DALLAS -- Lawmakers at all three levels of government have few good options for bringing the national public investment in transportation back to the 20-year annual funding average even if that would stimulate the economy and create millions of jobs, Moody's Analytics said in a new report.
An additional $86 billion a year of highway and transit funding, with total additional spending of $863 billion over 10 years, would raise annual transportation funding to 1.9% of the gross domestic product from the current 1.5% and create 12.7 million additional jobs, according to the analysis.
"The economic implications of such a move would be immense," Dan White, senior economist for Moody's Analytics, said in the report, Getting Back in the Habit of Funding Infrastructure. "The economic benefits would be worth the risk."
The current investment level of 1.5% of GDP rate is the lowest since the Bureau of Economic Analysis began tracking the numbers in 1947, he said. Spending peaked at above 4.5% of GDP in the last 1960s and early 1970s and has steadily fallen since then.
"States and local governments that invest more in infrastructure tend to have greater productivity and attract more private investment and hiring," said White and co-author Sarah Crane, noting that the increase in economic activity stimulated by highway and transit projects could also generate higher tax revenues, helping to finance future construction and maintenance.
The proposed 30% increase over current funding levels would require an additional $20 billion a year in federal transportation funding and another $66 billion a year by state and local governments based on their current share of infrastructure investments, White said.
State and local investments in infrastructure have grown twice as fast as the federal government, as federal highway funding has declined to just over 70% in the years following the Great Recession from a 77% share in 1975, White said.
The drop in the federal contribution to national infrastructure investment is a result of revenues from what White called the "antiquated" gasoline tax failing to keep pace with funding needs.
"Even if Congress did increase the gasoline tax, it would be good for only five or 10 years because cars are becoming more fuel efficient and don't use as much as gasoline," he said.
States have been able to raise their gasoline tax over the past few years, but mostly through legislative action rather than referendums, White said.
Congress is unlikely to deal with transportation funding and related revenue issues until after the 2016 presidential election, White said.
"The best-case scenario would have Congress pass a three to four-year bill this fall, funded with repatriation tax revenues, to get us through the next political cycle," he said. "Neither party wants to fight over taxes before an election because it makes both sides look bad."
Raising the federal gasoline tax, which has been 18.4 cents per gallon for more than 20 years, and indexing it to inflation, makes economic sense and would be the simplest to implement, but is not being seriously considered, White said.
"Voters hate gas taxes, plain and simple," he said. "What we have here is a politics problem, not an economics problem."
It would require extraordinary political will from the president and leaders in Congress as well as state officials to restore transportation spending to its 20-year average, he said.
"There are a few options out there, but things like a carbon tax or vehicle-miles traveled are five to 10 years away from being ready for prime time," White said. "You really have to look to the state level for innovations on the revenue side.
"The odds are that the solution will be something that hasn't been presented yet," he said.
Eight states have approved increases in their gasoline taxes in the last three months, said Carl Davis, a senior policy analyst at the Institute for Taxation and Economic Policy. A total of sixteen states have adjusted their gasoline taxes over the last two years, he said.
