March 2013

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Washington Insider U.S. Surface Infrastructure: Looking Beyond the Data What AED's new study really tells us about the future of the federal highway program. By Christian Klein A new AED-sponsored study by researchers at the College of William and Mary has painted a clearer picture of the fiscal problems facing the federal highway program. Among other things, our research team predicts the Highway Trust Fund (HTF) – the primary surface transportation funding mechanism – will be hundreds of billions of dollars in the red over the next two decades. Here are some of the most important conclusions I've drawn from the report: First, the challenges facing the federal highway program are not temporary; they are long-term structural problems resulting from multiple policy decisions that presidents and Congress have made over three decades. For example, in 1993, lawmakers decided to increase the gas tax to 18.4 cents per gallon, but not to index it for inflation. Our researchers found that had they done so, the HTF would have picked up an additional $64 billion over the past two decades and be on solid fiscal footing going forward. Our team also looked at the impact of another policy choice: higher automobile fuel efficiency standards, which are set by the Environmental Protection Agency (EPA) and National Highway Traffic Safety Administration (NHTSA) pursuant to congressional mandates. Not surprisingly, the researchers found that as Corporate Average Fuel Economy (CAFE) standards rise, gasoline consumption will decline, which will lead to a drop in gas tax payments to the HTF. If Congress fails to change the existing highway user fee structure while maintaining current investment levels, the HTF will incur a staggering $365.5 billion deficit over the next 23 years. The second key takeaway from the report is that the highway program's problems are bigger than most people knew. For the past several years, Congress has been able to patch annual HTF shortfalls on a piecemeal basis with small (if you consider a few billion dollars per year small) transfers from the general fund. That will be a less tenable solution going forward because highway user fee revenues will continue to decline at the same time lawmakers are trying to balance the budget and facing an array of additional fiscal pressures resulting from the retirement of the Baby Boom generation. Put another way, if Congress does not fix the HTF, it will be that much harder to reduce the federal budget deficit. But the study is not all doom and gloom. The third major takeaway is that there are solutions. One is to restore the purchasing power the gas tax had in 1993 by increasing it to 25 cents per gallon and indexing it for inflation going forward. Not only would that eliminate the projected deficit, it would bring in $167 billion in additional revenue over the next two decades that could be used to address our staggering infrastructure needs. Our researchers also looked at ways to replace the gas tax with a vehicle mileage-based user fee. But solving the HTF's problems will take bipartisanship, political courage, and creativity, all of which are in short supply in Washington, D.C., at the moment. AED is pushing lawmakers to deal with the user fee issue in the context of the broader tax and budget reform debate, but there's no guarantee we'll be successful. This leads us to the fourth takeaway – if Congress can't get the job done, states and localities are going to have step up and increase their own spending to fill the infrastructure gap. If they do not, our transportation system will continue to deteriorate and further undermine our economic competitiveness. The Texas Transportation Institute reported this month that congestion now costs the U.S. economy $130 billion per year in wasted time and fuel. The American Society of Civil Engineers has reported that "if present trends continue, by 2020 the annual costs imposed on the U.S. economy by deteriorating infrastructure will increase by 82 percent to $210 billion, and by 2040 the costs will have increased by 351 percent to $520 billion." Time for Action The time is now for bold, decisive action to rebuild our crumbling roads and bridges. Our new report is an important tool to help educate policymakers at all levels of government. Download it at http://bit.ly/htf2013. Help AED spread the word about this important new highway data.  Go to AEDaction.org today to send an e-mail about the report to your congressional representatives. Tell them now is the time to fix the Highway Trust Fund. Christian klein (caklein@aednet.org) AED's vice president of Government Affairs and Washington counsel. He can be reached at 703-739-9513. March 2013 | Construction Equipment Distribution | www.cedmag.com | 57 57_washington insider_KP.indd 57 2/27/13 4:43 PM

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