An Urban's Rural View

As they think about the federal government's debt, some Americans fall back on a familiar analogy: A family can't spend more than it earns, so neither should Uncle Sam. Is the federal budget in deficit? Cut spending until it isn't. Refrain, by all means, from new spending.

You may find that logic convincing, you may not. Either way you should hope Congress will vote to replenish the Highway Trust Fund. To understand why, consider a variation on the analogy.

Imagine a farm family with a crop in the field and harvest looming. Imagine a combine in need of major repairs but little cash on hand to pay for them. Imagine interest rates are low but sure to rise soon. If the choice is between losing the crop or borrowing to repair the machine, why not borrow?

That's the situation Uncle Sam is in with the Highway Trust Fund. He has a major productive asset -- the nation's highways -- in serious need of repair. If the asset isn't fixed, the economy will operate less efficiently and generate less tax revenue. According to the American Society of Civil Engineers, the time and fuel lost to highway congestion costs the economy $101 billion a year (http://tiny.cc/…).

The Department of Transportation says the fund will run out of money by the end of August. Starting August 1 DOT will have to slash its reimbursements of states' road construction and paving projects.

The Obama administration has a plan to solve this problem -- and many others. It would spend $302 billion over four years, boosting overall transportation spending by $150 billion, financed by closing corporate-tax loopholes. Republicans in Congress are, for all the usual reasons, uninterested.

A Democratic senator from Connecticut and a Republican senator from Tennessee have proposed a 12-cent increase in the gasoline tax, which has remained unchanged at 18.4 cents a gallon since 1993. That would raise $164 billion. But neither the administration nor most Congressmen want to risk drivers' wrath.

In the House of Representatives, Republicans have their own plan for replenishing the fund. But as part of it, Saturday mail delivery would end. Unsurprisingly, this plan is going nowhere, either.

So we're at an impasse, with the clock ticking. To summarize, the alternatives are raise taxes, which no politician likes to do; contribute money from general tax revenues, at the risk of increasing the deficit; or do nothing. No clairvoyance is required to figure out which way Congress is leaning.

The deficit is a real issue and Congress should indeed exercise caution when asked to spend. But sooner or later, the potholes in our highways will have to be patched.

When it comes to repairing vital infrastructure, our only options are pay now or pay later. With interest rates low, the logical choice is now.

In the end, the family analogy is too simplistic. It may have validity in general, but there are times when even a family can and should spend more than it earns. This is one of those times for Uncle Sam.

Urban Lehner

urbanity@hotmail.com

(ES)

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