Wednesday, May 7, 2014

Will the Congressional Republicans Impose Tolls On Our Freeways?

Do you hear the drums beating? Tolls, tolls, tolls, and more tolls. We need tolls on our freeways. We need to convert our freeways to toll roads. It’s an emergency; the Highway Trust Fund is running out of money. We will no longer, at least as of September 2015, pay to maintain and rebuild our deteriorating roads, highways and bridges. We will all fall into potholes and sinkholes. It’s an emergency. Today’s cars are much more energy efficient than yesteryear’s; thus we consume less gas. We must act, and act now. That’s the modus operandi of President Obama. Create an emergency and demand Congress to act. The drumbeat speeds up – tolls, tolls and tolls. Here’s the facts. The Highway Trust Fund is not running out of money. It’s been broke since 2008 when expenditures started exceeding revenues. Congress has allocated $54 billion from the general budget into the Highway Trust Fund since 2008. Congressional Republicans are fed up. They want to restore fiscal sanity to the program. Democrats are now clamoring for tolls, i.e. taxes, to fix our crumbling roads and bridges. If you believe increased revenues will solve the problem, then I have a bridge in Brooklyn for you. Remember the state lottery? It was going to fund our schools. Did it? Legislators responded by reducing the allocations for the schools, such that the net budget for the schools did not appreciably increase. Al Gore talked about “lock boxes.” No lock boxes exist when legislatures need money. So too with our bridges and highways. Any substantial toll revenue will be offset by budget cuts to the accounts. The end result is that legislators will suck more money out of the private sector to fund the ever-expanding public sector. The Highway Trust Fund is a microcosm of many federal programs. The national flood insurance program operates at a large deficit, currently $25 billion. Congress enacted legislation two years to reform the National Flood Insurance Program. Congress is now wavering because of the backlash from those paying substantially higher premiums. Medicare, Medicaid, and Social Security are fiscally unsustainable. The Post Office lost $1.4 billion last quarter. ObamaCare will fail quickly. It fails almost every basic rule of economics. Yet, we are told that raising the federal gasoline tax, imposing tolls, or enacting a mileage tax are the only options available. We can assume that Congress will not reduce, much less eliminate the program. The Highway Trust Fund was created by Congress in 1956 to fund our nation’s roads and bridges, especially the interstate highway system. The initial tax on gas was three cents per gallon. It was to be used exclusively for highway construction and maintenance. The tax has been raised several times since, topping off at 18.4cents/gallon 20 years ago. The tax has been fixed for 20 years. Thus, it is time to raise it. So goes the argument. The federal tax may not have been raised in 20 years, but state gas taxes certainly have. California is a shining example with the tax going from 3 cents/gallon to 9 cents/gallon in 1983, and then to14 cents/gallon in 1990, 36 cents/gallon in 2010 and 39.5 Cents per gallon in 2013. In addition, California imposes a sales tax on the retail price for gas, which includes the federal and state gas taxes. In other words, California is taxing a tax, with a substantial part of the gas tax revenues going into the general fund rather than highway construction and maintenance.. California now has the highest gas taxes in the nation. A significant change was signed into law by President Reagan in 1982. Part of the tax revenue now goes to urban mass transit systems under the Surface Transportation Act with one cent/gallon initially going into a Mass Transit Fund. The current tax is 18.4cents/ gallon, allocated as follows: 15.44 cents/gallon for highways and bridges, 2.86cents/gallon for mass transit, and .1cent/gallon for the leaking underground storage tank fund. Diverting the mass transit revenues back into the Highway Trust Fund might buy a little extra time for the highway fund, but it is politically unavailable. There’s no alternative to raising tolls. There is, but it is politically unpalatable. A way exists to cut costs and expand projects, but it too is politically untouchable to the Democratic Party while the Republican Party has not raised it. The biggest cost in these construction projects is the cost of labor. Congress in the Davis-Bacon Act of 1931 has artificially driven up the labor costs by requiring the workers on any construction project receiving federal funds to pay “the prevailing wage;” that is, “no less than the locally prevailing wages and benefits.” All contractors, union or non-union, must pay the prevailing wages and benefits. The prevailing wage is determined a voluntary survey of construction projects. The responders tend to be high cost unionized contractors because they wish to drive up the labor costs of their competitors. Davis-Bacon thereby substantially drives up construction costs and minimizes the benefits of competitive bidding. Eliminating Davis-Bacon would save the Highway Trust Fund. It will be politically “dead on arrival” in Congress. The drums are beating louder. Only Congress can change the law which forbids tolls on federally funded freeways. Will the Republicans give in to a de facto tax increase?

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