The House Resorts to More Gimmicks to Pass $325 Billion Highway Bill
Policy + Politics

The House Resorts to More Gimmicks to Pass $325 Billion Highway Bill


There were plenty of high-fives and backslaps on Thursday as the House overwhelmingly approved a multi-year, $325 billion transportation bill designed to address the nation’s woeful highway, bridge and infrastructure system.

Leaders from both parties hailed the 363 to 64 vote – capping three days of debate and consideration of 100 amendments -- as a major breakthrough essential to rebuilding the nation’s pothole riddled highways. As so often has been the case in Congress’s seemingly endless transportation melodrama, there is a lot less to the bill than meets the eye. Much of the promised new funding hinges on budget gimmicks that are already drawing sharp criticism from conservatives and good government groups.

The House and Senate still must reconcile major differences in the two versions of their bills before a Nov. 20 deadline – or kick the can down the road again. Since 2009, Congress has passed 35 short-term bills or “patches” to keep the highway program afloat until lawmakers could agree on new multi-year highway authorization.

While House Transportation and Infrastructure Chair Bill Shuster  (R-PA) and others claim the new legislation will cover federal transportation spending for the next six years, there is only enough revenue in the package to cover three years, according to analysts. Lawmakers will have to come up with more money down the road. The bill also doesn’t come close to matching the $478 billion of program spending sought by President Obama to bolster U.S. infrastructure spending to compete with China and other foreign economic rivals. And it once again fails to solve the chronic shortfalls in the Federal Highway Trust Fund.

Rep. Peter DeFazio of Oregon, the ranking Democrat on the transportation committee, tried to put a good face on a badly flawed bill, but he was compelled to acknowledge its huge shortcomings.  “I am very pleased, that after 10 years of short-term band aids and extensions, the House finally passed a bipartisan, six-year transportation bill,” DeFazio said in a statement. “This legislation isn’t perfect. Unfortunately, it doesn’t provide the level of investment needed to repair or rebuild our aging 1950s-era system of roads, bridges, and public transit systems.”

Related: Congress Uses Accounting Gimmicks to Fund Highway Bill

The long-troubled federal highway program has been largely funded by revenues from the 18.4-cents per gallon federal gas tax that hasn’t been increased or adjusted for inflation in two decades. The administration has tried to makes ends meet by repeatedly shifting money from the general fund to the highway fund to cover shortfalls. Many highway construction advocates and business leaders have long argued that increasing the gas tax would be the easiest and most efficient way to prop of the transportation program.

But gas-tax advocates consistently ran into resistance from Senate Majority Leader Mitch McConnell (R-KY), former House Speaker John Boehner (R-OH) and now the new speaker, Paul D. Ryan of Wisconsin, who prevented the House from even voting on an increase in the gas tax yesterday.

With tax reform revenue out of the question before the 2016 election, McConnell and Democratic Sen. Barbara Boxer of California came up with a number of one-time only budget gimmicks last summer to finance the Senate version of the highway bill that would keep funds flowing to state and local governments to address the crumbling U.S. infrastructure.

They settled on a dozen or so key provisions.

Related: Senators Move Towards a Big Infrastructure Deal

As the Fiscal Times previously reported, some of them are relatively minor, such as transferring money out of a “Sportfish Restoration and Boating” trust fund and a “Leaking Underground Storage Tank Trust Fund” that was created to deal with petroleum releases from federally regulated underground storage tanks. Another would require the deposit of civil penalties related to federal motor vehicle safety violations in the Highway Trust Fund instead of the Treasury’s general fund.

Others involved changes to Internal Revenue Service laws and regulations. For instance, roughly $1 billion could be raised in the coming decade by requiring mortgage lenders to reduce the amount of misinformation provided by borrowers on their mortgage applications. Some lawmakers including Sen. Chuck Schumer (D-NY) proposed a provision to raise an additional $2.4 billion over 10 years by requiring the IRS to utilize private debt collection agencies to help facilitate the collection of taxes owed the government. The problem is that the IRS tried this twice before and both times lost money.

About $7 billion would come from the sale of oil from the Strategic Petroleum Reserve. But clearly, the largest single source of new revenue for highways, $16.3 billion, would come from cutting dividends paid by the Federal Reserve to member banks that own shares in them. The proposal would slash the current dividend rate from 6 percent to 1.5 percent for large banks with over $1 billion in consolidated assets.

Related: Infrastructure Now, or Apologize for It Forever

Federal Reserve Chair Janet Yellen and the banking industry protested the proposed dividend cuts. But their complaints were dismissed until the last minute yesterday, when Republican Reps. Randy Neugebauer of Texas and Bill Huizenga of Michigan intervened to preserve the dividends by adopting yet another scheme involving the liquidation of another obscure but cash-rich fund known as the Federal Reserve Capital surplus account.

Michael Sargent, a research associate at the conservative Heritage Foundation, denounced the last-minute move as a “bait and switch.” He said the move will “set up the Highway Trust Fund for another bailout in just a few years, when the deficit between spending and revenues will be even greater than today.”

“The bottom line is that this is a status quo bill,” Sargent said in an interview. “It’s another bailout, but it’s just a longer patch than we’re used to. They’re going to be back in the same spot in three years, albeit with a bigger hole to fill. So people saying this is historic and is breaking the status quo are really incorrect. It’s just a longer patch than we’ve seen, and really doesn’t do anything to shore up the finances.”