The changes were dramatic. People found they could live in the suburbs and commute to city jobs. And when enough people moved outside the cities, businesses followed. Factories abandoned downtown because they could get supplies in and products out more efficiently. Cities declined while the suburbs boomed. New markets developed as smaller cities and towns could now get products more cheaply, all because of the new and well-maintained highway structure.
To pay for the system, the Highway Trust Fund was set up, funded by a gasoline tax. As more highways were built, people drove more often and longer distances: The money flowed in like crazy. The original plan for 41,000 miles taking 12 years and costing $25 billion ultimately required 35 years and $425 billion, but it was the best investment we made.
That funding model was copied by states across the nation, which set up trust funds or borrowed money backed largely by gasoline taxes or other user fees. And if more money was needed, it was never that hard to add a penny or two to the gasoline tax to build or maintain our roads.
But times have changed. The national gasoline tax has remained at 18.4 cents since December 1997. Of that, only 15.44 cents goes to highways. Adjusting for inflation, you have a real tax closer to 10.8 cents, a buying-power reduction of about one-third.
While the roads are wearing out and have to be replaced or repaired, the U.S. Highway Trust Fund is running out of money. The Congressional Budget Office recently estimated that by 2015 it would have more expenses than gasoline-tax revenue. Considering that the states in the region get more from the trust fund than they pay in, that is a real economic concern.
The same transportation-funding crisis is happening in the region. In Pennsylvania, which hasn't raised the gasoline tax since 1997, Gov. Corbett is trying to raise an additional $2 billion in transportation funds and is projecting continued declines in gasoline-tax revenue. In New Jersey, which hasn't raised the gasoline tax in 25 years, past raids on the trust fund and inadequate funding have created a similar gap that is growing.
So, what should we do? The simplest approach is to raise gasoline taxes. In Pennsylvania, the governor estimated a 10-cent-per-gallon increase was needed. In New Jersey, the estimates run to 15 cents or more. Unfortunately, that is impossible in an environment where politicians refuse to raise any tax, even one for something as critical as our highway infrastructure. I guess it is better that our roads fall apart than have people actually pay for their construction and maintenance.
The alternative is to borrow money, which is the way New Jersey likes to do things. But that means gasoline taxes or vehicle fees must back the bonds. Otherwise, they have to be paid out of general revenue. Which brings us back to the no-good-deed-goes-unpunished concept. As fuel efficiency rises, the higher taxes will yield lower returns. Indeed, small tax increases might be needed every year. More likely, other funding sources need to be found.
The unwillingness to adequately fund our highway system is setting the stage for a major economic crisis. If New Jersey and Pennsylvania don't find ways to finance the needed projects soon, even if that means raising taxes, the accelerating problems will reduce competitiveness, slow economic growth, and cost jobs. It is time politicians put the needs of the many before the needs of the few.
Joel L. Naroff is president and chief economist for Naroff Economic Advisors Inc. in Holland, Bucks County. Contact him at email@example.com.