In a rash scheme to maintain the depleted Highway Trust Fund, the House on Tuesday passed a bill throwing $10.8 billion at it for the next 10 months. The mechanism to raise the money is called “pension smoothing,” where companies reduce their tax-deductible contributions to pension funds for the next 10 years to provide more tax revenue for the government. Afterwards, the companies would then plow money back into pensions. Of course, that means higher deductions and less revenue for the government down the road. It’s a gimmick that at best nets nothing — and potentially puts pensions at greater risk, by giving companies less of a reason to fund them properly in advance.
But it’s worse than that: This deal symbolizes the desperation of a Capitol Hill where Democrats and Republicans are unable to agree on long-term solutions even for funding transportation improvements, something that members of Congress of all ideological persuasions have long treated as a basic responsibility of government. But maintaining the flow of transportation upgrades requires a sufficient source of revenue. The 18.4-cent-per-gallon gas tax that funds the trust has not risen for two decades — not even for inflation. Surely there are other ways to raise transportation money, but GOP opponents of raising the gas tax haven’t exactly been aggressive about suggesting revenue alternatives.
Instead, the highway bill resorts to accounting trickery. Putting pensions on the line for the nation’s infrastructure has think tanks across the political spectrum decrying the legislation, fearing potential taxpayer bailouts of pension funds if economic conditions prompt companies to later balk at resuming contributions. The conservative Heritage Action group calls the scheme “spend now and pay later.” The more liberal Tax Policy Center said it is wrong to repair roads and bridges with funds “that have nothing whatever to do with transportation.”
The Senate and President Obama will likely concur in this gimmick for now, before this term ends. But next session, Congress and the White House must find a way to make the Highway Trust Fund work — with an infusion of new transportation-related revenues. Even limited-government conservatives still like cutting ribbons on new roads and bridges. Paying for such projects in a straightforward way is far superior to fixing today’s cracks and potholes by creating a retirement mess in the future.