House Should Take Up and Improve Senate Bill

Last night, the Senate passed legislation extending highway funding through December and offsetting the cost with a number of deficit reduction measures. The Senate approach, which is based on an amendment from Senators Tom Carper (D-DE), Bob Corker (R-TN), and Barbara Boxer (D-CA), is far more responsible than the House bill, which relies in large part on a gimmick called pension smoothing. As CRFB President Maya MacGuineas explained in a press release:

What we really need is a long-term highway funding solution, but in the meantime, the least we can do is responsibly pay for temporary bailouts of the Highway Trust Fund. There is no question that the Senate bill is the more responsible of the two highway bills.

Unfortunately, it turns out that the Senate bill's savings fall $2.4 billion short of the general revenue transfer, according to a new CBO score. This deficit is mostly the result of a drafting error which causes its customs fees to raise $2 billion less than intended. The House has rightly objected to this shortfall and also expressed concern with some of the revenue-related provisions in the Senate legislation. Fortunately, the House has the power to correct this error, modify this bill, and work with the Senate to pass a responsible highway funding bill.

Score of Senate-Passed Highway Bill
Policy Ten-Year Savings/Costs (-)
Extension of customs fees $1 billion*
Increased mortgage reporting requirements $2.1 billion
Clarification of 6-year statute of limitations for overstatement of basis $1.3 billion
100% levy on payments to Medicare providers with delinquent tax payments $0.8 billion
Other provisions -$0.5 billion
Transfer from LUST trust fund $1 billion
Total Offsets $5.7 billion
Total Transfer $8.1 billion

Source: CBO
*Intended to raise $3 billion

In our press release – which was written before the error was identified – CRFB argued that “the House should reject efforts to resurrect phony offsets to cover the highway funding shortfall and either pass the Senate bill as written or work with the Senate to identify an alternative package of gimmick-free offsets." This remains true, with the caveat that the House must at least correct the drafting error in the bill.

Fortunately, a large number of options exist to fund this $2 billion shortfall and replace a portion of the offsets which the House views as undesirable. The table below includes some very small options with a high likelihood of achieving bipartisan and bicameral support.

Short-Term Proposals to Fund Highways
Policy Source
Ten-Year Savings
Extend customs fees as intended in Senate HTF bill Senate Finance bill $2 billion
Extend customs fees as in House HTF bill House bill  $2.5 billion
Rescind unused highway earmarks Senate Finance bill $0.1 billion
Allow pre-payment of PBGC premiums Senate UI bill $0.2 billion
Modify reporting of tuition expenses and scholarships on Form 1098-T President's budget $0.5 billion
Reconcile OPM/SSA retroactive disability payments President's budget $0.4 billion
Extend increased aviation security fee from Murray-Ryan through 2024 N/A $1.5 billion
Transfer 10% of the reserves from the airport and airway trust fund into the HTF N/A $1.2 billion
Reform failure to file tax penalties Camp tax draft $0.4 billion
Increase information sharing to administer excise taxes President's budget $0.1 billion
Index tax penalties to inflation President's budget $0.1 billion
Reduce the size of the Strategic Petroleum Reserve by 3% N/A $2 billion
Reform and extend Travel Promotion Surcharge through 2020 House travel bill $0.2 billion
Reform and extend Travel Promotion Surcharge through 2024 N/A $0.5 billion

Source: CBO, JCT

There are a number of responsible approaches to fund a temporary highway patch that do not rely on phony savings as in the House-passed bill (as well as the Finance Committee bill in the Senate). Ultimately, policymakers should abandon the practice of paying for one-time general revenue transfers with ten-years of savings, and instead focus on long-term solutions. As MacGuineas argued:

Once we get through the immediate funding cliff, lawmakers should begin working together on a long-term solution that brings highway spending and revenue in line…There are plenty of options to put the Highway Trust Fund on a more sustainable path. Continuing to jump from crisis to crisis with one patch after another should not be one of them. Once this current stopgap passes, Washington needs to start making some of the tough choices to either fully fund our infrastructure spending, better control its costs, or some combination of the two.