potholes

How The Hamilton Project Proposes Fixing U.S. Infrastructure Funding

By October 3, 2015 No Comments

It’s not just about raising the gas tax – it’s that (by a fluctuating formula), but by other means as well. There’s more than one way to fill a pothole.

While the U.S. Congress wrangles with reauthorizing spending on the Highway Trust Fund on an annual basis – making up for the shortfall in gas tax receipts – there are other ideas on how to maintain and improve the nation’s infrastructure  by engaging longer-term strategic planning.

One such set of ideas was put forth in April 2015 by way of The Hamilton Project (“Advancing Opportunity, Prosperity, and Growth”) in a policy brief titled “Financing U.S. Transportation Infrastructure in the 21st Century.” So named for the nation’s first Treasury Secretary, known for advocating sound fiscal policy as a means of driving America’s economic growth (“prudent aids and encouragements on the part of government” are necessary to enhance and guide market forces, the report notes), The Hamilton Project includes in its advisory council a blue-chip list of nationally-recognized business, economic, political and academic luminaries .

Instead of only recommending that there be a hike in the federal gas tax, The Hamilton Project offers a hybrid of solutions (a type of a gas tax increase among them). Those recommendations include:

Longer-range strategic planning – The report recommends the U.S. Department of Transportation undertake longer-term strategic planning that comprehensively encompasses all modes of transportation infrastructure. It would improve data collection on infrastructure use and needs, and determine how subsidies for funding and financing investment should be optimally allocated.

Build America Bonds – BABs were used in the American Recovery and Reinvestment Act signed into law in the wake of the 2008 financial crisis but expired at the end of 2010. The program provides a direct interest subsidy to support state- and locally-issued debt on infrastructure projects.

Expansion of the Transportation Infrastructure Finance and Innovation Act – TIFIA provides loans, loan guarantees and standby lines of credit to state and local surface transportation infrastructure projects. One requirement is that those projects generate their own payback, such as through tolls and other user fees, which has made the program successful since its inception in 1998. Hamilton proposes that the current appropriation of $1 billion per year be increased to $10 billion.

Gas tax reform – Responding to the concern that the tax is regressive, particularly when the price of gas rises, Hamilton proposes a tax that reacts to gas price volatility. When gas is cheap the tax will rise higher (within limits), and conversely, when the cost of gasoline rises the tax will drop. Also, the tax and its upper and lower thresholds would be indexed to inflation (the current tax of 18.4 cents per gallon has been fixed since 1993). Additionally, modernization of user fee technologies should be encouraged, perhaps by federal government-sponsored financial incentives.

Pooled procurement – States and local municipalities do not currently coordinate their purchasing of infrastructure-related goods and services. Hamilton recommends that there be a national platform for pooled procurement (i.e., an online system that facilitates a larger network of potential agencies that can work together). The federal government could additionally incentivize participation in the network with grant funding to successful users of the platform.

The think tank report has now been provided to politicians and other policy makers. It remains to be seen what influence it will have on the powers that be. As of October 2015, House Ways and Means Chair Rep. Paul Ryan (R-WI) has proposed tying infrastructure funding to international tax reform.

For the report abstract, go to www.HamiltonProject.org.