Gasoline Prices Leave No Money
to Maintain the Roads to Drive On

by
William Krehm

It is of the nature not only of economics, but of most things that everything sooner or later interrelates. There are no black holes left where economic and social problems can cower in isolation or end up manipulated to serve a favoured group.

This is being taught our governments once again in a way emphatic enough to warrant the ringing of church bells, and calling out the militia. We quote from The Wall Street Journal (28/07, “Americans Cut Back Driving, Straining Highway Funding” by Christopher Conkey): “An unprecedented cutback in driving is slashing the funds available to rebuild the nations aging highway system and expand mass-transit options, underscoring the economic impact of high gasoline prices. The resulting financial strain is touching off a political battle over government priorities in the new era of expensive oil.

“A report to be released Monday by the Transportation Department shows that over the past seven months, Americans have slashed their driving by more than 40 billion miles. Because of high gasoline prices, they drove 3.7% fewer miles in May than they did a year earlier, the report says, more than double the 1.8% drop seen in April.

“The cutback furthers many US policy goals, such as reducing oil consumption and curbing emissions. But, coupled with a rapid shift away from gas-guzzling vehicles, it also means consumers are paying less in federal fuel taxes, which go mostly to helping finance highway and mass-transit systems. As a result, many such projects may have to be pared down or eliminated.

“The challenge comes at a time when surging costs for asphalt and other construction materials already are straining state and local transportation budgets. These cost increases make it more expensive to maintain the nations roads, bridges and railway networks.

“In many areas the rough edges are already showing. About 25% of the bridges in the US are either functionally obsolete or structurally deficient, like the Mississippi River bridge that collapsed in Minneapolis in August, killing several people.

“Moreover, the pavement is rated non acceptable on one of every seven miles of the nations roads, according to the National Surface Transportation Policy and Revenue Study Commission, whose job is to assess infrastructure problems and recommend fixes. Overall, the commission estimates, $225 billion a year is needed to meet the countrys transportation infrastructure needs. Current is about 40% of that level.

“We were losing ground to these incredible increases in construction costs, but then to see the erosion in driving - its a double whammy, said John Horsely, executive director of the American Association of State Highway and Transportation Officials. On top of the federal gasoline tax, currently 18.4 cents a gasoline, the states charge their own gasoline taxes, typically ranging from 20 cents to 26 cents a gallon.

“The Bush administration is expected to release as early as Monday figures projecting a deficit of $5 billion or more in the Highway Trust Fund for next year. Thanks to the steady increases in driving, since it was set up under President Dwight Eisenhower, the trust historically has run a surplus. It collects gasoline tax revenue through a federal appropriation process before sending it back to the states.

“The prospect of the Highway Trust Fund running a big deficit has sparked a frenzy of lobbying on Capitol Hill in recent weeks, as business groups, ranging from the US Chamber of Commerce to the National Stone, Sand & Gravel Association, have pressed for as quick solution. “In recent weeks, Mr. Horsleys group has circulated a memo estimating that the states will lose a total of about $14 billion and roughly 380,000 jobs if Congress doesnt act to shore up the fund soon.

“On Wednesday, the House passed a bill targeting $8 billion for highway and mass-transit projects. The measure has a good chance of clearing the Senate as well, despite White House reservations.

“On Thursday, the House passed legislation that designates another $1 billion for bridge repair. House and Senate leaders are talking about including a significant increase in infrastructure spending in a possible second economic stimulus bill.