Back to the Drawing Board

Besieged by fiscal conservatives for deficit spending and by the transit lobby for eliminating a guaranteed source of transit subsidies, Speaker of the House John Boehner has postponed consideration of the transportation bill (which Roll Call calls the “transit bill” even though transit gets only about 20 percent of the money). In a post on the Cato Institute’s blog yesterday, the Antiplanner makes some suggestions for fixing the bill.

There are really three ways that House Republicans could try to compromise with Senate Democrats. One would be to include earmarks and other pork barrel in the bill, which Democrats and many Republicans love but Tea Party Republicans hate. The second would be to give more money to transit at the expense of highways–and in particular to allow transit to keep a share of federal gas taxes.

The third way is to spend more than the government is taking in. The 2005 bill provided guaranteed spending every year, but due to the recession gas tax revenues declined after 2007, leading to deficit spending. When House Republicans made a proposal last summer to reign in spending to be no more than revenues, Democrats wailed that the bill would cost thousands of jobs.

So the bill proposed by House Transportation Committee Chair John Mica earlier this month would have continued to spend at historic rates. However, it also rededicated gas taxes to highways, leaving transit at the mercy of Congressional appropriators who (unlike the 2005 bill) would be under no obligation to fully fund transit. This made the transit lobby mad.
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House Republicans could now go to plan B, which would be to give transit a guaranteed slice of gas taxes. Currently, the guarantee is 15.5 percent, with another 15 percent “flexible.” In practice, about a third of flexible funds go to transit, giving transit about 20 percent of gas taxes.

Contrary to statements I’ve previously made, it turns out that New Starts money does not come from gas taxes but from general funds. Curiously, the president’s 2013 budget proposal would fund New Starts out of gas taxes at the expense of reducing transit funds for buses (see p. 27).

In any case, if Republicans try plan B, I would urge them to go exclusively to formula funds and build user fees into the formulas (as I describe in this paper). Republicans absolutely should not go to plan C, which is to put earmarks and other pork in the bill.

Most likely, Republicans will wait it out until 2013, when they hope to have even more seats in the House and Senate. That will require Congress to extend the current law, set to expire on March 31, yet again. As I noted in the Cato article, failure to pass a bill does not prevent deficit spending, as the such spending is mandated by the current law and Democrats won’t support an extension unless this is continued.