $8.05
billion (subject to discretionary appropriation) for Amtrak, including $1.45
billion for fiscal year 2016—a 4 percent increase over current levels.[8 ]
·
Capital
Investment Grants. Section 3016
extends $2.3 billion in spending authority (subject to discretionary
appropriation) for the wasteful Capital Investment Grants (New Starts) program
for each of the bill’s five years.[9]
·
Export-Import
Bank. Inexcusably, Congress
is using the must-pass nature of FAST to reauthorize the Export–Import Bank
even though the bank has nothing to do with the domestic surface transportation
system.
·
TIFIA. The TIFIA program, meant to provide credit
assistance to projects of national or regional significance, is further
weakened in Section 2001 by lowering its project eligibility minimum to local
projects with just $10 million in total costs.
·
Crop
Insurance Reform Repeal. Section 32205 would repeal a reform to the Department of
Agriculture’s crop insurance program made in the Bipartisan Budget Act of 2015,
reinstating $3 billion in costs to taxpayers.
Conclusion
The FAST Act does
nothing to fix the broken Highway Trust Fund, but it does a great deal to make
its finances worse. Under FAST, the HTF will be close to exhaustion in 2021 and
will require an even larger bailout to maintain its new levels of higher
spending. By relying on budget gimmicks to fund ever more spending, FAST shows
that the road to compromise was simply paved by more government spending that
taxpayers cannot afford. America’s infrastructure should not have to rely on
funding hemmed from unrelated areas of the budget; serious thought is needed to
discern how best to finance the programs moving forward. Rather than provide
billions in more bailouts, the HTF needs fundamental reform that instills
fiscal soundness and refocuses gas tax dollars on federal priorities.
—Michael Sargent is a Research Associate in the Thomas
A. Roe Institute for Economic Policy Studies, of the Institute for Economic
Freedom and Opportunity, at The Heritage Foundation.
Comments
Most
bills passed by Congress before 2017 will need to be amended to eliminate
waste, subsidies, misinclusion, overcharges and mal-investment.
Norb Leahy,
Dunwoody GA Tea Party Leader
.
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