Money for Highways

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Drivers all over are finding that when they hit the road, the road hits back. Highways built or rebuilt after World War II are scarred with cracks and potholes. Bridges have collapsed. Poorly designed roads have resulted in deaths. Everyone agrees that crumbling highways should be fixed. No one wants to pay the bill.

The Situation

Engineers say U.S. highways rate a D+ grade. Still, U.S. roads are in better shape than those in Sweden, the U.K., New Zealand and Australia, according to a separate global survey by the World Economic Forum. Even in Germany, where the autobahn was born, western highways are in poor shape because the government shifted billions of euros to rebuild roads in the former East Germany after reunification. Germany has proposed to pay for repairs with a toll on non-German vehicles; EU regulators are considering the idea. Most nations pay for road repairs out of their general budgets, which are not as fat as they used to be. The U.S. pays for highways in part by charging drivers a fuel tax and funneling the money to states through a national Highway Trust Fund. The fund is almost out of money and lawmakers are brawling over how to fill the gap. Because of the uncertainties of federal funding, current repairs and expansions could be held up and states can’t plan long-term projects for fear they won’t be able to pay for them. Meanwhile, the wear and tear on roads continues.

Source: World Economic Forum surveys, 2012-13
Source: World Economic Forum surveys, 2012-13

The Background

Roads made of stone or timber date to around 4000 BC and tolls existed as long ago as the 7th century B.C. The Romans perfected early road-building techniques to defend an empire that extended from Britain to Egypt. The same need to move troops and weapons quickly was cited by U.S. President Dwight D. Eisenhower when he argued for an interstate highway system. Congress approved it in 1956; the first project started construction six weeks after the bill was signed. By 1980, 40,000 miles of interstate highways were open and this has now grown to about 47,000 miles. The Highway Trust Fund was begun in 1956 to set money aside for roads, bridges and transit systems. At first, fuel taxes made up all its revenue. Now they contribute about 65 percent, with Congress usually deciding to make up the difference out of the general budget. The U.S. currently charges 18.4 cents per gallon of gasoline and 24.4 cents for diesel — far less than many other countries. These taxes aren’t adjusted for inflation and haven’t been raised since 1993, when their buying power was almost double. U.S. federal tax dollars pay about 27 percent of transportation construction and maintenance; states pay the rest. President Barack Obama has kept a promise not to support a higher gas tax even as he calls for spending more on infrastructure.

The Argument

Some nations have shifted more highway costs to drivers. China has been adding more than 10,000 kilometers (6,200 miles) of highways every year through big taxes on new vehicles and tolls as high as 7 cents per kilometer (that’s 11 cents per mile). Australia, which pioneered privately operated toll roads, is proposing higher tolls for heavy vehicles. The French privatized highway operations in 2005. Companies collect tolls, though the country still keeps close control over how much money the companies reinvest in construction and repair. Local governments make sure roads used for the Tour de France receive special love and attention. In the U.S., many of the states where people drive long distances tend to vote for anti-tax Republicans. Public officials who have dared suggest switching to a system where drivers pay by the mile instead of the gallon have been lambasted. Using general budget money to bail out the Highway Trust Fund could again be the solution because no lawmaker wants to explain to voters why road spending and its associated jobs are being halted. With cars and trucks becoming more fuel-efficient and Americans driving less, people aren’t buying as much fuel. Less fuel means less fuel tax. Less fuel tax means more pressure to find a solution.

The Reference Shelf

  • The Federal Highway Administration details the history of the federal gas tax.
  • The Library of Congress looks at how various countries finance roads.
  • Bloomberg Visual Data on gasoline prices by country.
  • Germaine Greer wonders why the U.K. can’t have roads like the French.
  • The traffic-services company INRIX has a list of the most congested road systems. Belgium tops it.

First Published July 15, 2014

To contact the writer of this QuickTake:

Angela Greiling Keane in Washington at agreilingkea@bloomberg.net

To contact the editors responsible for this QuickTake:

Anne Cronin at acronin14@bloomberg.net

Steve Komarow at skomarow1@bloomberg.net