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McDonnell’s Bad Transportation Deal

Virginia governor Bob McDonnell

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What is it with Republicans and transportation bills? The pork-packed 2005 highway bill, which included the infamous Alaskan “Bridge to Nowhere,” was the fiscal low point of the Bush-Hastert years, and now Virginia governor Bob McDonnell has decided that his legacy to the commonwealth will be a gigantic tax increase to fund billions of dollars’ worth of dubious transportation projects. Politics is about tradeoffs and compromise, inevitably, but this is a bad deal on most counts.

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There are two ways to judge the deal Governor McDonnell has cut. For those who take the inerrantist Norquistian view that any tax increase is a bad tax increase, the package is self-incriminating: The statewide sales tax will rise from 5 percent to 5.3 percent, and the state car-titling tax will rise from 3 percent to 4.3 percent. (The more burdensome locally imposed annual personal-property tax on cars is unaffected.) There are some offsetting tax reductions, but the package is a net tax increase. That is enough to inspire categorical rejection in many conservative corners, and we have some sympathy for that view. The more complicated calculation requires evaluating the ability of Virginia’s transportation authorities to translate the new revenue generated by those tax increases into the execution of worthwhile projects that come out on the right side of a cost-benefit analysis. Success in that venture is far from assured — the several hundred billion dollars “invested” in transportation under the 2005 bill has not produced spectacular results.

Governor McDonnell began his term with a series of audits of the operations of the Virginia Department of Transportation, which identified about $1 billion worth of available funding that the agency was not making use of, along with a host of inefficient financial and operational practices. Reforms were made, and Governor McDonnell deserves credit for the action. But the process of executing new public construction projects in Virginia — particularly in the parts of the state contiguous to the District of Columbia — means managing a complex collection of partnerships between state and local players, federal entities such as Amtrak, and D.C.-centered agencies such as the Washington Metropolitan Area Transit Authority, which manages the dysfunctional and money-losing operations of the Metro, the capital area’s commuter-train and subway network. That is a lot of bureaucracy and a great many parochial political interests. Between the plan and the reality lies that undiscovered fiscal country from whose bourn no tax dollar returns.

There are a few sensible measures in the plan. Much of Virginia’s current transportation-revenue trouble comes from the fact that its original gas tax was instituted on a cents-per-gallon basis rather than on a percentage basis. Governor McDonnell’s aides estimate that the Virginia gas tax today is worth less than half of what it was when instituted in 1986, while the price of labor and asphalt has continued to climb. Covering the difference between the declining real value of the retail gasoline tax and growing expenses is in fact the main impetus behind the new program. Replacing the cents-per-gallon retail tax with a percentage on the wholesale side is a reasonable reform. Other measures, notably charging hybrid drivers an extra $100 per year and adding a 6 percent tax to diesel, are bound to be politically unpopular, and don’t make much sense — to punish drivers for choosing more fuel-efficient vehicles is to punish thrift. It would be far better to keep government out of the business of choosing consumers’ cars for them and let the market sort this out.

The McDonnell administration also is giving transportation projects access to general-fund revenues, whereas they previously had been restricted to funds generated by the gasoline tax and other dedicated-purpose taxes. Governor McDonnell claims this as a conservative victory, which it is only if we define that to mean “something Democrats did not want to do.” (Democrats preferred raising dedicated taxes to using general-fund revenue for transportation projects.) Dedicated revenues often amount to little more than accounting fictions, but they can function to constrain spending in the categories they cover. Governor McDonnell’s office says his plan “ensures that transportation will be treated like the core function of government that it is,” but experience teaches that government’s inclination to spend money on such “core functions” is in effect limitless.

Republicans enjoy a majority in the Virginia house, but the state senate is evenly split. In order to secure Democratic support, Governor McDonnell has also agreed to set up a commission to study Medicaid expansion, a policy to which he professes himself adamantly opposed. The governor’s aides argue that the Republican majority in the state house effectively ensures that the commission is a firewall against Medicaid expansion rather than an enabler of it, but majorities are impermanent things. This is the sort of compromise that has a short life expectancy.

Politically, the bill is problematic. Attorney General Ken Cuccinelli, the conservative favorite to replace the outgoing Governor McDonnell, is fiercely opposed to the transportation plan and its tax increases, while his likely Democratic opponent, former Clinton henchman Terry McAuliffe, favors it. Cuccinelli is now put in the position of running against the Republican governor and the Republicans in the state legislature as well as the Democrats. Cuccinelli and McAuliffe are currently in a dead heat in the polls, and he could have used an assist from his party rather than another hurdle. It is harder to gun as a small-government conservative when your party is enacting large tax increases. Cuccinelli might make hay of that by running as an opponent of bipartisan tax-hikers.

Virginia does indeed suffer from serious traffic congestion, particularly in the northern part of the state, where the bloated work force of the ever-expanding federal government lolls in the D.C. suburbs like the world’s most contented occupying force. But the cure for Big Government in Washington is not Big Government in Richmond, and Governor McDonnell should know as much. It is no secret that he is testing the presidential waters for 2016, and we suspect that he felt some pressure to produce a hallmark bill after the failure of some of his better ideas, such as privatizing Virginia’s ridiculous state-run liquor soviet. The resulting legislation must be regarded by conservatives as a black mark on the governor’s résumé. What remains to be seen is not whether this is a bad deal but how bad a deal it is.



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