A better way to fund roads
–- Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute. The views expressed are her own. –-
Just as motorists began the summer driving season, U.S. Department of Transportation Secretary Ray LaHood told Congress that the Highway Trust Fund will run out of money by August. Rising gasoline prices and the recession mean less driving, and less driving means lower revenues from gasoline taxes for the Highway Trust Fund.
At the same time, President Obama wants to spend $13 billion as a downpayment on high-speed rail, an expensive form of transportation that will reach only small segments of the country and that will not substitute for highways. The money would be better spent on developing a more stable source of revenue for highways, based on miles driven rather than gasoline used, that would help to reduce traffic congestion and greenhouse gas emissions.
When the Highway Trust Fund ran out of money in 2008, Congress transferred $8 billion to the fund from general revenues as a repayment from 1998, when the fund was in surplus, and $8 billion was moved into general spending. This year, if Congress transfers money, it would be a direct expenditure, with no fig leaf. Without a transfer, work on many projects would stop or slow down.
The federal government financed the interstate highway system by means of a fuel tax because that was the best method available. Legislation passed in 1956 provided that, on completion, the federal tax would be repealed and funding restored to the states. The highway system is now complete, so there is no rationale for continuing federal involvement in financing state roads.
The $13 billion allocated for high-speed rail would be better spent to encourage the states to adopt a new way of charging for road use. Driving is the primary method of transportation for Americans. They own about 235 million registered passenger cars, vans, pickup trucks and sport utility vehicles, and drive over 2.5 trillion miles a year.
Mechanisms for improving road finance were addressed earlier this year in a pathbreaking bipartisan report by the National Surface Transportation Infrastructure Financing Commission entitled Paying Our Way: A New Framework for Transportation Finance.
Embracing CAFE Society
– Christopher Swann is a Reuters columnist. The views expressed are his own –
President Obama may have a political Midas touch, but his decision to tighten fuel efficiency rules for cars was assailed from two directions.
Some critics charged that the rules would force car prices higher at the worst possible time — dealing a possible lethal blow to the American auto industry and hurting struggling consumers at the same time. Others berated the president for preferring regulation over a simpler tax increase. The Corporate Average Fuel economy standards — or CAFE — are costly, inefficient and politically craven.
Both criticisms rest on mistaken assumptions about pricing. Firstly there is scant evidence that tightening fuel standards were a major force in pumping up the price of cars in the 1970s and 1980s. Between 1978 and 1985 U.S. automakers managed a 50 percent increase in fuel efficiency without breaking a sweat.
The notion that CAFE standards significantly push up prices assumes technological stasis. Auto research continually spins off fuel efficient technology. The automakers and buyers then face a trade-off between deploying this to cut down gas usage, or to enhance the power and size of the vehicle.
Since the United States stopped tightening the standards in the mid 1980s, carmakers have chosen he latter. Obama’s rules are expected to add just $1,300 to the price of a car by 2016 and it is fair to assume that the price increase would phase in gradually along with the standards.
It would take just three years for fuel savings to put car buyers back in the black, according to the American Council for an Energy Efficient Economy.
Don, good observations.
There *is* good news. Electric cars are finally beginning, if only beginning, to come into their own. Yes, there’s the hidden cost of recharging via a coal-fired power plant, but work’s being done on that front, too. If power sources such as solar, wind, and geothermal can be worked out on industrial scales, we can move past that.
And though natural gas isn’t perfect, it is better than coal, and some heavyweights — such as T. Boone Pickens — are throwing their support towards vehicles powered by natural gas. A step — well, half a step — in the right direction.
Nuclear makes me a little queasy, even as I readily admit that over the decades we’ve had nuclear power plants, they’ve established an enviable safety record, overall. But I remember meeting a Russian lady at a party whose home was very near Chernobyl, and she and her family just happened to be traveling abroad when it went into meltdown, something my colleague who had invited her later confirmed. She and her family weren’t allowed to go home, for obvious reasons. (Not that they really wanted to, mind you.) Plus, eventually someone has to deal with the waste, unless we find a way to use it, too (and scientists are working frantically on that even as I type).
Air-powered vehicles aren’t making any splash, though apparently they hold tremendous promise. The techno wizards have already worked out the problems with the compression tanks, by replacing the metal ones with carbon fiber ones (or some such), redesigning them so if they get broken in an accident, they split, not explode, etc.
Even on the ordinary fossil fuel front, cars such as the Smart for 2 and Tata are quite fuel efficient.
I personally feel we ought to be paying more attention to mass transportation, expensive though it is. In the case of the U.S., I understand, as an American myself, we’re very much wed to our cars etc. Heck, way back when, one of my favorite pastimes was to hop in the carry on a beautiful weekend afternoon and spend hours driving around exploring “blue highways” and dirt lanes with a carload of buddies. Of course, back in that Stone Age, I could get gas at 14 cents/gallon, considerably cheaper than now, even adjusting for inflation. Besides, I usually borrowed Dad’s VW Beetle!
I’m from Texas, and Texans, like people from a number of other states, strongly believe in two things that are virtually identical: “They’ll take MY gun away when they pry it out of my cold, dead fingers!” — and “They’ll take away MY keys when they pry them from my cold, dead hand!” (Apologies to my fellow Texans who *don’t* feel that way — I know you’re there, but our reputation is spread wide and far. Smile.)
I sure as heck don’t believe building more and more and more highways is the answer; we’ve let the ones we have fall into an unforgivable state. We ought to fix those up first — while we’re building mass transit, both urban and long-distance.
Yes, people are driving more now that oil prices have dropped significantly — but several articles I’ve read say a variety of polls indicate that we’re finally “getting it.” Best of all, apparently people are striding rapidly towards efficiency, particularly at home. Turning off light. Lowering the thermostat on their hot water heaters and lowering the temp at which they wash clothes. Adjusting the aircon up and the heating down. Buying efficient stuff. Unplugging “energy vampires.” And so on.
So, there’s a lot out there that’s encouraging — but we can’t take our eye off the ball.
Last point: what to do about the fossil fuel industry’s employees if we do move away from use of such fuel in a truly big way? I don’t want to see those companies thrown into bankruptcy and their workers into the breadline. Maybe we could help those companies, as a nation, transition to greener activities. That would likely mean more tax money, unless the price of re-tooling and production drops significantly. If I were young enough, I’d likely go back to school and make a huge career change from being a (retired) university English teacher to something like making or installing solar panels/films, windmills, or the like. Maybe the oil workers could be helped do exactly that.
You know, I’ve long been a supporter of going green, though I wasn’t all that vocal about it until I read the interview an Austin paper had with T. Boone Pickens in which he said he was moving into windmills in a big way. I was well aware of the man long before that, and my jaw hit the floor. He was an *oilman,* for pete’s sake — and he’s saying “oil’s dead”??? THAT sure blew my socks off.
Well, okay, I’m probably up to a dime’s worth by now, so I’ll shut up! 
Biofuels run into trouble
– John Kemp is a Reuters columnist. The opinions expressed are his own – Despite a promising start, the U.S. experiment with renewable fuels is facing a serious challenge next year. Falling gasoline consumption, lower pump prices and contradictions within the federal government program are intensifying existing pressures on ethanol distillers and farmers already struggling to cope with over-capacity and collapsing margins.
ETHANOL ENTHUSIASM
Between 2000 and 2007, production of fuel ethanol quadrupled from 1.6 billion to 6.5 billion gallons, and the industry is on course to distill a record 9.3 billion gallons in 2008.
Ethanol production is not really economic at oil prices below about $60-70 per barrel (prices of grains and fats for ethanol conversion and processing costs are too high relative to oil). So the original boost to ethanol came from its use as an oxygenating additive in reformulated gasoline, rather than as fuel in its own right, when a number of states banned the use of MTBE.
As oil prices breached $50 in late 2004 and continued to climb steadily higher over the next four years, ethanol’s properties as a fuel suddenly became more attractive. Blenders began to use ethanol as a cheaper (partial) substitute for conventional oil-derived blendstocks in making gasoline.
Prompted by national security concerns and encouraged by lobbyists for the farm sector, U.S. legislators tried to accelerate the use of ethanol by mandating a minimum ethanol content for all gasoline produced or imported into the United States.
The centerpiece of the government’s intervention is the Renewable Fuel Standard (RFS) which sets a steadily increasing minimum volume of ethanol that must be blended into the nationwide gasoline supply each year.
quote: For $100 the auto Industry can make any vehicle a Flex Fuel Vehicle capable of running on Gasoline or any blend of ethanol..
the flex fuel sensor for a GM costs $500, the larger needed injectors cause worse atomization, and less accurate fuel air mixtures. GM gets away with this because it lets the vechile get %20 worse fuel economy. They trade these MPG costs to other vechiles to stay under the cafe cap.
The only responsible choice in this situation is to start a shift that pulls us away from needing such a high Trust Fund for roads. If Americans drive more than any other country it isn’t likely because they all want to do so. If you could get to the same place equally fast (if not faster because of traffic) and save money doing it on your commutes to work… you would. But the sad fact is, that even in the best cities in America rail and other mass transit is a laughable alternative to driving a car. We have to start somewhere, so a rail system that doesn’t hit a lot of places just yet, I’m all for. When it grows, as long as it maintains good speeds and regular departures, you will see a shift away from the individual propulsion pods we call SUVs.