Economy & Business

Corker’s Folly

Sen. Bob Corker (R., Tenn.) (Chip Somodevilla/Getty)
Raise the federal gas tax? Here’s a better idea.

What can Senator Bob Corker be thinking? On his first Sunday-news-show appearance of the year, right at the beginning of a new Republican Senate era, does Corker communicate a new GOP message of growth and reform? Does he talk about business and personal tax reduction that might rejuvenate start-ups, higher wages, and job-creation? Does he talk about rolling back Obamacare or regulations in general? Does he discuss sensible immigration reform, including border security? Free-trade promotion that will help consumers and businesses? Education reform? The Keystone pipeline?

No. His first Republican message is: Raise the federal gasoline tax. He said this on Fox News Sunday and he repeated it on CNBC the next day.

What a great idea. American consumers and businesses finally get a break with plunging oil and gasoline prices. Main Street finally has something to cheer about. And then Mr. Corker weighs in with a wet-blanket proposal to raise federal gasoline and diesel taxes by 12 cents a gallon over two years from the current 18.4 cents.

I have a counter idea for Mr. Corker. Why not lead the way for a complete reform of the Highway Trust Fund (HTF), transportation spending, and the Federal Highway Administration?

Corker can start by going to the history books. There he’ll learn that President Eisenhower’s original version of federal highway funding was to devote money to interstate highways. Not to mass transit or the “Big Bertha” boondoggle in Seattle. Not to the infamous “Big Dig” project in Boston, which finished five times over-budget and nine years behind schedule. Not to a museum honoring the long defunct Packard luxury car. Not to hiking trails on old rail lines in small towns and other exotic, earmarked, boondoggled forms of taxpayer waste. (Hat tip: CNBC producer Jake Novak.) Ike said the money should go to interstate highways.

Next, the good senator can read congressional testimony from the Cato Institute’s Chris Edwards on federal highway transit funding. Edwards has at least a dozen good ideas to reform so-called infrastructure spending.

In particular, Edwards says that if you took the transit-spending portion out of the HTF and placed it with the states and localities where it belongs, the trust fund would actually be in balance. If states like California want to build $100 billion speed trains to nowhere, let them. But people in the rest of the country shouldn’t have to pay for it with gas and diesel taxes.

Think of this: A quarter of HTF spending today is for non-highway purposes. That should be stopped. That was not Ike’s original mission.

Federal redistribution of gas-tax revenues is almost always unfair, with fast-growing states like Texas getting far less than they need. Federal rules like Davis-Bacon raise building costs for state and local infrastructure by at least 20 percent. Federal aid breeds cronyism, political connections, and bureaucratic power in Washington D.C. And Federal aid distorts state and local decision making, especially for local urban transit.

Why should federal-government disbursements of tax money from the 50 states be for local busses, subways, and other forms of urban transit? Actually, there was a time when most of that was privately funded, owned, and operated. And today, there’s actually a lot of local experimentation going on for the privatization of toll roads (Indiana) or public-private partnerships for roads (Texas, Florida, California, and Virginia).

Whatever it is, you can trust that private management will be more efficient than the federal government. And state and local officials and their wasteful programs can be removed more easily than federal legislation that never expires.

And all this talk of infrastructure stimulus for the economy is nonsense. In a piece called “An Autopsy for the Keynesians” in the Wall Street Journal, University of Chicago professor John Cochrane described how the spending multipliers never happened, a forecasted depression didn’t follow the end of WWII spending, and, more recently, the federal spending sequester of 2013 did not lead to the loss of 700,000 jobs, but instead sparked a modest pickup in employment and economic growth. And Cochrane asked these pointed questions of the infrastructure-stimulus advocates:

“Can you bring yourself to say that the Keystone XL pipeline, LNG export terminals, nuclear power plants and dams are infrastructure? Can you bring yourself to mention that the Environmental Protection Agency makes it nearly impossible to build anything in the U.S.?”

No and no.

Senator Corker, I hope you have a moment to read this article. And I hope you can read some of the history surrounding Ike’s interstate highway program, congressional testimony from Chris Edwards, and John Cochrane’s Wall Street Journal op-ed. With that background, perhaps you will become a true government reformer, rather than a high-taxer.

Please Senator Corker, with the new Republican Congress in place, don’t turn the GOP into the dumb party.


Larry Kudlow — Larry Kudlow is CNBC’s senior contributor. His new book is JFK and the Reagan Revolution: A Secret History of American Prosperity, written with Brian Domitrovic.

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