That might not be a concern if U.S. highways were mostly new, but they're not. The Interstate Highway System was built half a century ago, and as we are seeing in Utah, much of it is worn out and in need of expansion. Think of I-15 in Utah County.
The federal government reported Monday that Americans drove 3.7 percent fewer miles in May than they did in the same month a year ago. Utahns cut their driving 4.4 percent.
As a result, there will be an estimated $5 billion deficit in the Federal Highway Trust Fund next year. Here's the reason: The federal gasoline tax is 18.4 cents per gallon. As motorists drive fewer miles and switch to vehicles that get better gas mileage, they burn fewer gallons of gasoline, which means less federal revenue for building and repairing highways.
The states also are raising less from their own highway taxes. In Utah, where the gasoline tax is 24.5 cents per gallon, receipts are projected to fall $10 million to $20 million short of prior expectations.
At the same time, the price of asphalt, which comes from oil, is accelerating. To stay within budgets, governments are cutting back projects.
So, what can policymakers do to raise more revenues?
Well, they could raise per-gallon federal and state fuel taxes, but that would be political suicide in an election year as consumers fume about the price of gas. In fact, John McCain proposed the opposite, a federal gasoline tax holiday. That would make consumers happier, but it would plunge highway spending even deeper into a pothole.
The tax structure could be changed from a per-gallon levy to a straight sales tax, which would raise more money as the price of fuel increased. But that would be even worse for the economy than a per-gallon tax hike.
There is talk in Congress of giving states more power to charge tolls on existing interstates. That would decouple revenues from gasoline consumption, but in an economic downturn, it, too, would be an additional burden to a recovery.
Our advice: Do nothing, at least for now. Allow the economy to adjust to the oil price shock before tinkering with fuel taxes.
