Could Gas-Tax Bonds Pay For the Next Federal Transportation Bill?

House infrastructure committee chairman Jim Oberstar (D-MN), facing steep political odds
in his push to pass a new six-year federal transportation bill this
year, has begun to pitch an outside-the-box solution to the financing
shortfall that is still stalling congressional action: Treasury bonds.

(Photo: Pop and Politics)

Oberstar's
proposal would plug the hole in anticipated highway trust fund revenue
for the next transport bill with top-rated Treasury debt securities.
Those bonds, the Minnesotan explained on Friday, would "be repaid with
revenues from the highway trust fund out into the future. And we would delay the repayment for the first perhaps four years, giving the economy time to recover."

In
order to repay the Treasury for its up-front bond issue, Congress would
ultimately need to raise the gas tax -- a step lawmakers have been
unwilling to take since 1993, and one that the White House has ruled
out for the time being.

"The idea of waiting three or
four years for the economy to recover would be an appealing part of"
the idea, Iowa state DOT chief Nancy Richardson told Oberstar when he
sought her reaction to the plan at a Friday House hearing. "[That]
would allow it to appeal to some of the dissenters in
terms of increasing funding."

Delaying for
three or four years, however, also would assume that future Congresses
would be more open to voting on a gas-tax hike that few lawmakers are
eager to debate, even in rosy economic times. The evidence of success
for such kick-the-can-down-the-road moves is few and far between: both
parties, for example, have habitually voted to postpone previously scheduled cuts in Medicare reimbursement rates for doctors rather than fix the long-term formula.

In addition, the growing production boom in semi- and fully electric cars casts doubt
on the gas tax's ability to raise sustainable revenue for
transportation going forward. Depending on how popular highly
fuel-efficient cars become by the time Congress considers a future gas
tax change, the cents-per-gallon increase needed to repay the Treasury
may be much higher than any current predictions.

The gas-tax bonding plan has a third potential hiccup.

Oberstar suggested that $130 billion in Treasury bonds would be sufficient to close the gap between the cost of his six-year transport bill
and anticipated gas-tax revenue. Yet that total would not appear to
cover the estimated $50 billion that Oberstar's legislation would set
aside for high-speed rail.

Securing sufficient votes from
fiscally conservative Democrats and Senate Republicans for deficit
spending on high-speed rail would be difficult on its own, and adding
the bonding proposal could add complications.

Oberstar
spokesman Jim Berard cautioned that the bonding idea is among several
"proposals that have been floating around" for financing a new
transport bill, adding: "There isn't a magic bullet out there that
seems to have captured everybody's imagination. So we don't want to get
too far out in front of this thing because we don't want to give the
impression that we've found the answer."