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August 4th, 2008

Could Driving Less Cost Drivers More?



One negative aspect has surfaced from Americans’ “drive” to drive less. As high gas prices have forced drivers to cut back on gasoline purchases and drive more fuel efficient vehicles, they have unwittingly accelerated an ongoing drain to federal funding designed to maintain US bridges and highways. The Federal Highway Trust Fund has long relied solely on the federal gas tax to maintain their funding.

According to the Federal Highway Administration, “Americans drove 9.6 billion fewer vehicle-miles traveled (VMT) in May 2008 than in May 2007.” Compared to a year ago, VMT dropped 3.7% in May, and in the first five months of 2008, Americans drove 29.8 billion fewer miles.

Lawmakers must quickly develop a new strategy to bolster a depleting highway trust fund, and raise sufficient federal dollars to support a multitude of future highway projects:

The federal highway trust fund could be in the red by $3.2 billion or more next year. The fund, set to finance about $40 billion in transportation projects next year, is increasingly strained.

Lawmakers from both parties are eager to find a way to fund politically popular transportation projects. But one possible solution — an increase in the gas tax, which was last raised in 1993 — is considered unrealistic in an election year.

A proposal to shift $8 billion from the general fund to the highway trust fund has considerable support in the Senate. But it faces opposition from a number of Republicans who say it would trade one problem for another by deepening the federal budget deficit.

After all the strides drivers have made to put a dent in gas prices, those efforts could be voided if the federal gas tax is raised to maintain highway funding.

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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