The Wrongologist

What’s
Wrong Today:

What could be wrong
with our quest to increase fuel economy? It helps the environment and lowers
our cost of commuting, a big deal with high gas prices.

In
1993, the average new passenger car got 28.4 miles per gallon (MPG). The best-selling car got 18 MPG in the city and 27 on the highway.

In
2010, the average new car got 33.7 MPG, while the best-selling car got 22
(city) and 33 (highway) MPG.

The Economist carried this chart laying out our
success with gas economy:

According
to Michelle
Hirsch of The Fiscal Times, fuel
standards will rise to 34.1 MPG by 2017.
 

One
particularly interesting trend was highlighted in a recent study on
“Transportation and the New Generation” by the Frontier Group: From 2001 to 2009, the average annual number of vehicle miles traveled by young people
(16 to 34-year-olds) decreased from 10,300 miles to 7,900 miles per capita—a
drop of 23%. [PDF ]

Doug
Short of Advisor Perspectives prepared this
chart showing how miles driven
has
fallen from 3.04 trillion miles in 2008 to 2.94 trillion miles in 2012, less
than they drove in 2006. (The grey bars show periods of recession) 

 

So, What’s Wrong?

Unintended
consequences can accompany a good thing and that’s true with improved gas mileage. Just as cars
are growing more fuel-efficient, Americans are driving less. While better
fuel-efficiency is good news for Americans’ wallets and less driving good for
the country’s air, for our highways
and mass-transit systems, it is a burgeoning disaster.

Why?

Because we fund highway infrastructure mostly
from federal fuel tax revenue. Fuel taxes go into the Highway Trust Fund
(HTF), which was created in 1956 to finance highway construction nationally. Buy fewer gallons of fuel and the amount
available to fund improvements declines.

Fuel taxes
account for 22% of all highway funding and 17% of mass-transit funding
nationally (with the rest coming from state and local governments). The HTF spends
most of its funds on highway and bridge maintenance and construction, but in
1982, Congress created a Mass Transit account within the HTF.

The current
rate of 18.4¢ was established
in 1997. Today, 15.44¢ of every 18.4¢ of fuel-tax per gallon funds
highways, while 2.86¢ funds mass transit and 0.1¢ funds clean-up of leaking
underground storage tanks. The HTF also receives some revenue from taxes on
truck tires, diesel, and other driving-related sources, but most of its money comes from gas taxes.

But as the
trend in tax receipts has slowed, the HTF has suffered:

• Funds
  paid into the HTF fell by 14% from 2007 to 2010

• Between
  2008 and 2010 Congress transferred $34.5 billion in general revenues into the
  HTF, the first time it had ever received such an infusion

(To learn more about how the Highway Trust Fund operates,
read The Federal Excise Tax on
Gasoline and the Highway Trust Fund: A Short History by James M. Bickley here).

Higher
fuel economy standards starting in 2017 will cause gas tax revenues to decline
by 21% by 2040. Earlier this year the Congressional Budget Office forecast that
the HTF will be unable to fund highway maintenance by 2013. The CBO projects that
the HTF will pay $589 billion to states by 2022 and take in $422 billion during
the same period. The CBO lays out the options to fund the shortfall as:

• Raise
  the gas tax by 5¢

• Divert
  funds from the general fund to the HTF

• Cut
  infrastructure spending by 10%

Mr. Obama opposes
raising the gas tax, so it is probably a political impossibility. And with the Fiscal Slope and the deficit
fighting in Congress, that money will be difficult to find elsewhere. This
leaves us with CBO’s “cut infrastructure spending by 10%.

This isn’t just a federal problem. Around 50% of all
surface-transportation funding and 20% of mass-transit funding comes from the
states, most of which face budgetary
woes of their own.

Repairing
America’s transportation infrastructure cannot afford to wait. The American
Society of Civil Engineers (ASCE) estimated in 2009 that 36% of America’s major
urban highways are congested, costing
$78.2 billion each year in wasted time and fuel costs. They also say
that our roads rate a “D” on their infrastructure
report card. They estimate the 5
year need for funding to be $930 billion 
 and estimate that spending for
the same period will be $380.5 billion.

We all
experience poor roads and road repair projects that take years to complete.
Fortunately, few of us experience the catastrophic failure of a bridge during
rush hour, but most of us know about delays at a bridge toll.

On our
roads, we get to experience the
leading edge of our nation’s decline to third-world status every day.

We can’t
let political inaction push us toward the CBO’s cut our infrastructure expense
option. Congress and the people need
to make highway infrastructure a priority.

You can’t grow the economy and get down to
business if you can’t get there from here.

Build it
and they will come.