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Commentary By Diana Furchtgott-Roth

A Good, But Not Great, Highway Bill

Economics, Economics, Cities Tax & Budget

On Thursday the House Transportation and Infrastructure Committee marks up its new transportation bill, the American Energy and Infrastructure Jobs Act.

The bill, sponsored by Chairman John Mica of Florida and Rep. John Duncan of Tennessee, both Republicans, authorizes $260 billion in spending over the next five years.

It's about time that Congress considered a transportation bill. The last one expired in September, 2009. The new draft, subject to changes in committee, on the House floor, and then in conference with the Senate, looks like an improvement.

It streamlines the federal bureaucracy and eliminates or combines 70 different programs, enabling transportation projects to be approved faster. "Shovel-ready" projects might actually be shovel-ready if this bill were passed. Plus, it contains no earmarks (extraneous spending) and it frees states to spend their transportation budgets as they choose, for the first time in many years.

But, in other respects, the bill does not go far enough. With the deficit exceeding a trillion dollars for a fourth year in a row, the federal government should be looking for ways to pay for what it wants to spend.

Here are some suggestions for ways to improve the bill that members could consider during the markup.

What should be the federal role in financing roads? In all other areas, except perhaps national defense, consumers can purchase more of a product if they want to do so, provided they have enough money. They want cell phones-they can buy them. They want water service-they can buy it.

The same should be true of congested highways and roads. If road users want more road space, they should be able to pay for it.

Supposedly, motorists and trucks pay now with the federal excise tax on gasoline and diesel. But the revenue from these taxes is insufficient to cover the cost of roads that drivers want to use. And as cars become more fuel efficient, and President Obama achieves his goal of a million electric cars on the road, fuel tax revenue will continue to decline.

The new bill assumes that all new road construction comes from the federal purse. Since revenues in the Highway Trust Fund, which come from the gas tax, are deemed insufficient, companion bills raise additional funds from energy production.

More exactly, companion bills will divert to highways the revenue from the federal sale of oil and gas leases that now goes into the government's general revenues. It's a good idea to raise revenue by selling these leases, and it will help to reduce the deficit. But these revenues should not subsidize drivers.

Rather, customers should pay for their roads, not through federal fuel taxes but on the basis of use, just as they pay for their electricity and water bills. Heavily-travelled roads could cost more than lightly-used roads, and driving at peak hours could be more expensive than driving at 2:00 am.

The new bill allows states to toll non-interstate highways. Why not also permit the tolling by the states of interstate highways, if only just for maintenance? After all, over the life of a road, the amount spent on maintenance exceeds the cost of construction.

If the bill allowed states to toll interstate highways, states would have a source of revenue for what is often described as "the nation's crumbling infrastructure."

If representatives are concerned that some strategically-placed states will charge too much for tolls, they could insert a clause, similar to the bill's Section 1204 for non-interstate tolls, to limit tolling to levels consistent with road maintenance.

The new infrastructure bill no longer obligates states to spend highway funding on non-highway activities, such as museums or landscaping. But this does not appear to apply to mass transit. It should. States are now required to spend 20 percent of their Highway Trust Fund allocation on mass transit, yet only 2 percent of passenger miles are used by mass transit.

Just as users of roads should pay all of their costs, such as construction and maintenance, so should users of mass transit. If individual states want to subsidize mass transit, they should do it out of their own revenues. With Uncle Sam broke, the Federal government should not be subsidizing expensive mass transit systems.

In the Washington D.C. suburbs, for instance, Maryland wants help in replacing a 16-mile jogging and bike trail with an above-ground railroad that would join different points on the capital's subway system. Called the Purple Line, the cost would be $2 billion. Maryland has so far budgeted $69 million, less than 4 percent of the cost.

Guess who Maryland expects will pick up the tab? Uncle Sam! He'll pay for anything, even a useless railroad, that few will use and many do not want, particularly bicyclists and pedestrians. Of course, if Marylanders had to pay the entire cost, the Purple Line would not get built. Instead, Marylanders might put in a dedicated busway, at far lower cost.

Mass transit does not have to be expensive, nor subsidized. Atlantic City, New Jersey , has an inexpensive unsubsidized system of vans that runs along Pacific and Atlantic Avenues. New York City has a low-cost high-frequency "dollar vans" that the City is trying to shut down to remove competition with the subsidized and unionized city subways and buses.

Uncle Sam is broke. He stares at many of us in the mirror each morning. We taxpayers are tired of paying for services that ordinary Americans or local governments should pay for themselves. The new infrastructure bill is an improvement on the past, but it could be even better.

This piece originally appeared in RealClearMarkets

This piece originally appeared in RealClearMarkets