Congressmen brainstorm ways to fund transportation

With the US’ transportation bill stuck in traffic on Capitol Hill, a group of Congressmen on Wednesday presented a series of ideas, from the trivial to the radical, on how to overcome the main roadblock on the $500 billion measure: finding a way to pay for it.

“The best I’ve been able to come up with is taxing oil by the barrel,” Democratic Representative Peter DeFazio of Oregon, a 23-year veteran of the House Transportation and Infrastructure Committee, told delegates gathered at the annual meeting of the Coalition for America’s Gateways and Corridors.

DeFazio acknowledged that oil firms might well end up passing on some of the tax to consumers, which, is exactly the outcome many in Washington DC wish to avoid. Faced with the worst economic downturn since the Great Depression, the Obama administration has come out again raising the gas tax, the main source of revenue for the US’ woefully underfunded Highway Trust Fund.

Absent an increase in revenues for the trust fund, DeFazio and other key members of the House Transportation and Infrastructure Committee, including chairman Jim Oberstar, will be hard-pressed to meet the $500 billion price tag they put on their new six-year bill.

Representative Earl Blumenauer, Democrat from Oregon and a member of the House Ways and Means Committee, which will ultimately be tasked with finding a revenue source for any transportation bill, pointed to stock traders as one such source.

“Let these masters of the universe pay a little,” he said, referring to firms that engage in “hyper-trading,” or very fast-paced, automated trading on stock exchanges. Blumenauer proposed taxing them for each of these hyper-transactions. Investment banks and hedge funds, which often write fast-paced algorithms for automated trading, would be among those hit by any such tax.

Gas tax: could go up or could go away altogether

As a starting point, though, Blumenauer acknowledged that Congress should at least agree to index the national gas tax for inflation. That would at least marginally help the tax, which has stood at 18.4 cents per gallon since 1993, regain some of its purchasing power.

Other members of Congress proposed a more radical solution.

“I’m going to propose doing away with the gas tax,” said John Mica, the Republican leader of the House Transportation and Infrastructure Committee, joking that he saw “a couple of dentures” fall out among audience members when he said this.

“You could do that. There are six or seven states that have a sales tax [for transportation],” he said. He would model his tax, which he would call “a flat tax” after their sales tax, except he would “put in a floor and then a ceiling so that we stabilise it”.

The over-arching idea, he said, is to stabilise the revenue coming into the Highway Trust Fund so that it doesn’t fluctuate as widely as it does now with the fixed per-gallon charge. 

Leverage and maximise revenues

But Mica viewed stabilising the revenue as just the “first element” of a three-step plan he devised to pay for transportation.

“The second element is taking the money we have and maximizing that by leveraging it,” he said, pointing to public-private partnerships as one major tool the government could use to increase the purchasing power of the dollars it brings into the trust fund.

Another tool would be an infrastructure bank that would lend to transportation projects, though Mica objected to the Obama administration’s $25 billion request for such a bank as “peanut-brain thinking”.

“Hell, in just three projects in New York there’s a requirement for that much money,” he said. Instead, he suggested that the bank be funded with at least $250 billion.

Once revenues are stabilised and leveraged, he said the final thing the government should do is embrace the “Mica 437 day plan”. The number 437 is the number of days it took for the state of Minnesota to rebuild the I-35 bridge, which collapsed in August 2007, killing 13 people. Mica said the delivery of all projects should be sped up so that they can be built as quickly as that bridge.

DeFazio agreed with Mica on the point of speeding up projects by making their environmental reviews less cumbersome. However differences remain between the two politicians on the usefulness of public-private partnerships and the national infrastructure bank.

“Those are nice little things,” DeFazio said, but they aren’t going to help the US afford its transportation spending. The key, he said, is to find a reliable revenue source that will be able to fund transportation projects over many years. That means reaching for the “t-word” or taxes, in order to step-up transportation spending, he added.