Highway Funding Crisis
For what seems like an eternity, there’s been a lot of talk in Washington, D.C. Talks about making significant investments to bring our nation’s infrastructure up to date. The highways and bridges used by families, businesses, and freight trucks are parts of the infrastructure and need attention. Currently, there is a Highway Funding Crisis among us. So far, no new infrastructure plan has become law.
The Importance of Overland Freight Shipping
These statistics, featured in a report by TRIP, show how important overland freight shipping is to our economy. In freight transportation we understand how vital our roads and bridges are to keeping freight moving.
Our freight transportation system moves an average of 51 million tons of freight daily. This translates to an approximate value of $55 billion daily. Trucking accounts for the largest share of freight movement.
In 2016, the share of freight moved by truck was 72 percent by value and 66 percent by weight. From 2006-2045, the amount of freight loads moved by trucks yearly is expected to increase by 91 percent. This has around a 41 percent increase due to weight.
The system includes 958,00 miles of Federal-aid highways.
Another matter is whether our highways and bridges infrastructure can hold up. We are still finding out if they are in shape to absorb the expected rise in freight shipping by truck.
State of Our Highways and Bridges for 2023
As A-to-Be reports in their white paper, America’s Transportation Infrastructure — A Funding Crisis, seven percent of America’s bridges have been designated structurally deficient. At the same time, the percentage of significant highways rated as being in the poor or mediocre condition is approaching 20%.
Meanwhile, delays due to overcrowding on urban interstates cost American drivers $160 billion annually. All told, underfunding and deferred maintenance have put us in a position where current conditions require an investment estimated to be around $836 billion.
Freight shipping isn’t the only activity impacting the condition of our roads and bridges. In 2018 American motorists drove a record-setting 3,225 trillion miles, outpacing 2017 by 12.2 billion miles. As that number increases, there will be even more wear and tear on our bridges and highways —and a bigger bill to pay.
Federal Highway Crisis Funding Expiring
The law currently providing funding to the Highway Trust Fund expires September 20, 2020. The Fund was established in 1956 to provide highway construction and maintenance money. The Fund receives federal excise taxes of 18.4 cents a gallon on gasoline and 24.4 cents on diesel.
Those figures were set in 1993 and have not been adjusted for inflation. It’s not surprising that they haven’t been sufficient to keep up with needed maintenance and new construction. In recent years the Fund has required annual transfers from the General Fund to meet its obligations.
A new bill, America’s Transportation Infrastructure Act of 2019 (ATIA), would provide $287 billion to the Highway Funding Crisis Trust Fund over five years. ATIA has cleared the Senate Environment and Public Works Committee but, at this time, has not been scheduled for a vote by the full Senate.
Why Different Funding Sources Are Needed
As noted above, the excise taxes on gasoline and diesel have not changed since 1993 and are insufficient to cover all the projects approved by the Fund. Had the taxes been adjusted for inflation, they would have been approximately 15 cents higher in 2019.
Raising gasoline and diesel excise taxes is a politically unpopular move that could make it more difficult for many Americans to commute to work and take family vacations. But there are other reasons why new funding sources are needed to pay for ATIA or whatever bill eventually becomes law.
Increased fuel efficiency has led to a decline in excise tax receipts, even as Americans drive more.
Also, in addition to contributing to surface projects through the Highway Account, the Fund now has a smaller Mass Transit Account, which is funded by the gasoline and diesel excise taxes — even though many mass transit vehicles (notably subway cars) do not rely on either fuel. This has become a significant bone of contention for opponents of mass transit and low-tax advocates.
It seems politics is making it difficult, if not impossible, to pass a funding bill. In April 2019, President Trump, Senate Minority Leader Charles E. Schumer, and House Speaker Nancy Pelosi announced a $2 trillion package to upgrade Highway Funding Crisis, bridges, railroads, and broadband. The agreement did not specify how the package would be funded, and there has been no progress on bringing it to reality.
White House chief economic adviser Larry Kudlow, speaking at the North American Leadership Forum in October 2019, said, “Folks, we will give you the permits. If you can figure out how to pay for it, go ahead and do it.” Kudlow said President Trump is focused on deregulation and faster permitting but will not provide the funding for the projects themselves.
The Bottom Line
While the Highway Funding Crisis shouldn’t affect freight shipping directly until the fourth quarter of next year, 2020 looks to be a critical year for the future of America’s highways and bridges. Whether through public investment, private investment, or a combination of the two, something has to give. America needs its trucks on the road and those roads to be in good condition.
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