Washington is grabbing too much power — just look at Obamacare, environmental regulations and education standards. That has been a constant complaint of conservatives, not only during Barack Obama’s presidency but during George W. Bush’s as well.
But power is also flowing out of Washington, largely unnoticed, and back to the states and localities. You can see that if you look at transportation policy, which is following the same path as the federal government’s little remembered revenue-sharing program that was enacted in the 1970s and repealed in the 1980s.
Federal transportation spending has an even longer pedigree, dating from the Interstate Highway System enacted by Dwight Eisenhower in 1956. While a few states were already building limited-access toll highways, the new law instituted a federal gasoline tax to pay for interstates across the country.
The law made sense at the time, and for years afterward. There was much more economic disparity among states back then, and federal money could be spread from rich states to the poor ones. Interstates would make trucking transportation cheaper at a time when overregulation was making freight rail uneconomical. Routes between states could be coordinated, connecting all major metropolitan areas (but not those which would become major later, notably Phoenix and Las Vegas).
But the law doesn’t work anymore. Gas tax revenue is flatlining. People have been driving less since 2007, gas mileage has improved, and increasing mileage standards along with more electric and hybrid vehicles will reduce gas tax revenues even more in years to come.
Those revenues are insufficient to replenish the Highway Trust Fund. Congress could increase the gas tax, but it won’t; it’s highly unpopular and only a handful of members favor an increase. Obama understands that and is not seeking one.
The alternative is to spend money from general revenues. But that puts a squeeze on discretionary spending, because general revenues will increasingly be needed to pay for entitlements including Social Security and Medicare. In the meantime, Obama has said, the best Congress “could do would be to stagger through another year” of temporary transportation funding.
In effect, the feds are abdicating and the states are taking up the burden. New roads and bridges are needed in some places, and existing roads need to be maintained, repaired and upgraded. More than 30 states have passed transportation finance measures in the past three years, according to transportation consultant Ken Orski. Six states have increased gas taxes. Others have increased highway tolls, floated toll revenue bonds or passed sales taxes dedicated to transportation. “The move toward greater fiscal autonomy, self-sufficiency and financial innovation at the state and local level is likely to grow in strength,” Orski writes.
The gas tax, justified as a user fee, is being replaced by tolls, a more efficient measure of actual use: Transponder technology allows tolls to be levied based on demand, with adjustable fees to reduce congestion during peak use in states including Colorado, Florida, North Carolina, Texas and Virginia. There is a move toward public-private partnerships such as the one Canada adopted to finance a new Detroit River bridge using private capital to be repaid from tolls. Some conservatives complain about tolls, evidently on the theory that highways are built and maintained for free. But private decision-makers are more likely to make better decisions than the feds about where the real needs are.
Democrats have obdurately blocked (and most Republicans have been less than eager about supporting) reforms to entitlement programs, which means that entitlements will continue to squeeze discretionary spending out of federal budgets. Transportation is just a leading example.
Something similar happened years ago with revenue sharing, a program promoted in the 1960s by Brookings Institution economist Joseph Pechman. He argued that revenues from the progressive federal income tax would rise faster than incomes, and that Congress should share the largess with the states. He concocted a formula that rewarded states with progressive tax codes of their own and penalized states without them. It passed Congress in 1972 and was signed by Richard Nixon.
Economic redistribution increased as inflation pushed people with stagnant real incomes into higher tax brackets. In response, Colorado Sen. William Armstrong added income-inflation indexing to the 1981 Reagan tax cuts.
That plus increased entitlement spending led to the repeal of revenue sharing in 1987. Now we’re seeing the slow-motion disappearance of the Highway Trust Fund. Washington is always trying to accumulate power. Now some of it is flowing away.
