The Beltway
An occasional column by Gabe Nelson, Automotive News' D.C. correspondent, analyzing the auto industry's relationship with Washington.
GABE NELSON

Brace yourself for the fiscal pothole

COMMENTARY
Gabe Nelson is a staff reporter for Automotive News
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WASHINGTON -- Cars are getting more efficient. Congress is not.

That confluence of factors has brought Washington to the brink of another fiscal crisis, this time over highway funding.

And it should be deeply frustrating to the auto industry, which has invested tens of billions of dollars in cleaner, more efficient vehicles, only to discover that Congress is too paralyzed by partisan squabbles to invest in serviceable roads for them to use.

Here's the situation: By late July, if revenue and spending remain on their current trajectories, the U.S. Department of Transportation's Highway Trust Fund will run dangerously low on cash. That means no more federal grants for roads and bridges in need of repair.

Predictably, the argument is about taxes and spending. Every one of these man-made crises gets a snappy name: debt ceiling, fiscal cliff, government shutdown. Let's call this one the fiscal pothole.

President Obama clearly sees it as the next crisis. "States might have to put some of their projects on hold," he warned the nation in his weekly video address on May 18. "In fact, some already are, because they're worried Congress won't clear up its own gridlock."

It comes as no surprise that the highway fund is almost empty. For years, spending has outstripped the roughly $40 billion that the federal government collects annually from an 18.4-cents-a-gallon tax on gasoline and a 24.4-cents-a-gallon tax on diesel fuel.

Yes, highway projects have gotten more expensive. But the main reason for the gap is on the revenue side: Cars and trucks are much more efficient than they were in 1993, the last time the fuel taxes were raised.

Light-duty vehicles used 123.9 billion gallons of fuel in 2011, an 11 percent drop from 2004, according to University of Michigan researcher Michael Sivak. And that was before the Obama administration's strict new fuel economy standards even began.

Current laws offer no solution to the funding problem. For the nation to avoid the fiscal pothole, Congress needs to act. But once again, Congress is proving itself incapable of anything but brinkmanship.

This month the Senate Environment and Public Works Committee approved a six-year bill that would maintain spending at current levels, plus inflation, but without any suggestion of where that money would come from.

That task was left to the Senate Finance Committee.

"Admittedly, compared to the Finance Committee, which has to lead all of us in figuring out how to pay for this six-year bill, we have an easier role," U.S. Sen. David Vitter of Louisiana, the Public Works committee's ranking Republican, told reporters.

(Needless to say, the Finance Committee hasn't yet proposed a solution.)

But at least the Senate put some sort of plan on the table. The House hasn't even done that, knowing that any solution would require new tax revenue -- anathema to Republicans, especially in an election year -- or huge cuts in infrastructure spending at a time when roads and bridges are falling apart.

The worse that America's roads and bridges get, the less attractive driving becomes to motorists. And that's bad news for the auto industry, which is investing heavily to address big issues such as oil dependence, climate change and affordable mobility.

It is expensive and challenging, but companies have been willing to gamble on the idea that they will sell smaller, lighter vehicles running on batteries or hydrogen fuel cells. They do not know which technologies will win. The marketplace will decide.

By comparison, the government's fiscal pothole is easy to fix. It knows how to build infrastructure. It just needs to make the investment. That means spending prudently to build what the country needs, and collecting revenue, in some fashion, to pay for it.

It's only a lack of courage that stands in the way.

Automakers cannot build their own roads, and they shouldn't have to do so. There's a reason that in every developed country, the responsibility has been handed off to the government to build infrastructure for the common good.

Ask most members of Congress and they will agree: This is a job for government.

Too bad the government isn't doing its job.

You can reach Gabe Nelson at gnelson@crain.com.

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