Recently, Republican members of the U.S. House of Representatives have proposed opening up more federal land and offshore areas to natural resource extraction. Such a move would both increase domestic energy production and raise government revenues through royalty payments. During the current economic slump and resulting fiscal crunch, anything that can increase the quantity of energy supplied and reduce government deficits should be lauded. But what some Republican members of Congress propose to spend these revenues on is far from laudable.
Led by House Speaker John Boehner, some in the Republican caucus wish to pour oil and natural gas lease revenues into the Highway Trust Fund, which has suffered from severe shortfalls for several years now. Right now, a six-year surface transportation reauthorization proposal (“the highway bill,” the previous multi-year reauthorization expired 777 days ago) from House Republicans needs to find an estimated $75-$100 billion in additional revenues in order to fully fund their bill, and proponents of such a funding mechanism argue that this will help close the gap. Many in the free market energy community are also applauding.
However, both groups fail to appreciate the long-run dangers of moving from the current (and longstanding) “user-pays” principle to a “taxpayer-pays” principle. They ought to pay more attention to the concerns of free market transportation scholars, such as the Reason Foundation’s Robert Poole and the Independent Institute’s Gabriel Roth. Since the Interstate program was established in 1956, federal highway spending relied on the “user-pays/user-benefits” principle. The idea was to tax road users (on fuel, tires, etc.) and then use the tax revenues to fund maintenance and capacity enhancements. This makes sense, as one would expect user tax revenue to approximately track user demand. Revenues were deposited into the Highway Trust Fund, which is partially shielded from the highly politicized appropriations battles that take place over most funding. This concept has long enjoyed broad bipartisan support.