Saturday, October 6, 2012

POTHOLES AND POVERTY - OR SOMETHING BETTER




Recently, Congress acted to extend the 18.4 cent Federal gasoline tax to the end of March, 2013.  The fact that extending the tax was contentious is a sad commentary on the lack of both planning and wisdom that characterizes our national legislative process. 
  
The tax, which has not been raised since 1983, is clearly inadequate. In 2008, the Highway Trust fund – which is the fund intended to support transportation improvements in the U. S. – ran out of money.  Spending from the Trust Fund has exceeded revenues since 2002.  Although Congress has plugged the gap with revenues from the General fund, it has failed to come up with an integrated plan – and a funding program –to assure adequate maintenance of our existing assets and provide the improvements needed to assure competitive capabilities in the years ahead. 

Allowing the gasoline tax to lapse would, among other things:

  •  Encourage people to drive more, thus worsening the already severe congestion that irritates us all – and costs more than $100 billion annually in extra fuel costs. 
  •  Increase our negative trade gap, and increase our  energy dependence  
  • Cost lots of jobs.  1billion in infrastructure spending supports about 25,000 jobs; if the tax lapses and we stop spending, hundreds of thousands of jobs will be in immediate jeopardy. 
  • Accelerate the already severe deterioration of existing bridges and highways

It’s hard to understand why anyone would even consider allowing the tax to lapse.  Americans pay far less for gasoline than driver’s in other countries, and much less in fuel taxes as well.  The recent Simpson-Bowles Commission recommended an immediate 15 cent per gallon increase in the tax; others have suggested more substantial increases.  Everyone except politicians seeking votes seems to agree that our infrastructure needs immediate and substantial help. 

It is clear that it does – and that the needed help will cost lots more than another 15 cents a gallon at the pump.   In 2008 the national Surface Transportation Policy and Revenue Study Commission – a Congressional creation – recommended spending at least $225 billion annually, far more than we now spend. Various estimates put the bill for deferred maintenance of our highways and bridges in the neighborhood of $2 trillion.
     
In addition to needing lots more maintenance on our roads and bridges, we also need an integrated plan to upgrade and expand our capabilities in many areas. We need a plan that measures the adequacy of our highways, mass transit capabilities, airports, ports, communication systems, energy transmission systems,  waste facilities, water systems, hospitals, law enforcement facilities and educational assets against those of other countries – and that provides for the many and substantial  improvements needed to put the U. S. back in a position of leadership. 

Around the world, our competitors are spending far larger shares of GDP on infrastructure improvements than the U. S.  Brazil, India and China, are reportedly spending more than $1trillion annually! And we are clearly falling behind. 

In 2005, the World Economic Forum rated the U. S. # 1 in economic competitiveness; today, we are ranked #15. Unless we fix the problem, we’ll rank even lower in the years ahead.  

Solving the problem is a necessity if we want the country and our kids to have a satisfactory future– and stepping up to that necessity also represents an opportunity to solve one of today’s major problems. If Congress and the President were to come up with a national infrastructure plan this fall, and fund it at just $200 billion annually for the next ten years, we’d generate about 5 million new jobs.

Although it is clear that $200 billion will not be sufficient to meet the competitive challenge being mounted by others, it will be enough to  provide a big chunk of the roughly 12 million jobs we’ll need during those ten years to put the currently unemployed back to work and provide opportunities for new workers.  Moreover, the economic activity created and facilitated by that infrastructure investment will drive GDP growth, create lots of additional employment opportunities and – hopefully – provide the resources needed to build the capabilities not included in the initial plan. 
     
Some will doubtless say we can’t afford it. In my view, these are investments we cannot afford to forego.  Moreover, since we have spent or committed between $3 and $5 trillion during the last ten years in Iraq, Afghanistan and other military adventures – spending which has produced nothing and has yielded neither assets nor infrastructure to support our future growth – I just don’t buy the argument that we can’t find a way to finance the assets and capabilities needed to assure a decent future for our kids and grandkids.
Those interested in a more comprehensive examination of our infrastructure problem can find an excellent recent report here:
 

6 comments:

  1. Mr. Crandall - I discovered your blog via a Bloomberg article that was published last week. Hopefully so did many others. Thanks for lending your voice to these important issues. I especially appreciate someone in your position who is willing to speak out about the growing problem of economic inequality in the US. It's perverting the political process and, I think, threatening American democracy itself. The more business leaders like you who are willing to call it what it is the better off this country will be. Thank you for your honesty and integrity.

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  2. Agree that gas tax is the best way to pay for roads. It is, conveniently, also the best way to reduce traffic and increase the average fuel economy of vehicles on the road, as drivers, on their own, increase demand for higher mpg vehicles and decrease demand for lower mpg vehicles. And auto makers will respond by focusing their investments on matching that change in demand. Arbitrarily increasing mpg requirements on auto makers merely makes cars more expensive, enticing people to hold onto low mpg vehicles longer, and increases mileage drivers consume as their new efficient vehicles continue using cheap gas.

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  3. The states need to do the same gas tax increase to pay for the antiquated state highways. We all know of 2 lane highways that need to be devided 4 lane routes, extra uphill passing lanes, and small town bypass routes. Here in California, the roads are the same as they were in 1955 but the population is 5 times the size. I guess we have a bunch of spineless politicians who are afraid to make the right call.

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  4. Gasoline costs are taking a toll on the average family. If we had public transport systems like those found in Europe I would agree with higher gas taxes. The current costs are squeezing the middle class.
    The reason for the high cost of a gallon of gas is speculation, NOT supply and demand or dependence on foreign oil. Before 1990 investment banking firms were not allowed to trade in oil freely; that began to change in the 1990 and by the end of that decade, an estimated 20% of transactions were done by speculators; today over 80% of transactions are done by speculators. We should reinstate the protections put in place after the 1929 crash.
    Want to raise money for infrastructure? forget about upping the gasoline tax (Wall Street will love you for that one), start taxing the speculator's transactions instead (fat chance, unfortunately, lobbyists will see to it).

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  5. A VMT (Vehicle Miles Traveled) tax would be even better as it would more fairly distribute the cost of using transportation infrastructure across those that actually use it. The reason the public and Congress is wary of increased or extended taxes is a lack of trust in our public spending habits. We should reduce the size/scope of federal transportation spending and return most of the responsibility and spending to the states (along with their collected share of gas taxes)--set states free to address their transportation needs. Federal bureaucracy (particularly environmental regulations) unduly hamper transportation infrastructure projects at local and state levels. Additionally, we need to find new and creative ways to fund transportation projects with private sector involvement--allow the private sector to participate by auctioning "naming rights" to various advertisers, increase toll roads, etc.!

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