Spending Money We Don’t Have on Projects We Don’t Need

House Transportation & Infrastructure Committee Chair Peter DeFazio yesterday released a proposal to spend tens of billions of dollars the federal government doesn’t have on projects we don’t need. Congressional authorization for federal spending on highways and transit expires this year, and DeFazio proposes to renew this with a program that will increase spending by 62 percent without increasing the taxes that support it.

Whereas the previous law spent an average of $61 billion per year over the last five years, DeFazio’s proposal would spend almost $99 billion a year over five years. At one time, federal spending on highways and most transit came out of gas taxes and other highway user fees and Congress didn’t spend more than came in. Since the mid-2000s, however, Congress has ignored actual revenues and spent billions of dollars a year out of general funds. The 2015 law, for example, simply appropriated $51 billion of general funds into the Highway Trust Fund (which despite the name spends money on both highways and transit).

DeFazio’s bill would not only increase this deficit spending, it includes a poison pill for highways while it unleashes spending increases on transit. For highways, the bill would include a “fix it first” provisions that says that states cannot increase highway capacity until they get existing roads in a state of good repair. No similar provision is made for transit even though transit is in a much poorer state of repair.

A 2019 analysis by the Department of Transportation found that the nation’s highways can be brought into a state of good repair by increasing annual maintenance spending by about $3 billion a year, which would still leave $40 billion a year for other highway projects (p. ES-16). In contrast, the same report found that transit needs to increase spending on rehabilitation by $18.4 billion a year, which is approximately what transit agencies currently spend on new projects (p. ES-17). Transit needs a fix-it-first policy much more than highways.

Instead of putting the brakes on new transit projects, however, DeFazio proposes to give transit agencies extra incentives to build them. Total federal spending on transit would increase from $12 billion to $21 billion a year. The bill would also increase the federal government’s share of light rail, streetcar, and other rail transit projects from the current 50 percent to 80 percent of the project cost. DeFazio also wants to streamline the approval process so that minor details such as low ridership projections, a lack of cost-effectiveness, and a history of cost overruns can be ignored.

Speaking of obsolete transportation, DeFazio also proposes to triple federal spending on Amtrak. The bill calls for spending $13.1 billion on the Northeast Corridor (which is only about a fourth of what the corridor needs to be brought up to a state of good repair) and $16.2 billion on Amtrak in the rest of the country. This is on top of a $19 billion “passenger rail improvement, modernization, and expansion” program, which is a contradiction in terms since passenger rail hasn’t been “modern” in any way since the mid-1950s.
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DeFazio does propose to increase funding for states to experiment with mileage-based user fee programs. But why should they bother when the federal government is dumping money on them for transportation regardless of user-fee revenues?

In all, the bill proposes to spend $82 billion a year on highways, $21 billion on transit, and $10 billion a year on intercity rail, which is almost all dedicated to passenger rail. Yet federal revenues from highway user fees amounted to less than $44 billion in 2018, so DeFazio’s bill is going to require well over $50 billion a year in deficit spending on highways and transit alone.

It is also worth noting that highways carry more than 80 percent of passenger miles of travel, while transit and Amtrak together carry just 1 percent. Despite this 80-to-1 ratio, transit and Amtrak get more than a quarter of the spending in DeFazio’s plan.

The problem with DeFazio’s package is the same as the problem with all socialist programs. Divorced from user fees, the proposal would spend wildly on on things we don’t need simply based on the whims and prejudices of the appropriators. Given that the pandemic is almost certain to be followed by a large drop in transit ridership and probably a drop in Amtrak ridership, this bill is exactly what we don’t need.

Of course, this bill has very little chance of passing in 2020. But if Democrats take over both houses of Congress next January, this one may look fiscally conservative compared to the bill they will try to pass next year.