CBO: New Highway Bill Has More Spending, Taxes, and Deficits

David Ditch

Congress is preparing to bail out the federal highway program once again without paying for it. According to a July 9 score by the Congressional Budget Office (CBO), the House Transportation Committee’s BUILD America 250 Act (BUILD) would add more than $147 billion (about $1,100 per household) to the already unsustainable national debt over five years, while violating the user-pays principle.

BUILD is a five-year highway bill that authorizes $474 billion for roads, mass transit, and other surface transportation programs from the Highway Trust Fund (HTF) for fiscal years (FYs) 2027 through 2031.

The highway fund was created as a “user pays, user benefits” system, with drivers paying a user fee (the federal gas tax) to finance building and improving the interstate highway system. Congress broke this model by expanding the trust fund far beyond interstate highways, adding diversions to fund transit systems and boondoggles such as streetcars.

As a result, not only have drivers been subsidizing users of other modes of transportation, but HTF spending growth has rapidly outpaced gas tax revenue. Overspending created chronic deficits that depleted the fund’s balance in 2008. Rather than rein in spending, legislators have approved $271 billion in Treasury transfers to keep the trust fund solvent since 2008, replacing the “user pays” principle with taxpayer bailouts.

BUILD would substantially increase Highway Trust Fund spending. Although the bill would raise a net $12.4 billion over nine years through new “registration fees” (taxes) on electric and hybrid vehicles, those revenues fall far short of covering the additional spending.

CBO estimates that BUILD would exhaust the HTF’s current balance in fiscal year 2028, at which point spending would be limited to incoming revenues. To support BUILD’s spending through FY 2031, the HTF would require $147.65 billion in transfers from the Treasury, resulting in a commensurate increase in the deficit. Rising interest costs, not counted in CBO’s score of BUILD, would add $40 billion more to the total fiscal impact over the course of a decade.

By comparison, trust fund spending would exceed revenues by $121 billion in CBO’s most recent 10-year projection of the status quo, meaning BUILD exacerbates the trust fund’s problems.

More fundamentally, the Highway Trust Fund is less focused on the interstate highway system it was created to support. Roughly 30 percent of HTF spending is devoted to projects unrelated to the interstate highway system, such as mass transit, which receives roughly $1 of every $5 of HTF spending despite accounting for less than 4 percent of US commuting and transit ridership still being below 2019 levels.

The 2021 Highway Bill substantially increased transit funding, and BUILD would retain the higher transit funding level. If Congress approves BUILD as-is, spending from the trust fund’s Transit Account would be 75 percent higher in FY 2031 compared to the FY 2019 level.

All told, BUILD uses deficit financing to maintain spending that is outside of the federal government’s proper responsibilities, on projects that cost more specifically when funded by the federal government, and at a time when adding to the national debt is riskier than ever. Many of these projects, such as bike lanes and pedestrian infrastructure, are more appropriately financed by state and local governments, which are better positioned to assess local transportation priorities and bear their costs.

The Transportation Committee’s bill authorizes spending, but it does not itself provide the Treasury transfers needed to finance that spending once the Highway Trust Fund is exhausted. Those financing provisions fall under the jurisdiction of the House Ways and Means Committee. Absent Congress authorizing the additional bailout, Highway Trust Fund spending would have to fall to match incoming revenues beginning in fiscal year 2028.

The Highway Trust Fund no longer functions as a genuine user-financed trust fund. And highway spending has grown far beyond its original purpose to subsidize state and local projects of questionable value. Congress can continue pretending otherwise through periodic bailouts, or it can restore fiscal discipline by matching spending to dedicated user revenues and refocusing the federal role on genuinely national transportation priorities.

There is still time for Congress to produce a highway bill that returns to the “user pays, user benefits” principle, reduces federal micromanagement, and spends within its means. The BUILD Act moves in the opposite direction.

Source: https://www.cato.org/blog/cbo-new-highway-bill-has-more-spending-taxes-deficits