Wall Street Journal 7/15/14 7:22 p.m. ET
Say this about the supposed evils of Washington “partisanship”: It always seems to vanish when the subject is transportation dollars. About the best that can be said of this week’s bipartisan breakout to pass a new highway bill is that it could have been worse.
On Tuesday the House whooped through a $10.8 billion plan to extend federal transportation funding through next May. The Highway Trust Fund is supposed to be funded by federal gas and diesel taxes, but it has been decades since those dedicated revenue streams have kept pace with Congress’s appetite for more road and mass-transit projects. The fund is due to run out in August—thus Congress’s latest rush to find more money.
The White House’s surprise endorsement on Monday of the Republican bill guaranteed the big 367-55 vote and probably ensures the Senate will pass something close to it. So Kumbaya, as they say on K Street.
The White House endorsement is testament to how desperate Democrats are to claim a “jobs” victory before Election Day. The Administration until Monday was demanding a four-year, $302-billion bill, which it proposed paying for with President Obama’s go-to revenue raiser: New tax increases on corporate overseas earnings.
The White House’s class-warfare theme has been an election-year bust, however, and Republicans feel no pressure to roll over on corporate penalties. Mr. Obama decided to cut his losses and claim part-victory for providing more construction jobs this summer.
The Republicans’ $10.8 billion “patch” is more prudent, if also a tribute to budget gimmicks. Ways and Means Chairman Dave Camp is paying for the additional spending with a combination of new custom fees, transfers from a fund to repair leaky underground fuel-storage tanks, and changes to pension taxes. This “pension-smoothing”—which will supply $6.4 billion of the revenue—is an especially ugly budget ruse, and thus increasingly a Congressional favorite.
Under smoothing, employers are given permission to delay contributions to pension plans, thereby increasing corporate taxable income. That pushes immediate money to the Treasury, but at the cost of piling up pension liabilities in the longer-term, hurting employees and potentially the taxpayers who might have to bail them out. Congress used the same imaginary revenue-raiser to fund the 2012 highway bill, and the Members know most of the media won’t report the boring pension details.
Mr. Camp’s hand was somewhat forced by a last-ditch Democratic effort to raise the 18.4-cents-a-gallon gas tax. With the failure of President Obama’s $300 billion blowout, the House Democratic fallback was to pass a patch that would expire at the end of this year. Their betting was that they and the business community (which wants higher gas taxes) could then leverage a lame-duck session to jam Republicans into a tax hike. Mr. Camp’s 10-month extension at least avoids that box canyon.
Yet the bill does nothing to address the revenue-spending mismatch that is today’s highway fund. Gas taxes bring in about $35 billion a year, yet Congress has refused to pare back an average $50 billion in annual transportation spending.
Democrats claim a higher gas tax is the answer, even as one of their policy goals with a higher tax is to penalize motorists into driving less—thereby reducing trust fund revenues. President Obama’s mandate for more fuel-efficient cars is already a major cause of falling highway fund revenue. The gas tax is the federal version of state cigarette taxes.
Republicans over the years have proposed a number of innovative reforms to a federal highway program that bristles with waste and bureaucracy. These include devolving more power to the states to set priorities, slashing the billions thrown at money-losing urban mass-transit projects, streamlining environmental laws that add to construction costs, and potentially devoting some royalties from expanded federal oil and gas drilling to fund roads. Too bad they never seem to get around to implementing them.
House GOP leaders are claiming the temporary nature of this patch is designed to give them another run at reform next year, perhaps with the support of a Republican-led Senate. We’ll hold them to that. The trust fund problem has been begging for a fix for years. This latest stopgap is a dodge, not a victory.
Washington’s Highway Dodge
Wall Street Journal 7/15/14 7:22 p.m. ET