Boehner’s Bailout: The Highway to Hell

Last week, John Boehner’s spokesman, Brendan Buck, falsely asserted that the highway bill is “completely paid for –without raising the gas tax,” and will not engender further bailouts.  The reality is that this bill will impel an immediate $40 billion bailout from the general fund, while relying on phantom offsets to pay for it over 10 years.  Moreover, these offsets will never pass and will never come to fruition, while the deficit-producing bailout will occur immediately.


Here are the inviolable facts.  This 5-year (2012-2016) surface transportation reauthorization bill, H.R. 7, will commit $262.8 billion in spending through 2016, even though the revenue from the user-pay taxes (gas tax and other highway related taxes and fees) will only reach $193.2 billion over the same period.  Even working with CBO’s numbers, which don’t account for FY 2012, there will still be a $55.2 billion deficit over 4 years ($210.3 billion in contract authority vs. $155.1 billion in revenue).

Boehner can propagate his protestations from now until tomorrow, but the fact is that, under this bill, contract authority for transportation will outpace its funding source by roughly $55 billion from FY2013 through FY 2016.  That is their solemn commitment to the Democrats; that spending will definitely be authorized at those levels.  Any “offsets” discussed henceforth are notional, phantom, temporary, and/or stridently opposed by Democrats.

Back in November, Boehner announced that he would agree to spend roughly $52.5 billion per year on transportation, instead of $38 billion (projected annual revenues from gas tax) as originally proposed by the House.  But fear not, he promised to offset the deficits with royalties from new drilling in ANWR, the Outer Continental Shelf, and from shale fracking in the western states.  We all agree that these are laudable proposals that should get passed as standalone measures.  But the idea of using non-existent royalties to pay off an immediate 5-year deficit was always inane.


Last week, CBO confirmed this by scoring the total offsetting revenues from all the drilling bills as just $4.3 billion over 10 years (just $2 billion through 2016, the relevant budgetary frame).  What a joke!  Besides, using offsetting revenues for deficits violates the GOP CUTGO rule that requires all increases in spending to be offset by other spending cuts.

In order to rectify this, Boehner concocted a new stratagem.  Under the new bill, they plan to remove the $40 billion from the transportation bill that would go towards mass transit, and open up a new fund, called the “Alternative Transportation Account.”  Hence, the gas tax revenue will no longer cover mass transit; it will exclusively purvey highway spending.  They will fill the remaining deficit in the highway trust fund with some “unspent” trust fund monies.  The problem is that those funds don’t really exist.

Much like the phantom $2.6 trillion in the Social Security Trust Fund, the existing balance in the highway trust fund (HTF) is not representative of a tangible resource.  The dollar figure that members of Congress are banking on represents internal liabilities between other government accounts and the HTF.  These are merely IOUs from the treasury to the HTF.  In other words, we are just spreading the same funds and the same deficits from one account to another.

Putting that aside for a moment, how do they plan to pay for the $40 billion newly-created “Alternative Transportation Account” to fund mass transit?  They will bail it out with an immediate $40 billion transfer from the general fund.  Again, this is their immediate guarantee.  That money will be spent instantly.


Now, they are claiming it will be offset with royalties from drilling and a new plan to reform federal workers’ pensions…..over 10 years!  CBO scores the pension reform provision, which would increase the amount that federal workers contribute to their pensions, as a savings of $42 billion.  However, according to my calculations, we would only actualize just under $11 billion in savings through 2016, the relevant budget frame.  In other words, we will be offsetting an immediate $40 billion bailout with $13 billion in offsets ($11 billion from pension reform and $2 billion from energy bills) during the course of the authorization period.  This is no better than TARP accounting.

Moreover, we all know that Democrats will never ever agree to federal pension reform or drilling in ANWR.  Heck, they almost fought a civil war in Wisconsin over similar pension reforms.  Now that Boehner has already committed to the Democrat idea of outspending the gas tax revenue, what will he do when the clock strikes midnight on April 1?  Why start off negotiations with a solemn commitment to the Democrat spending levels when Democrats are vociferously opposing the offsetting revenues?  This is all a ploy to get conservatives to send the bill off to conference, where the final product will be dramatically different from its current composition.  The final product will consummate the higher spending levels and strip out the ‘house-of-cards’ patchwork of offsets.


Senate Republicans have already agreed to an even worse bill – one which also raises taxes.  What incentives do Democrats have to cooperate with the House bill, once we commit to the higher spending levels?  In fact, they will invariably strip the bill of other good reforms, such as the elimination of the 10% “transportation enhancements” mandate on the states.  Don’t fall for the trap, House Republicans.  We’ve seen this rodeo before.

Boehner’s spokesman noted in his piece at Red State that his bill will “make sure the plan won’t add a dime – ever – to our deficit.”  Where’s Joe Wilson when we need him?

Cross-posted to The Madison Project


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