The Perils of Flat Funding

The Perils of Flat Funding

September 01, 2015  | ENO CENTER FOR TRANSPORTATION

In the weeks leading up to the federal surface transportation vote on a short-term extension, a few members of Congress started touting that we will have a five-year bill soon. But it comes with a caveat: flat-funding for roads, bridges and transit systems.

It is not news that our current funding levels are not meeting the needs of our nation’s economy, and creating a long backlog of projects. The deficiencies of our underinvestment are evident in the low “D” grades given to both roads and transit and “C+” grade for bridges in ASCE’s 2013 Report Card for America’s Infrastructure.  In 2011, the American Society of Civil Engineers released an economic analysis with EDR Group that looked at what our continual underinvestment in highways, bridges, railroads and transit systems would mean for the nation’s economy by 2020.

The findings were alarming four years ago when ASCE released the report. Now, as we look to a five-year bill with no increase in federal investment, it’s about to become a reality.

This Failure to Act report revealed the following ripple effects if we continue status-quo investment levels and allow the further deterioration of U.S. surface transportation infrastructure amid deferred maintenance:

– The cost of unreliable transportation infrastructure to businesses will reduce the productivity and competitiveness of American firms relative to global competitors. Cumulative costs will reach $430 billion by 2020. To compensate for these increased costs, businesses will have to divert increasing portions of earned income to pay for transportation delays and vehicle repairs, draining money that would otherwise be invested in innovation and expansion.

– Households will be forced to forgo discretionary purchases, reduce health related purchases along with other expenditures that affect quality of life, in order to pay transportation costs that could be avoided if infrastructure were built to sufficient levels. These increased cumulative costs to households equates to $1,060 less for discretionary spending every year until at least 2020. From 2011 to this year, it has cost your personal budget $5,300. If the status-quo continues for the next five years, it will cost you another $5,300.

– The U.S. will lose jobs in high value, high paying services and manufacturing industries as we struggle to remain competitive. The only sectors seeing gains would relate to auto services.

– Overall job losses of more than 876,000 in the year 2020 are mitigated by more people working for less money and less productively due to the diminished effectiveness of the U.S. surface transportation system, meaning 234,000 jobs will only exist if many more workers agree to pay cuts.

– America’s gross domestic product will underperform by $897 billion because of a decrease in exports due to deficient transportation networks. Exports will drop in 79 of 93 different tradable commodities, totaling a $28 billion loss.

There is a lot at stake in the Highway Trust Fund battle, and as the past year has shown us, a multi-year bill will take political courage and cost some political capital on both sides of the aisle. To go through that struggle and come out the other side with a bill that does not grow the program is a waste of energy and hand-wringing. The recent trend of short-term extensions bought by budget gimmicks are all because Congress continues to ignore the most direct route for raising revenue: increasing the gas tax to recoup its 1993 purchasing power.

We are stealing from the future two-fold if we do not raise the gas tax (or identify another long-term sustainable source of revenue) to increase investment in transportation. First, these gimmicks mean that Congress is adding to the national debt. Second, shortchanging our transportation system is literally stifling our nation’s economic growth.

If Congress were to raise the gas tax by at least 20 cents, it would cost on average $187 more per year per motorist. In contrast, right now each motorist is paying $516 a year in additional repairs and operating costs. In addition, Americans spend an average of 34 hours a year stuck in traffic, costing the U.S. economy $101 billion in wasted fuel and lost time annually. It’s a savings for your wallet by staying out of the auto mechanic shop. It’s an even bigger savings as it protects that $1,060 mentioned above.

In contrast to underinvestment, the 2013 Report Card also showed the benefits of increased funding for bridges. The number of structurally deficient bridges decreased from 2009 to 2013, as did the average age of bridges, thanks to increased investment. Because of these improvements, the grade went up from a “C” to a “C+.”  That’s the kind of positive trends we see when we prioritize investment. If we do not, we are at risk of backsliding on these recent successes along with harming our economic competitiveness.

Ultimately, the decision of how to find the revenue to fund a five or six-year bill is the job of Congress. But as they devise a deal that can get through both the House and Senate, they have an onus to devise a bill that supports economic growth.

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of The Eno Center for Transportation.

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