History is never quite what you’ve been taught, even though you earned your grades by being able to repeat those inaccuracies. Certainly, when it comes to America’s highways, most believe that President Dwight Eisenhower came up with our Interstate Highway System in the mid-Fifties. His participation in a military convoy to take ordnance across America in 1919, when few good roads existed outside of the major cities, had proven America needed great highways.
As it turns out, though, what we now know as the Interstate Highway System was actually put into play by President Roosevelt in April of 1941, when he created a committee to study a National Interregional Highway system. It would take almost two years for this group to release its study’s results; but, on January 14, 1943, its members recommended building 40,000 miles of highways all across the country.
That report didn’t make many waves, but that’s understandable; it came out right after the news that our Marines had captured Guadalcanal. Rommel was in retreat across North Africa; and gas rationing had gone into effect in America the month before.
Still, both the House and Senate started crafting legislation. And the combined final passage of the Federal Highway Act of 1944 allowed $450 million a year to be put toward highways (split 50-50 with states), and it set the funding for secondary feeder roads at $125 million annually. This was passed and signed into law in late December of 1944, before the Second World War ended.
Keep in mind that this bill and the concept of building highways coast to coast came about when deficits against Gross National Product were the highest they had been in American history. That fact may explain why Congress never got around to funding its legislation. No, it would take another President, this time Dwight Eisenhower, to force Congress into a second bill in 1956 to get our Interstates started.
This superhighway system, sold as being necessary to protect America in case of an attack, was called the National Interstate and Defense Highways Act. The monies the federal government provided for it jumped to 90 percent of construction costs, and some funds were even diverted from the Pentagon to make this happen. But don’t be misled; that bill used the Roosevelt Committee’s guidelines, because it called for 41,000 miles of interstate highways. Before it was completed that number would grow to almost 47,000 miles of interstates. And at the time there were barely over 63 million registered vehicles in America, somewhere around 25 percent of today’s total.
In his column last week, covering the current debate over our highways, George Will quoted Princeton historian James M. McPherson as saying that, before the all-weather macadamized roads, “It cost the same to move a ton of goods 30 miles inland as it cost to bring a ton across the Atlantic.” With business math like that, we should never have needed constant debates over the need for good roads; and the government’s inaction to bring America into the 20th century was inexcusable. However, as one can see, today’s debates are once again producing nothing. And, even if there were total agreement on what to do about our highway infrastructure, as Roosevelt and others before him found out, nothing may happen for years to come.
As for Eisenhower’s 1956 bill, it should be noted that numerous states already had decent highways within their borders, often toll roads. In many cases, once the toll revenues had paid off the cost of those highways, the booths were removed and these highways were added to the system; this included Interstates in Connecticut, Kentucky, Maryland, Texas and Virginia.
Sadly, that concept is now moving in reverse. If some people have their way, every last road in America, including the street in front of your home, will become a toll road.
Oh, and existing toll roads will become double toll roads.
The latest discussion of this idea comes our way courtesy of Wired magazine. This publication is well known for promoting high-tech stuff that’s just about to become a reality, or that just launched at a retailer near you. However, when it comes to highways, the arguments Wired is making are old, tired, and worn-out. They include such political favorites as, “the gasoline and other taxes don’t come close to maintaining the roads;” “incredible amounts of money are lost due to congestion;” and “emissions from automobiles are destroying our health.”
Wired even offers hard numbers to back up some assertions, including the fact that being stuck on highways that aren’t moving costs Americans $75.5 billion each year in fuel and their time. Other indirect costs of traffic, such as food truck operators’ also being stuck in traffic, comes to $45.6 billion per year. Combined, that equals $121.1 billion annually lost in productivity, wasted gas and diesel, and additional costs for goods due to slower delivery times. This means that what we lose because of the condition of our highways — or the lack of sufficient highways — in high-traffic regions is costing all of us almost two and one-half times what we currently pay in federal highway taxes.
Remember that comment about the fact that before modern roads it cost as much to move one ton of goods 30 miles from the port as it cost to bring it across the ocean? This is where government accounting in the past would recognize that problem, fix it with better roads — knowing that the cost of those highways would lower the costs of goods, raise productivity, and quit wasting fuel — and achieve positive overall net cost to the citizens. Or, the road would cost less in the long term than the high costs of the non-performing status quo.
So Wired magazine puts up the logical fallacy we all know: There’s not enough money for all of the highways and upkeep that our infrastructure demands, and therefore the current gas and diesel tax system is broken. Compounding that fallacy, they leave out the obvious fix: Raise the tax.
Of course, they do; Wired is a techie magazine, so they want a techie answer: Because of modern communications, GPS locating services and so on, they reason, why not charge every person for every mile they drive in their vehicles? Wired even quotes a RAND study about how this can save money on everything from not being stuck in traffic to saving money on insurance — because you’d pay for that by the mile, too.
Wired brings up the fact that half of the states have looked into doing this already; and it’s been 12 years since Oregon first tested the system. That state loved the scheme so much that it “enshrined it into law” — but capped participation at 5,000 motorists, who no longer pay the state part of the gasoline tax, but instead are billed 1.5 cents per mile.
Wired, like most publications, also points out that because there are more fuel-efficient vehicles on the highway, Americans aren’t buying as much gasoline as we once did, and therefore the gas tax per gallon used will continue to decline.
That’s a statement with no basis in fact anymore, for several reasons.
First, the Ford F Series truck, the No. 1 selling vehicle in America, sold 896,764 units in 2017. At the same time, the very fuel-efficient Toyota Prius managed to sell just 65.5 thousand units. That’s down from the 181.2 thousand Prius models sold in 2007 — when gasoline prices had already started their climb toward $4 a gallon. And, while it is true that gasoline sales fell for nearly a decade, that decline was moderate and almost non-existent at first, but gained steam starting in 2008. That’s right, falling gas tax revenue had little to do with the fuel efficiency of the vehicles we bought, and everything to do with the Financial Meltdown of 2008 and the millions of jobs lost in its aftermath.
For the record, the US Energy Information Administration posted that in 2016 we set a new high mark for gasoline consumption in America: We used 143.37 billion gallons. So no, the Highway Trust Fund is not falling because of a lack of gasoline sales, it’s rising again.
Second, an ironic bit: 23 years ago, the national speed limit was 55 mph; many drove 64, because the likelihood of getting a ticket at that speed was nil. Today we’re driving at 75-80 mph, meaning we are losing 30 – 35 percent of our vehicles’ fuel efficiency. Translation: We’re buying 30 – 35 percent more gasoline than we need to go from point A to point B. Alternative translation: We’re already paying a 30 – 35 percent premium in gasoline taxes, both state and federal. That’s right, our high-speed runs across the Metro areas of America are feeding the Highway Trust Fund.
Do the Math
Back to Wired magazine’s claim that charging people 1.5 cents per mile would create real monies for the highway system. Now, I know those at Wired magazine are really high-tech guys; but I’m equally sure 4th-grade math still applies to them. Currently Oregon has a 34-cent-per-gallon highway tax, and that does not include the 18.4 cents for the feds. In 1919 Oregon became the first state in the Union to levy a tax on gasoline to build highways. So, we’ll use the Oregon numbers to see if the assertion that charging people by the mile they drive will resolve our highway trust issues holds water.
From my home in West Fort Worth to Fox Four on Friday mornings, or to our radio station on Saturdays, is right at 75 miles round trip. If I’m driving a car and getting 25 miles per gallon on I-30, I’ll use 3 gallons of gasoline. Or, using the Oregon model, 3 gallons of gas at 34 cents per gallon in tax. Therefore, I’m out $1.02 in taxes for highways, but under that 1.5 cents per mile charge for every mile driven, I’d be out $1.12 for the same trip. Fair enough; that extra dime multiplies and adds to the highway funds. (If the 1.5 cents per mile replaces both state and federal taxes, it’s a money losing proposition across the board.)
But let’s make the same trip in a Prius getting 50 miles per gallon. With Oregon’s gasoline tax, the owner would use 1.5 gallons of gas or pay 51 cents in highway funds. Again, they would pay the exact same $1.12 if charged 1.5 cents per mile. Big jump in contributions to the highway funds here. But now let’s take that Ford F-150, driving at 80 miles an hour and getting only 15 miles to the gallon as a result. That takes 5 gallons of gasoline, or $1.70 in Oregon gasoline taxes — or substantially more than that $1.12 if you charge by the mile.
That’s right, charging people by the mile they drive is an extremely perverse tax concept. In fact, gasoline taxes are regressive to begin with: The poorest person with a 20-year-old car driving the same miles per year as the richest person in town in their BMW 7 Series pays the exact same amount in gasoline taxes. But in the case of paying by the mile, the worst fuel efficiency — whether it’s because of engine design, vehicle size or shape, or driving habits — gets the biggest break on taxation. If you drive a big rig, this is great news. But if you drive to conserve fuel, or you buy a truly fuel-efficient vehicle, a per-mile charge hits you hardest.
In any case, there is no free lunch. If we need more money to fix and build new roads that money is coming from one place. Us.
But Wait, There’s More
Worse, the pay-per-mile concept is just the start. Reading the reports on it, one will find that some proponents envision a “variable per mileage fee” — raising the rate per mile in rush hour, or even just when the freeway isn’t moving at all.
That should remind us of the all-new 10-mile toll road in Virginia on I-66. It was reported that those variable tolls in rush hour might well go to $40 under some circumstances, although officials adamantly downplayed that possibility “except in the rarest of occasions.” Like the morning of February 13 at 8:31 a.m., when that toll was $46.50 to drive those 10 miles or so. Think of it this way: On that morning, if you had a car that got 25 miles to the gallon, your “tax” to drive those 10 miles of I-66 express lane amortized on a per gallon basis would be around $116.25.
Oh, and imagine being charged per mile for every mile you drive and then having to pay a toll on top of that, because the toll roads already built aren’t going away or turning free.
One other thing Wired left out of their story is that Portland voted to increase the gasoline tax for just their city. In 2016, the first year it went into effect, it brought in more money than was expected; they were hoping for $16 million to fix and enlarge their streets but received $19.9 million instead. And for what it’s worth, the state of Oregon increased gasoline taxes by 4 cents per gallon last year (although that will sunset in 2020), which made the total 34 cents used in this column’s computations. That’s a major omission by those pushing a pay-by-the mile road tax and claiming Oregon’s motorists and state love that plan. Apparently they don’t, as they raised gasoline taxes instead.
Theft in Plain Sight
Of course, the real plan is still public-private partnerships. Because done right, that scheme allows Wall Street to turn all of America from an unbelievably wealthy country where we, as Americans, own our roads, bridges, water systems, and so on, into permanent renters of those same structures.
Think about the house you may have bought 40 years ago for $50,000 and rented out for $500 a month; today, after minor improvements, that long-paid-off $50,000 home could lease for $2,000 a month. That’s the same game plan for our highways: Fixed costs going in, minor repairs over the decades, great tax write-offs for depreciation, debt paid off and tolls that go up at will. See, private business isn’t held accountable by voters the same way politicians are held responsible for depraved indifference.
Goldman Sachs and others on Wall Street have been out pushing this on the nation’s politicians for well over a decade; the only reason it hasn’t moved forward faster is because the American public is against it. Just ask our neighbors over in Collin County how much fun it is paying a toll every time they go to work or go shopping.
At one point we had the greatest highway system in the world, the best infrastructure, many of the best airports, and so on. Just ask yourself, how did we pay for all that in the days when we had only a quarter of the motorists and half the population we have today? Knowing that, and understanding how brilliantly it worked, why is that the one thing no politician today wants to duplicate, that we know really works?
It’s because they have Wall Street on their backs — and in their pockets.
Note from Ed: On Wednesday morning Reuters reported that President Trump had praise for Oregon’s program that charges motorists for each mile driven. That column incorrectly states that the charge is 1.7 cents per mile, not the 1.5 cents used by Wired magazine. It also states only 700 Oregonians are enrolled in the program. Then the Houston Chronicle reported that the Koch Brothers will try to kill any talk of a future gasoline tax increase. While MarketWatch reported that the White House economic advisors are critical of any new gas taxes and also praise the Oregon program as being “innovative”. Makes one wonder why only 700 have enrolled in that program after a decade of experimentation, while both Portland and the state raised their gasoline taxes.
© Ed Wallace 2018; Ed Wallace is a recipient of the Gerald R. Loeb Award for business journalism, bestowed by the Anderson School of Business at UCLA, and hosts the top-rated talk show, Wheels, 8:00 to 1:00 Saturdays on 570 KLIF AM. Email: email@example.com