Highway Trust Fund Bankruptcy Will Halt Nationís Transportation Projects

By the time of President Obamaís election in 2008, the nationís transportation system was in need of repair and many portions of the original system were still somewhat incomplete. Entering office in the midst of a recession, Congress was able to pass the American Recovery and Reinvestment Act, which allocated funding for various public works projects, including repairs to the nationís ailing highways and bridges. The act also included the Transportation Investment Generating Economic Recovery (TIGER) competitive grant program that invested $3.5 billion in 270 projects across the country.

Today, all of those projects risk being halted before completion.

The idea of an interstate network of highways and roads crossing the United States began in the 1930s. There were many ideas and plans presented to create a transcontinental system that would meet the defense needs and the anticipated traffic of a peacetime society. Amid regional and national political differences, the first attempts at such a network began in 1945, though there were no uniform standards in place. By the time President Dwight D. Eisenhower took office in 1953, less than a quarter of the highway system was deemed adequate for the then current traffic and definitely not ready for the projected levels of the future.

One year later, Congress passed the Federal-Aid Highway Act of 1954, which authorized $175 million for the interstate highway system. Eisenhower was not happy with it, however, noting that there had to be a more permanent funding source to properly establish an elaborate superhighway system that would last for generations and that it should be maintained in partnership between state and the federal government. Two years later, his goal would be achieved after much political wrangling.

The Federal-Aid Highway Act of 1956 called for uniform design standards, and included a network of free and toll roads. Regional plans could include bridges and tunnels as long as the inclusion promoted integration into the system. The act also included a one cent increase in the gas tax Ė from 2 cents to 3 cents Ė which would be put into a fund to be known as the Highway Trust Fund.

Called the greatest public works project in history, it would be nearly 35 years before it was deemed complete.

The Highway Trust Fund will be bankrupt by the fall (and possibly as early as August) unless emergency action is taken. The federal gas tax which provides much of the revenue for the fund has been at 18.4 cents per gallon since 1993. While it is more than obvious that the current funding is not adequate to meet needs, politicians have been reluctant to increase it after the backlash from the 1993 increase. The gas tax was established with the idea that those that use the roads were helping pay for them when they purchased gasoline and currently provides $34 billion in funding annually. After the increase during the Clinton presidency, Democrats lost their majorities in both the House and Senate.

Neither party has been willing to face that sort of retribution since.

In 2012, Congress pieced together a series of one-time tax changes and spending cuts unrelated to transportation to help fund the trust fund. Now that money is expected to be gone before the fiscal year ends on September 30th. In February, President Obama signed into law an additional $600 million in the TIGER grant program, which was funded by Congressí Consolidated Appropriations Act. That money, however, will not be enough to address the long-term funding needs.

The federal government provides most of the funding for highway projects.

U.S. Transportation Secretary Anthony Foxx is currently trying to gain public support for congressional approval of the presidentís proposed four-year, $302 billion plan that would keep the trust fund solvent partially through changes in corporate tax laws. Closing corporate loopholes such as those that encourage investing overseas, for example, would provide $150 billion in revenue to the fund. While that effort would be a one-time fix, it would provide enough funding for several years, allowing many more projects to go forward.

This week, Reps. John Delaney (D-Md.) and Mike Fitzpatrick (R-Pa.) wrote a letter to their colleagues to get the conversation started on the transportation funding issue. In it, the congressmen suggested the repatriation of foreign revenue and investments as per President Obamaís plan. Congress is under pressure to provide $100 billion over the next six years for highway funding.

Delaney and Fitzpatrick are also looking at a long term solution by suggesting the creation of a financing entity, the American Institute Fund, that would provide loans to state and local governments. They would repay the loans at a rate determined by the American Institute Fund. They also propose that the Treasury issue $50 billion in treasury bonds, the profits of which would go to the proposed financing entity. This is part of the bill introduced by Rep. John Delaney this year.

In a contentious election year, Congress is left with few options that seem politically expedient. The halting of projects would mean the loss of thousands of jobs, further risking the fragile forward progress the nationís economy has made thus far. However, after the Supreme Courtís recent ruling on campaign finance limits, they will also feel pressure from their corporate donors that are unwilling to let go of their massive profits. Needless to say, an increase in the gas tax is off the table.

Nevertheless, Delaneyís bill has more than 30 members of each party as co-signers to his bill. There is also some talk that Congress may do yet another quick fix and transfer money from general treasury. Sen. Barbara Boxer (D-CA) told reporters last week that there does seem to be consensus on some sort of tax reform to prevent the trust fund from going bankrupt.

For now, states are holding off plans to start any new projects until the funding issue is resolved.


Jim Ven
Jim V1 years ago

thanks for the article.

Atanu Banerjee
Atanu Banerjee3 years ago

Candidate Obama precisely said that - do not expect change from the same guys, but then he himself subscribed to that system. If now we blame the system, then why we elected him ? Citizens priority first and these guys spy on us, against universal health care, against banning guns which is killing Americans everyday, I sometime wonder what the system up for ? Turn US into a monster whom everyone will fear ?

Robert Hamm
Robert Hamm3 years ago

Obama was that fesh air. The Machine completely stiffled him. The Machine will make sure we never get to vote for a person like that. they will be vetted right out before the primaries. I hate to sound that cynical…..but its true. Look how they went after Christie when he hugged Obama and acted Moderae even a LITTLE bit. ALL these guys are dirty enough the machione can crush them out of consideration almsot at will.

Atanu Banerjee
Atanu Banerjee3 years ago

Time for bringing refreshing air to DC who could think out of box. Can we do that or still keep electing the same faces, who in turn would keep on convincing one way or other ?

Robert Hamm
Robert Hamm3 years ago

Paying TAXES is NOT Punsihment Erid. Its civic duty. Its what makes the homeland great. But no one gives a shit about the homeland anymore. They only care about their wallet. WE are quickly slipping to 3rd world statrus in many areas. All because the corporations OWN Washington and the people no longer do.

WE are seeing demontrated right in front of us that fascism will and is destroying this country. Congratualtions on championing it eric.

Eric Lees
Eric Lees3 years ago

The problem is we are broke and our elected leaders are either to stupid, are cowards, or are actively working against the interest of the people. The economy has been on life support with FED QE for the last 5 years allowing DC to kick the can down tge road. So instead of a recovery we have a more distorted economy than before.
Global corporations are holding onto cash overseas because the USA punishes them if they invest that cash in the USA.

More specific to the transportation fund, we need a new model as the % of cars that run on gas declines. But that would also take some long term planning. Anothor reason companies are hoarding cash, no clear vision from DC. Good luck getting any politician to to plan beyond their next election

Alan Lambert
Alan Lambert3 years ago

President Elect Obama should have gotten then President Bush to include a 10 year-4 trillion dollar Infrastructure bill in the first tranche of TARP back after the crash in 2008. Then we wouldn't be in this mess of Reagan's creation...

John W.
.3 years ago

We have the same problem here in the UK.

Debbie Wood
Debbie Wood3 years ago

Kamia T. You are right about the toll roads. There is one coming to my area, and it is splitting neighborhoods in half, never a good thing to do. No one except the big wigs in the state and local governments want it. It will bring urban spraul into a rural area that does not need it or want it. But we have been told we have to accept it, it is a done deal. Just like they are spending road money on giving funds to a private company to build and profit off a baseball park. No one but the local polititions want it. Meanwhile, our existing roads and bridges crumble. There are about 20 bridges in our county that need replacing. All it will take is one big storm with flooding to wash some of them out. Our area was cut off 2 years ago when 3 small bridges were washed out in Tropical Storm Debbie. They were repaired, inadiquately, and another storm will likely take them out again. I will drive the long way around before I will pay their tolls on the roads we don't need or want.

Mary B.
Mary B3 years ago

Jacob R / Steve R, Freddy, Adam, Bruce..... ask Mr.Cruz control where the 24 BILLION in 16 days went !!!!!That would buy a lot of "Green Eggs and Ham"....might even repair a few roads and bridges.