Segment 2 Of 2 Previous Hearing Segment(1)
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THE IMPACT ON TRANSPORTATION PROGRAMS OF REDUCING THE FEDERAL FUEL TAX
Tuesday, March 21, 2000
House of Representatives, Committee on Transportation and Infrastructure, Subcommittee on Ground Transportation, Washington, D.C.
The subcommittee met, pursuant to call, at 2:02 p.m. in room 2167, Rayburn House Office Building, Hon. Thomas E. Petri [chairman of the subcommittee] presiding.
Mr. PETRI. I would like to begin by announcing that our full committee chairman, Bud Shuster, has asked me to pass on to all of you his regrets that he could not attend today's hearing, and his appreciation for the testimony of those who will be testifying. He has also asked that a recent dear colleague's white paper on the effects of eliminating the 4.3 cent gas tax be made a part of the record of this hearing. Without objection, that will be done.
We are meeting today to examine proposals to lessen the impact of the recent rise in fuel prices on the transportation sector. Every day we see newspaper or television reports on the rising cost of fuel. There are stories about truckers having to park their trucks because they can't afford to keep them running. Many airlines have already imposed surcharges to reflect the higher costs.
There is also plenty of speculation in the press about how high prices will go before the summer vacation season. Prices of $2 per gallon, which seemed far-fetched just weeks ago, now don't seem to be out of the question. Prices are simply too high and have risen too fast. The United States has been caught flat-footed and its economy is at the mercy of foreign oil suppliers.
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This situation is unacceptable and we must take action. I believe that it would be most productive to look at increasing supply as the short-and long-term solution to the problem. Options that need to be explored include the use of the strategic petroleum reserve, putting pressure on OPEC, and supporting increased domestic production.
One purpose of this hearing will be to examine the effect of repealing the 4.3 cent Federal gas tax that is deposited in the Highway Trust Fund. Unfortunately, there are problems with this approach. As described in the committee's white paper that was released last week, the resulting cuts to the highway and transit programs would be severe. Over $20 billion in Federal assistance to the States for highways would be cancelled and the Federal Transit Program would have to be cut in the next authorization bill. The State of Wisconsin reports to me that such a cut would cause the delay of 330 new projects and 464 miles of highway rehabilitation.
Finally, there is also no guarantee whatsoever that a tax cut will manifest itself in lower prices at the pump. It is much more likely the tax cut will benefit the oil companies or OPEC since they will be under no obligation to pass it along to consumers.
Accordingly, I think it will be more productive to explore increasing oil supplies. Since the current Administration took office, domestic oil production has dropped by 17 percent while consumption has increased by 14 percent. This, coupled with an oil cartel run by countries that are supposed to be allies and that our Nation is supposed to be able to influence seem to me to be real causes of high fuel prices. But we need a complete hearing of the gasoline tax issue.
Today we will hear from a wide variety of witnesses, including members of the Department of Transportation, State and local officials, motorists and truckers, and individuals representing the construction industry. I ask that Members who are not on the subcommittee but that have requested to participate in today's hearing be allowed to do so.
And with that, I yield to the Ranking Democrat on the subcommittee, my colleague from West Virginia, Nick Rahall.
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Mr. RAHALL. Thank you, Mr. Chairman.
I commend you for holding these very timely and important hearings today.
Once again, we find on behalf of the leadership of the Transportation and Infrastructure Committee that we are united on an important issue facing America: this time being against the repeal of 4.3 cents of the Federal motor fuels tax. And if history has any bearing here, Mr. Chairman, when we are united, we will not be denied.
Repealing any section of the Federal motor fuels tax at this time is SSI—simply stupid idea.
[Laughter.]
Mr. RAHALL. If Governor Bush thinks that reducing the price of gasoline or diesel fuel by 4.3 cents per gallon is going to spell relief to consumers, then my friends, he must be campaigning in a place called la-la land, not the United States of America.
In the real world, now, if you clip coupons, 75 cents off on a can of coffee or a dollar off on a box of cereal means real savings. However, reducing the price of gallon by 4.3 cents at the most would save the average consumer anywhere from 50 to 75 cents a week, if—and the biggest if, and in my opinion very doubtful—if, that is, the oil companies don't suck up that savings themselves.
And what do we get in return if we repeal the 4.3 cents? We get a $20.5 billion cut in the Highway Program, we get more potholes, we get higher rates of highway accidents and fatalities, we get the loss of an estimated 840,000 jobs, and we get the mass transit account going broke by 2003.
Think about it. Local bus companies grounding to a halt, light rail trains standing silent on their tracks. Major cities would be thrown into chaos and many people in smaller communities would rediscover the thrill of walking miles to work in the dead of winter.
Jimmy Carter was right: an energy crisis is the moral equivalent of a war. But the problem we have had in this country is that every time one occurs, we skitter about looking for solutions. And then we forget the whole thing when oil prices go down. During the Arab oil embargo and the Iranian oil crisis of the 1970's under President Carter, we created the Synthetic Fuels Corporation and all types of programs aimed at energy self-sufficiency. When oil prices dropped, public support waned and then the Reagan Administration, along with Congress, abolished most of these incentives.
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The last oil crisis we had was in the early 1990's. Congress responded with this: the Energy Policy Act of 1992. This is the conference report, all 443 pages of it. Has it made one bit of difference? Has it made one bit of difference? Are we less dependent today on imported oil than we were in 1992? No, obviously not. Again, when oil prices dropped, many programs in the 1992 law simply were not funded and these initiatives were simply forgotten. So we continue to go through this boom-and-bust cycle in energy policy and it simply has got to stop.
When we select a course of action to address the real problem—that of supply and dependence on foreign sources for oil—then we must stick to it, stick to it through the good times as well as the bad.
In conclusion, Mr. Chairman, we are all very much aware that the independent truckers have been hit especially hard by the increase in diesel fuel prices. They are going out of business, and this should concern us all. We are losing competition in the transportation industry, certainly in the railroad area. And with the loss of the independents, it can indeed happen in trucking as well.
In response, some of the independent truckers have a proposal involving a fuel surcharge. It may be their only lifeline, and I certainly think it is worthy of this committee's consideration.
Again, I thank you, Mr. Chairman. I know perhaps I am preaching to the choir of witnesses we will have today—or maybe they will be preaching to the choir here—but I see that most of them are in support of our position.
Thank you.
Mr. PETRI. Thank you.
And as I indicated earlier, a statement by the Chairman of the full committee, Mr. Shuster who wanted to be here but has been delayed will be made a part of the record.
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Mr. Oberstar?
Mr. OBERSTAR. Thank you very much, Mr. Chairman.
I want to begin by complimenting you and Chairman Shuster for initiating this hearing, but especially for standing up against powerful forces in your own party who wanted to repeal the 4.3 cent per gallon fuel gallon, and to whom you said, ''That makes no sense.''
It is not going to help the consumer. It is not going to deal with supply. It will not help the Nation's infrastructure. It will have a devastating impact on jobs and investments. And I admire the way you have handled it, demonstrated once again the qualities of leadership that are essential in this body.
This is not and should not be a partisan issue. The 4.3 cents was initiated in the Clinton Administration. Before that, there was 5 cent tax increase in the Bush Administration in 1990. Those taxes all now go into the Highway Trust Fund and repealing that tax—or any part of it—frankly won't make a dime's worth of difference at the pump.
We have seen this over and over again. We try some tax fix and the money only gets pocketed someplace else. The aviation tax was suspended for a while about a year and a half or 2 years ago and the airlines simply pocketed the money and the ticket prices stayed the same.
Well, if you do the 4.3 cent repeal, we will cut $20.5 billion out of TEA–21 over the next 4 years. Worse, it will have a triggering effect—automatic negative effect—on transit. Without a say by the Congress, mass transit receipts will go down $1.5 billion annually, and that will trigger the Byrd Amendment, and that will mean automatic reductions in the transit account.
In addition, we just passed last week the aviation bill under Chairman Shuster's dynamic leadership. The 4.3 cent fuel tax on surface transportation will undermine what we just accomplished in aviation. If the repeal were to go through, we would need an additional $700 million a year from the general fund for Air 21. And it is quite likely, in that situation, that all that we worked out would mean that Air 21 would not be fully funded.
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And that would all take us back to the underfunding of infrastructure in the 1970's and 1980's when infrastructure investment went down by over 50 percent all across America. We have just begun to correct the imbalance. On average, with the dedicated revenue stream, you have a highway construction zone every 30 miles and 3 million jobs in the construction sector.
The best way to deal with the price crunch, is to increase supply, or maybe to somehow reduce demand. I was just listening to our colleague, Congressman Stenholm, who represents both the cotton patch and the oil patch, who said, ''Last year at this time, when the small drillers and explorers in the oil patch were hurting with low crude oil prices and everyone else was enjoying $1 per gallon or lower gas prices, there was no one out there saying that we should help the poor small drillers and explorers to bring in more production. And no one is saying that this year, either, because a lot of those folks are out of business and they aren't out there bringing more production into the marketplace.''
What we should do, though, is get a message across to our colleagues on the Appropriations Committee, to stop overriding TEA–21 and fully fund the Clean Fuels Bus Program. TEA–21 provided $1 billion for the Clean Fuels Formula Grant Program for transit busses. I think it was a visionary effort to affect both the supply side and the demand side of the equation.
Increasing the supplyside of alternative fuels and technology would reduce the demand side for conventional diesel busses and enhance livability of urban communities. Tokyo has over half of its automobiles and more than two-thirds of its busses on clean fuels—propane and compressed natural gas.
If the Appropriations Committee would simply follow the formula that we wrote in TEA–21, instead of overriding the mandate, and not earmark every last dollar for special projects of their own, we would have a good start on alternative fuel technologies and a resolution to this problem.
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I look forward to the ideas that will be set forth in the hearing this morning.
I thank you again, Mr. Chairman.
Mr. PETRI. Thank you.
Mr. Terry?
Mr. TERRY. Thank you, Mr. Chairman.
I have a full statement that I would like to enter for the record, but I would like to say that I appreciate that you're holding this hearing. There have been a variety of options put forth, including repealing the excise tax of 4.3 cents. And I truly believe that this is not a 4.3 cent problem. We are talking about 70 or 80 cent problem. And it is supply and demand.
What we have to focus on are policies that will increase the supply. And also ask questions like, Why has domestic production so significantly decreased over the last 7 or 8 years? Our reliance on imports has greatly increased, up to 56 percent and might go as high as 65 percent if we don't adopt different policies and procedures and habits.
So while we focus on an excise tax, I hope we can expand past and look at some of the Government policies that have made it difficult for domestic production and look at ways we can enhance domestic production and reduce our reliance on OPEC, Russia, and other countries for our oil. The impetus of today's hearing is to look at the effects on transportation, the trucking industry, and the independent truckers. But it is all trucking. It is all transportation. And those costs are going to be transferred to the consumer. It is inflationary, it will greatly impact our economy, and we need to focus on it now so we can stop it now.
So I appreciate the opportunity, Mr. Chairman, that we can legitimately discuss the real issues that are affecting American consumers today.
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Mr. PETRI. Thank you.
Are there any other opening statements?
Mr. Cummings?
Mr. CUMMINGS. Thank you very much, Mr. Chairman.
I, too, join the chorus in thanking you for holding this hearing.
The cost of crude oil has reached $30 per barrel, the highest level since the Gulf War. And constituents are paying as much as $2 per gallon for home heating oil and diesel fuel, nearly double the cost a year ago. Alarmingly, gasoline prices could top $1.80 by the summer. In the past couple of months, my office was inundated with calls from constituents and homeowners regarding these increased costs.
This has also become a serious issue from commuters in the Baltimore-Washington region and has affected travel and commerce along the entire eastern seaboard.
My constituents have received some relief since the President released $300 million in emergency heat funding. The President also proposed an additional $600 million in emergency funds to help families with slightly higher incomes, which was approved by the Appropriations Committee. Calls have been made for the President to release oil from the strategic petroleum reserve. Some believe that a small release could immediately stabilize prices and convince OPEC ministers to increase production. Others contend that a repeal of the 4.3 cent gas tax would reach that goal.
As we debate these issues, our constituents are still paying the price, and even facing bankruptcy. I don't believe that repealing the 4.3 cent gas tax will fix the problem. We cannot guarantee that the reduced price will be passed on to consumers and our State aviation and transit and safety programs will suffer greatly through the remainder of TEA–21.
We must find a solution to this problem. America's people are suffering.
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I look forward to hearing from today's witnesses and hope that we can work together to mitigate this crisis.
Thank you, Mr. Chairman.
Mr. PETRI. Thank you.
Mr. Metcalf?
Mr. METCALF. Thank you, Mr. Chairman.
I appreciate you holding this hearing. I don't believe lowering the fuel tax will help in any significant way. In 1995, Congress, with the full support of the current Administration, voted to change the law and allow companies to export oil from Alaska's north slope. At the time, I believed that lifting the ban was a mistake, that it would raise gasoline prices on the west coast, and I said so on the Floor of the House. Now with fuel prices approaching $2 per gallon on the west coast, I have unfortunately been proven correct.
Refineries on the west coast depend on north slope oil for much of their production. A single company—British Petroleum, BP—controls an overwhelming share of the oil. In a recent complaint, the Federal Trade Commission alleges that BP manipulates the price of oil prices on the west coast by exporting to Asia. When the ban on north slope oil was lifted, Americans were told that the action would benefit the oil industry and the American consumer. But north slope oil exports have only benefitted one company and have contributed to the tremendous fuel price increases experienced by west coast consumers.
I don't believe the United States should export any oil when we must import oil for our Nation's use.
Thank you, Mr. Chairman.
Mr. PETRI. Thank you.
Mr. Pascrell?
Mr. PASCRELL. Thank you, Mr. Chairman.
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Mr. Chairman, this has been an eye-opener for many Americans, depending on where you live. It would seem to me, after examining and reading as much as we are privy to, and meeting with the Secretary of Energy—which in itself was an eye-opener for me—and to find out that perhaps all of us were asleep at the switch, rather than finger pointing we need to move on and find some solutions.
I don't accept the idea in the proposal to repeal the fuel tax. And I say that for these reasons.
First, there is no guarantee that prices at the pump would fall if the tax were cut. Ranking Member Oberstar brought out the example of reducing one tax a few years ago. And the Federal tax is not imposed at the pump in the first place. So the reduced tax could simply be kept by those supplying the fuel.
We can debate as to how much of a savings this will be. In everything that I have read—and I will stand corrected—it isn't much. What will be lost is much. Some States have laws which automatically increase the State tax if the Federal tax is reduced.
Since the revenue from this tax is used for infrastructure and transportation safety programs, cutting it would reduce Federal support for these programs. The Transit Program would face similar devastating cuts. And think of the densely populated areas of this Nation and what this would mean where we count tremendously on mass transportation.
Mr. Chairman, I believe that public safety would be compromised. There are about 12,000 highway deaths per year and they are due to unsafe highway conditions. There are many projects within the Program that deal with those safety problems. We have dealt with it. We have tried to expand and to grow incrementally in addressing these safety problems.
And I believe specifically that if we follow through on this proposal—which was a knee-jerk proposal—if all of these things I have just said are accurate, this was a knee-jerk proposal. And I know we are in the business down here of trying to out-tax-cut each other, but the American people have caught up to us and are not so sure that that is always the solution to the problem.
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There are proposals to increase supply. There is no doubt about that. And we can debate the issue of the reserve. One thing we need to do—which was recommended in 1998—is that we have a reserve which we didn't have before. And we create that reserve for home heating oil. I think that that is—if nothing else comes out of these hearings, I think that is something that we can focus on because that has brought a lot of suffering, particularly in the northeast.
In the northeast, 36 percent of our homes are heated with home heating oil. In New Jersey, the market price for home heating oil has been as high as $2.24 per gallon. And while I'm at it, there have been calls for—and we spoke to the Secretary of Energy just 2 weeks ago—there needs to be a far-ranging investigation into two things: price fixing, and possible anti-competitive behavior. This is serious business. In the northeast, where three-quarters of the fuel does not come from the OPEC nations—they're handy to point a finger at, they've provided a target. But we need to take a look at what is happening in our own States that produce this oil, and we need to do it right now.
Now, we haven't heard anything about this, Mr. Chairman. We haven't heard anything from the Attorney General's Office. We have simply speculation. But I personally believe that in a country where if you put a chicken under your coat when you're poor you may go to jail, we in the Congress need to take a very serious look at what has happened over the past 3 months with the price of fuel, and let the chips fall where they may.
I believe it starts here with our committee.
Thank you, Mr. Chairman.
Mr. PETRI. Thank you.
Who else would like to make an opening statement? Is there anyone else?
Mr. Blumenauer?
Mr. BLUMENAUER. Thank you, Mr. Chairman.
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In my State, we have been facing some of the highest gasoline prices in the country for months. And we have had energetic conversations back home. But I could not agree more with the sentiments that have been expressed around the dais already that somehow focusing on the Federal gasoline tax, and rushing for a reduction is simply the wrong way to go. There is no clear evidence at all that this would benefit the consumer. It would in fact erode support for important transportation infrastructure and alternative transportation systems, which in the long run can provide benefits, including less reliance on imported oil and giving people more transportation choices.
We do have at work the market forces, supply and demand. It's appropriate for us to look at whether there is any interference in those market forces. But I hope that this committee, in our work, will be able to help provide at least some perspective, because inflation-adjusted gasoline prices are in fact a quarter less than they were in 1981.
We might have an opportunity in this committee to discuss what a comprehensive energy policy should be. Perhaps we could raise the question about the reasons and impacts of people who insist on purchasing huge, gas-guzzling vehicles that get less than 10 miles per gallon and the inability of this country to promote energy-efficient standards that were such a great idea when some of us were struggling with reliance on imported oil and gasoline shortages, as well as high prices, a couple of decades ago. We sort of turn our backs and then we wonder when some of the efforts of supply and demand may come into play.
This might have some self-correcting benefits where maybe some people would be a little more rational about how they view energy and gasoline consumption, and the costs and consequences of the way we organize our communities and how we travel.
I hope that this committee will provide some perspective so that we don't embark—either on the administrative level or congressionally—on a path that will have absolutely no impact on things like heating oil prices or gasoline prices, and may in the long-run make it worse.
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I know under your careful leadership, Mr. Chairman, that of our Ranking Member, and our crack staff that we will be able to bring this into proper perspective.
Mr. PETRI. Thank you.
Any other opening statements.
Mr. Borski, did you have one?
Mr. BORSKI. Thank you very much, Mr. Chairman.
I want to thank you and Mr. Rahall for holding this very important hearing.
In 1993, Congress approved the 4.3 cent per gallon increase in the fuel tax. Now as a result of rising fuel prices there is a movement by some to repeal the 4.3 cent gas tax. Proponents of repealing the tax state that it is necessary to reduce the price at the pump and to counteract the strangle hold on oil by OPEC. This is misleading and it is a hasty attempt to solve the problem of high fuel prices that most of us encounter.
I suggest that the one thing we do not do is repeal this gas tax. The fuel tax has no effect on rising gas prices. The basic factors that determine the price of gasoline are supply and demand. OPEC nations have reduced oil production, which has constricted supply, resulting in higher prices for consumers. Reducing or eliminating this tax will have no effect on supply, and subsequently no effect on prices. Additionally, there is no guarantee that repealing the 4.3 cent gas tax would reduce the prices at the pump, because the tax is collected after the fuel leaves the refinery. It is not imposed at the pump.
There is no way to mandate that those supplying the fuel pass along the savings. Oil companies are free to set their prices regardless of the Federal and State gas taxes. Therefore, while consumers will probably not realize any benefit from the 4.3 cent tax being repealed, State highway and transit funding will lose over $7 billion annually.
Even if the reduction in the gas tax resulted in a drop of prices at the pump, the savings to consumers would only amount to less than $1 a week. The amount saved by motorists would be trivial compared to the potentially devastating effect the gas tax reduction would have on the economy, the States, and on our Nation's transportation infrastructure.
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The Transportation Equity Act for the 21st Century, which originated in this subcommittee and passed Congress with tremendous support in 1998 directly link the Highway Trust Fund revenues to State funding allocations. One of the greatest Achievements of TEA–21 is to promise the States predictable funding levels for State highway and transit programs.
States like Pennsylvania have responded to TEA–21 by creating long-term transportation plans. These plans would be severely hampered if the 4.3 cent gas tax is repealed. Transit programs, which have received generous support through TEA–21, would be confronted with severe cuts in funding. We would not be able to continue to fund mass transit programs at their current levels after TEA–21 expires in 2003 and the Highway Trust Fund's Mass Transit Account would be depleted.
The Philadelphia area public transit system, SEPTA, has benefitted greatly from TEA–21. It operates in a heavily transit-dependent region, serving thousands of Philadelphia area residents who do not even own automobiles. It depends on Federal assistance to modernize its multimodal facilities. Currently, they receive $140 million and a reduction in the gas tax would result in a 30 percent cut in funding from the Federal Government if the tax is not replaced with money from the general fund.
Repealing the tax would render it impossible to develop new starts, like the Schuylkill Valley Metro Project. This initiative would link Philadelphia to its western and northern suburbs, uniting the Philadelphia region. And it would enhance transit operations for those coming off welfare and trying to reach suburban jobs. The loss of Federal funding would also force SEPTA to slow down progress on projects under construction, like the Frankford Transportation Center, which is located in my district, or even scale back the project to fit available funding. The effect of repealing the 4.3 cent tax would also mean that the Welfare to Work Program would be in grave jeopardy.
It is clear that a reduction in the fuel tax would result in a reduction in transit funding. Any interruption to service has a profound impact on my constituents in the Philadelphia region. It is important that transit entities like SEPTA continue to receive funding to meet the transportation needs of their regions.
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In addition, repealing the 4.3 cent per gallon fuel tax would result in a staggering loss of highway funds to the States in the next few years. If this tax were to be repealed, according to the DOT, the Highway Program would be cut by $20.5 billion through fiscal year 2003. And in my own State, the Commonwealth of Pennsylvania, we stand to lose over $900 million.
This economy is still strong, Mr. Chairman, in its 8th year of expansion. Repealing this 4.3 tax could have a catastrophic effect on the economy. The Department of Transportation reported that $1 billion of highway spending supports 42,000 jobs. Loss of funding for highway construction and other infrastructure improvements, which would result from repealing the 4.3 cents, would lead to an average loss of approximately 840,000 jobs over 2 years.
Mr. Chairman, we must not set a precedent of reacting to market forces by stifling the funds that we use to reinvest in our Nation. We must do everything we can to provide relief to consumers while continuing to protect transportation infrastructure for all.
Thank you, Mr. Chairman
Mr. PETRI. Thank you.
Mr. Clement?
Mr. CLEMENT. Thank you, Mr. Chairman.
This hearing is very, very important. I think all of us know the importance and significance of rebuilding America. We must rebuild our infrastructure. Our transportation needs are great. The United States of America is a strong country. We have a lot to be proud of. We want jobs for our people, not only more jobs but better jobs for our people.
This committee—the Transportation Committee—has a real responsibility to make sure that we continue to move forward in the 21st century and do what is necessary to provide for the transportation needs people are crying for today.
Being from Tennessee, we are suffering from traffic gridlock, traffic congestion, and we want relief. We don't want to back up from our commitments, obligations, and promises that we made to the American people. Yes, my people—just like the people all over this country—want lower gas prices. I am one that has already encouraged the Administration as well as the Secretary of Energy to do everything they possibly can to bring these gas prices down. As you all know, there is going to be an OPEC meeting next week. I suspect we are going to have some relief there—probably not immediate relief—but I would like to think that we are going to keep bringing those gas prices down.
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We had the truckers here just this past week marching on Washington, D.C., and I cannot blame them at all because a lot of them are going out of business if they can't get some relief because of these high gas prices.
But I know also that the people of America are expecting the Transportation and Infrastructure Committee to show some real leadership and some real courage and to demonstrate to America: yes, we have made some commitments; yes, we have made some promises; and we are going to keep those commitments and promises in the future.
Thank you, Mr. Chairman.
Mr. PETRI. Thank you.
Any other opening statements?
Mr. Baldacci?
Mr. BALDACCI. Thank you very much, Mr. Chairman.
Thank you for allowing me to sit in as a member of the Transportation Committee on the Surface Transportation Subcommittee.
I want to commend you also for having this hearing and for raising this issue.
Maine is particularly unique, where we do not have mass transit we are dependent upon being able to move goods and to be able to move people to work and home on the roads. Little rail infrastructure artists. And 95 percent of the truck traffic is on the roads.
A year ago, the national average price of diesel fuel was 96 cents per gallon. Today, it is over $1.48, a 47 to 50 percent increase in one year. And over the course of a week in January, the price leaped from $1.31 to $1.41 per gallon, a staggering increase of 8.5 percent.
Farmers in Aroostook County could not move their products to market because of the inability and cost was prohibitive in going north, and potatoes were stuck in storage and jeopardized of being lost because of the travel expenses.
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I also recognize, Mr. Chairman and members of the committee, that these funds are directly tied to highway and bridge improvements and safety needs and economic development that is being depended on throughout the country. But I also think it's important that if there is some way that we can make sure that there is some general tax relief—not for particular groups or organizations, but across the board—so that we could cover loggers and farmers and fishermen. We could cover small business people, truckers. So that we would be able to make sure that across the board there was some tax relief from the general fund in recognition for the expense and the spike in the prices.
At the same time, I join my colleague and other colleagues from New Jersey and throughout the country who are looking into prices and working with the Federal Trade Commission to make sure they're working with the nine State Attorneys General to investigate the recent spike that took place, and I believe—and many other colleagues believe the manipulation of the oil supply, increased demand and, therefore, raised the prices.
I think Americans have gone through this suffering and they've been hurt. They're expecting their elected leadership to look into it and to make sure that that information is brought to them. I am hopeful that the President and his leadership in what he has been proposing, along with the work of the Secretary of Energy, will bring relief to the people before we start the summer tourist season.
I have to believe that as we go down this road we also have to look at conservation and weatherization. There was leadership in Congress that delayed the review of the fuel efficiency standards that would have increased the mileage that automobiles received when they were travelling around. There was leadership in Congress that cut and gut the weatherization budget.
75 percent of the northeast is dependent upon home heating oil. Because of a cold snap and low supplies, we were forced to then divert from home heating oil to gasoline supplies, which created a gasoline shortage. Mr. Chairman and members of the committee, we must have a more coherent, comprehensive energy policy in this country. It must be done on a bipartisan basis in Congress to show the American public that we will not be going through this in the future.
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I commend the President for the heating oil reserve in the northeast because it is going to be an insurance policy and a buffer against this problem happening again. The less supply, the more ripples it's going to have in gasoline production. Also, we should be able to offer tax credits to the small well producers who have had their wells capped in the southeast so that they can bring that production back on line.
Mr. Chairman and members of the committee, we must approach this multi-faceted, complex issue in a way which will show the American public it's not going to happen again. We are not going to be held hostage by OPEC or anybody else. We are going to take steps in this country to ensure that this country has the resources that it needs in order to continue enjoying the prosperity and enjoying the abilities to get back and forth and to be able to take care of their families, whether it is to get into a station wagon on the weekend or be able to make sure that they get back and forth to work. Every region of parts of this country needs to be able to make sure that they have the proper inventory levels.
I appreciate the opportunity for this hearing and to participate in this hearing, and look forward to working with this committee and other members as we move forward.
Thank you very much, Mr. Chairman.
Mr. PETRI. Thank you.
Are there other opening statements?
Mr. LaTourette?
Mr. LATOURETTE. Thank you, Mr. Chairman.
In the interest of expediency, I would ask unanimous consent to submit my opening statement.
Mr. PETRI. Without objection, your prepared statement will appear in the record.
Mr. LATOURETTE. Also, comments made by Gordon Proctor, the director of the Ohio Department of Transportation, who shares my view that any attempt to repeal the Federal fuel tax is misguided, penny wise and pound foolish. The estimated savings is $26 per motorist versus the $237 million it would cost Ohio on an annualized basis. Compare that with the $21.5 billion it would cost motorists in broken cars, tires, and other repairs, it is a silly idea. I hope—and I am certain with all the brainpower in this Congress—we can find a better way to deal with this crisis.
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I yield back my time.
Mr. PETRI. The gentleman yields back.
Are there other opening statements?
[No response.]
Mr. PETRI. We have 47 members of this subcommittee. If each had spoken for 55 minutes, it would have been 3 or 4 hours. We took 45 minutes to get through opening statements. That's pretty good.
I would like to welcome our first witness, representing the Administration, Hon. Peter Basso, Assistant Secretary for Budget and Programs and Chief Financial Officer of the United States Department of Transportation.
As you know, your full statement will be made a part of the record and we look forward to your 5-minute summary.
TESTIMONY OF HON. PETER J. BASSO, ASSISTANT SECRETARY FOR BUDGET AND PROGRAMS AND CHIEF FINANCIAL OFFICER, U.S. DEPARTMENT OF TRANSPORTATION
Mr. BASSO. Thank you very much, Mr. Chairman. I will certainly summarize my statement.
Let me first thank you and the committee for holding this very important hearing. I would like to begin by giving you a brief history of the fuel taxes concerning the Federal-Aid Highway Program.
In the 1956 Highway Act, which established the Highway Trust Fund as the mechanism for financing expanded highway programs, it was funded by motor fuel taxes for highway use purposes. From 1956 until today, Congress has addressed fuel taxes no less than 10 times. Twice in that history—first in 1990 and then in 1993—Congress increased the fuel tax for deficit reduction purposes.
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In both of these instances, including the 4.3 cents under discussion today, after the purpose for which the tax was enacted was fulfilled, the tax receipts were redirected to the Highway Trust Fund in recognition of the infrastructure needs of this country.
I want to emphasize that the user taxes deposited in the Highway Trust Fund were enacted for a very explicit reason: to meet the growing needs of highway and transit systems in this Nation. By many indications, the investments made by these funds were a success. The pavement condition and the condition of bridges on the National Highway System have been steadily improving. Transit ridership has reached a 35-year high with annual passenger miles increasing by 15 percent from 1993 to 1998.
As can be seen from the graph to my left, a 4.3 cent per gallon decrease in tax would decrease revenue to the Highway Trust Fund by $1.4 billion in the current fiscal year, and by $7 billion each of the fiscal years 2001 through 2005. If that were to occur, the revenue loss would in fact total $39 billion for that period of time. That lost revenue will adversely impact the solvency of the Highway Trust Fund and the Trust Fund's ability to meet its commitments as required under the Byrd Solvency Test.
The Highway Account would in fact fail the Byrd Test in fiscal years 2001 and 2002. That test requires that unpaid commitments the end of the fiscal year must be less than the sum of the current cash balances plus 2 years of revenue. That test would require that we reduce by almost $2.8 billion the apportionments to the States in fiscal year 2001 and another $1.8 billion in fiscal year 2002.
In addition, the States would lose both Federal obligational and contract authority due to the revenue-aligned budget authority calculation.
TEA–21 included the RABA provision to more closely align highway spending receipts into the highway account. Using current receipt estimates for fiscal years 2002 and 2003, States would lose—as members of the committee have said—almost $21 billion in obligational and contract authority. The graph to my left, again, depicts current estimates in the blue line of where that obligational authority would go, and the red line shows what the condition would be under this repeal proposal.
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The reduced program size would be felt by every State. I will mention a few examples. California would lose $1.8 billion. Texas would lose $1.4 billion. Pennsylvania would lose $930 million. Wisconsin would lose $370 million. Florida would lose $900 million. These are very significant numbers.
Increase highway investment by all levels of Government positively affects the systems and operational performance. If such investment is reduced, the system's condition and performance would be expected to decline and highway user costs increase as well as travel time.
Another area: highway safety. Federal motor carriers safety operations and research would be reduced by one-third, in essence returning to just below the funding levels enacted in the new Motor Carrier Safety Legislation that came about this about year. Grants to the States to expand enforcement would likewise be reduced dramatically.
Let me not overlook mass transit. The Mass Transit Account would run short of cash in 2004 so that the next reauthorization could only support about $3.9 billion in trust fund programs, a 30 percent reduction from the TEA–21 levels.
Again, as mentioned, 79 cents a week, Mr. Chairman, would be made available to every household in exchange for the dramatic reductions in infrastructure investment that I've already outlined. Assuming States and localities don't make up that difference—and I don't have any reason to believe they would—we would see levels returning to that which we saw in the first year of the ISTEA Program, a dramatic reduction.
Let me just mention two other things and then I will conclude.
It has already been mentioned concerning the 42,000 jobs per $1 billion of funding supported through this program. We could stand to lose 265,000 jobs if this proposal were enacted. We stand to lose 53,000 jobs in the transit programs.
Let me conclude, Mr. Chairman, by saying that it is extremely important—as not only I am testifying today, but many other voices have raised—that we maintain the appropriate levels of funding for infrastructure investment to carry out the provisions of TEA–21 and assure that we put America on the right course for the 21st century.
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Thank you.
Mr. PETRI. Thank you, Mr. Basso.
Mr. Rahall?
Mr. RAHALL. Thank you, Mr. Chairman.
Mr. Basso, once again you've come before this subcommittee well-prepared with an array of detailed facts, representing truth, justice, and the American way, and I certainly congratulate you and the Transportation Department on the excellent information you have given us.
Your testimony indicates that repealing the 4.3 cents might save the American consumer 79 cents a week. But your testimony later put that figure at more of 50 cents. But either one, it's not even the price of a Big Mac. As a matter of fact, this is what you can get for that savings, right here, this pack of chewing gum.
My question to you is very simple. What is the Administration's position on a proposal to repeal the 4.3 cents?
Mr. BASSO. Mr. Rahall, let me just mention on that question that many voices have been raised concerning what should be done about the 4.3 cents. The independent truckers spoke to me last week. They described it as burning the furniture in the house. Another way of looking at that is all the testimony I have presented today suggests that the impacts are extraordinarily draconian across the country, and the Administration is clearly deeply concerned about this issue.
Mr. RAHALL. Deeply concerned? That's the Administration's position on repealing the 4.3?
Mr. BASSO. The Administration really sees a lot of factual issues with this, a lot of factual problems. Clearly, we are in much the same position as those who have represented information that suggests that we have a critical problem if we get into that area.
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Mr. RAHALL. Have we gone in this country from an Administration supporting a chicken in every pot, to one that is now in favor of a pack of chewing gum in every pocket or purse?
Mr. BASSO. I can tell you—the chicken I wasn't around for, but the chewing gum—I think we're not there yet.
Mr. RAHALL. Thank you.
Thank you, Mr. Chairman.
Mr. PETRI. Thank you.
Mr. Coble?
Mr. COBLE. Thank you, Mr. Chairman.
It's good to have you with us today, Mr. Secretary.
Mr. BASSO. Thank you, sir.
Mr. COBLE. I am going to sermonize for a minute.
I am getting tired—it's not your fault and it's not my fault—but I am getting tired of our having to cow-tow to OPEC nations whom we bail out from time to time. I am not averse to our having gone to Kuwait's aid. I think we should have. But it seems to me a lot of those OPEC nations forget that they have a pretty good friend in America. That hangs in my crawl really worse than the price at the pump.
If you have an answer to assuage my concern there, Mr. Secretary, I will be glad to listen to you on that one.
But I heard an economist speak recently, Mr. Chairman and fellow members, and he said—and I don't have the notes exactly—but he said that the cost of gasoline is about on par with the cost of other goods that Americans buy, based upon inflation having been injected into the equation, say 25 years ago. If you bought a tie or a suit of clothes 25 years ago, he says we're paying about the same comparative price for that suit or tie today as we are for a gallon of gasoline.
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I haven't checked behind him, Mr. Secretary. Is he on the money?
Mr. BASSO. Congressman, in terms of that kind of economic explanation, he's probably on the money. In fact, if he went back to 1980 and compared some of the prices and do that kind of comparison, he would probably see in terms of current dollars that gasoline at the pump is actually lower. But I must add, sir, that the issue is really what the committee has before it. That 4.3 cents provides for infrastructure investment in a very meaningful way, and that is really critically important to the Nation. I would want to add that.
Mr. COBLE. And I didn't mean to get off the 4.3, but the OPEC deal is gnawing at me particularly.
And I will admit, Mr. Chairman and fellow members, we in this country are spoiled. All you have to do is travel internationally—Germany, here, there, and yonder—and people can't believe what we're paying at the tank here compared to what they are paying over yonder, as my grandmother used to say.
Do you have any encouraging words for me, Mr. Secretary, concerning my first point—which also doesn't address the 4.3—our relationship with OPEC moguls?
Mr. BASSO. Let me just observe. I know Administration officials will be meeting, I believe, on Monday with OPEC nations to clearly try to address what we consider to be a major concern, the current rise in the gas and oil prices. Certainly the President in his radio address Saturday addressed several measures to try to mitigate this problem—not only the gasoline prices, but the heating oil issues, and other things. So I would say the Administration is clearly trying to squarely address this with the OPEC nations.
Mr. COBLE. Thank you, Mr. Secretary.
Thank you, Mr. Chairman.
Mr. PETRI. Mr. Oberstar?
Mr. OBERSTAR. Thank you, Mr. Chairman.
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Jack, thanks very much for your testimony. I regret I had to be out for a good part of it meeting with constituents, but I did read your presentation prior.
I just want to ask you again about this Clean Fuels Bus Program. We do have an opportunity to make a dent in both demand and supply by vigorously implementing this, and I just wonder what the Administration has done within the context of the appropriations process to slow down this earmarking. This is just devastating.
Mr. BASSO. Yes, sir.
Let me first comment overall on earmarking just for a moment.
We saw this time around on the TEA–21 programs 90 percent of the discretionary money we had earmarked. Clean Fuel Busses—we have consistently supported that and other kinds of alternative energy sources to try to move forward. What we have seen is that the way things have been earmarked have really precluded us from moving forward on that program. In the fiscal year 2001 budget we are trying to vigorously where we have gone before. We will vigorously defend that money and try to make this program go forward.
I think we would all agree that this is a very, very important program to being able to address some of our energy considerations, and our environmental considerations as well.
Mr. OBERSTAR. Thank you.
Thank you, Mr. Chairman.
Mr. PETRI. Thank you.
Mr. Hutchinson, any questions?
Mr. HUTCHINSON. I just want to thank you, Mr. Chairman, for allowing me to participate in this. I am not on this subcommittee, but this is an interest of vital concern. I agree with the assistant secretary in his analysis and need for this 4.3 cents for road construction, particularly in my district. But I did have a call from a trucker before I came here today who indicated he was going belly-up, joining a host of others who have met that fate because of the unanticipated rise in fuel costs. I do hope that we can take some action that would be helpful.
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I share Mr. Coble's concern about OPEC. I think we need to look at ways that we can increase our leverage on that cartel to protect our truckers, consumers, and farmers.
I just want to thank you for your comments.
Mr. Chairman, thank you for allowing me to be here today.
Mr. PETRI. Thank you, Mr. Hutchinson.
Mr. Clement?
Mr. CLEMENT. Thank you, Mr. Chairman.
Mr. Secretary, on page six of your testimony, you state that Federal funding for highways must be adjusted for inflation over the next 20 years and that State and local funding growth must remain consistent with historical trends in order to close the gap between future investment requirements and future spending.
How do you define ''future investment requirements'', and is your goal to maintain existing conditions and performance of the highway system? Or improved conditions and performance?
Mr. BASSO. Mr. Clement, let me answer it this way. Our goal is clearly to improve the conditions and performance of the system.
We recently—and recently being the last few years—turned the corner from deteriorating conditions and performance to now on the National Highway System—which is of course the backbone of the Nation's system—to actually reversing the decline of conditions and performance. The same in the bridge program, which frankly, during my rather extended tenure, has been a critical problem.
So looking to the future, the numbers we put forth are really about not only maintaining the conditions and performance, but enhancing the system, not only through concrete, asphalt, and steel, but also through smart systems like intelligent transportation systems and other ways to make the whole system function at a level that is going to be necessary.
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What I am responding to here is not a luxury in this country. It is an economic necessity that we be able to meet and maintain that system in a way in which it will provide for the movement of goods and services and people throughout this country.
Mr. CLEMENT. Mr. Secretary, on page seven of your testimony, you indicate there will be a 30 percent cut in transit funding beginning in 2004 if the fuels tax cut is enacted.
Could you be more specific about how the cuts would be administered if the 4.3 cent tax cut is enacted? And would you tap the discretionary program, the formula program, or both programs?
Mr. BASSO. Sir, I think where we would be placed—I can tell you that the macro answer is that we would halve the program. But one of the things that comes into play in that is the fact that at that point the Congress will be in the position of reauthorizing the program, and that probably would shape exactly how that distribution would be made. At that time, I am sure we would have recommendations. But it is my hope that we never have to face that, sir.
Mr. CLEMENT. Thank you, Mr. Secretary.
Thank you, Mr. Chairman
Mr. PETRI. Mr. Pease?
Mr. PEASE. Thank you, Mr. Chairman.
Mr. Secretary, I appreciate you being with us today. I apologize because I, as my colleague, Mr. Oberstar, was in the hall with some constituents. So if I ask you something that's already been asked, please forgive me and stop me and we will save time.
There have been a number of concerns expressed on the impact to the States of a reduction in the Federal gasoline tax. My question focuses on this fact scenario:
Is it reasonable to assume that this dramatic increase in gasoline prices will result in less gasoline consumption, and that that fact alone will reduce the amount of moneys going to the States as a consequence?
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Mr. BASSO. Congressman Pease, that's a very good question. I think the analyses we have done—and we have been looking at that question a number of years—would suggest that at the levels we are at now, or even up to $2 a gallon, you wouldn't see any dramatic changes in vehicle miles travelled. What you would have as those prices rise, is what is happening in the independent trucking world: many, many small and independent businesses being put out of business in that regard.
And I would suggest—and I will supply it for the record—where we think those cut-offs are, where we might see some decline. But I don't believe so.
Mr. PEASE. Do you anticipate a flattening in the income if the prices stay where they are now? Or are we not at that level yet?
Mr. BASSO. Our projections don't suggest there would be a flattening. There probably would be less growth in the revenue, which has been pushing up the revenue-aligned budget authority figure up to $3 billion. You should probably see decline from those levels, based upon our projections.
Mr. PEASE. Thank you very much, Mr. Secretary.
Thank you, Mr. Chairman.
Mr. PETRI. Mr. Borski?
Mr. BORSKI. Thank you, Mr. Chairman.
Thank you, Mr. Secretary.
We focused largely here on the Highway Program and on mass transit. The hits they would take are substantial and I think would be catastrophic.
Can you elaborate a little bit on truck safety, particularly with the inspectors we need to look after truck safety? Would that program take a hit as well?
Mr. BASSO. Congressman Borski, you raise a point and I am glad you did. I should have mentioned it myself.
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The way we fund the operations of our Motor Carrier Inspection Program is as a percentage of the apportionments to the States we take it off the program. If the apportionments did the kind of dramatic declining that I suggested could happen from this, there would be considerably less money available for operations. We had proposed increases in the fiscal year 2001 budget to fund additional inspectors and that could—and I emphasize could because you have to wait to see how the math works out—but certainly could have a negative effect on what we believe needs to be done in the safety area, including inspections, oversight, and other things which we all agree need to be addressed.
Mr. BORSKI. Thank you.
Thank you, Mr. Chairman.
Mr. PETRI. Thank you.
Mr. LaHood?
Mr. LAHOOD. Thank you, Mr. Chairman.
Mr. Basso, why doesn't the Administration come out against the reduction or elimination of the 4.3?
Mr. BASSO. Mr. LaHood, let just address that this way. I think today what I came up to do was express a lot of reasons for concern on the 4.3 cents and its effects on the program. The Administration obviously has been carefully considering this. We do clearly have other negotiations and hope to improve the situation.
But I think we have expressed in what I have put out here all the negatives that come from this, and that really hits at the heart of the Administration's concern, sir.
Mr. LAHOOD. What is the heart of the Administration's concern?
Mr. BASSO. This Administration has invested, on average, about 76 percent more—with the help of the Congress, let me be fair, with the clear support and action by the Congress—76 percent more on average in infrastructure over the past 7 years. If that funding is to be reduced, we would have serious concerns about the conditions of the system, performance of the system, the transit programs, and also the things that TEA–21 and ISTEA brought us, which are the Access to Jobs Program, the Borders and Corridors Program—and I could probably go on with a litany. But I think we have a concern that those need to be supported.
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Mr. LAHOOD. I don't understand why you just wouldn't come out in opposition to the elimination. I am puzzled by that.
Mr. BASSO. Congressman LaHood, I think the best way I can address that is the way in which I have to say that we have concerns. We have expressed in some detail what those are and why they are. I appreciate and understand your question. I think I am trying to give you the best answer I can today, sir.
Mr. LAHOOD. What is your feeling is the cause for the increase in the gasoline prices at the pump?
Mr. BASSO. Based on the data I have available to me, clearly when the price of oil per barrel goes from $10 to $30 per barrel, that's one of the clear factors that is driving the price at the pump. That is a dramatic increase over a short period of time, and particularly dramatic with the prices at the low levels we saw last summer with those barrels.
Mr. LAHOOD. Explain to me—I didn't hear the President's address on Saturday, so tell me what he said that would give us assurances that the Administration is doing all that it can to—it's easy for all of us to sit around here and badmouth OPEC, and I know there are some who would like to badmouth the Administration. You've presented a whole raft of material about the importance of the 4.3, yet you aren't willing to say that you are opposed to eliminating it. I don't get it.
Mr. BASSO. Well, let me mention that the President spoke on this subject in his radio address and was very emphatic on several points, including the establishment of a regional home oil heating reserve, reauthorizing the strategic petroleum reserve, enacting a comprehensive package of incentives to promote energy security, investing in alternative energy sources—we support the Clean Fuel Busses—and there will be meetings between the Administration and the OPEC nations—I believe it is Monday—for the purpose of trying to clearly address issues that need to be addressed here on this subject.
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And these are very definitive proposals we put forth. Plus the things that we have in the budget that deal with alternative fuels and the Secretary of Energy's testimony on various actions the Department of Energy is trying to take really sum up definitive actions that are being taken on the part of the Administration.
Mr. LAHOOD. So what should we be saying to our constituents who go to a gasoline pump and have to pay $1.50 or $1.70 per gallon? What should we say to them? That the Administration is not for reducing the tax that was imposed by the Administration? That the Administration is going to be doing some jawboning with OPEC?
What serious things can we say to our constituents about the high price of gasoline?
Mr. BASSO. I think the thing that is going to affect the high price of gasoline most is when the OPEC nations, in particular, and our own producers at home reduce the price of a barrel of oil. The Administration clearly is working to try to bring that about and take other long-term steps to help mitigate these crises that come up at various periods of time, going all the way back to the 1970's. And I think that is probably the clearest statement we can make. I feel we are taking those actions aggressively and definitively, and I hope they will bring down the price.
Mr. LAHOOD. What leverage does the Administration have with OPEC?
Mr. BASSO. I can tell you—I am not an expert on those negotiations, but I think it is fair to say that clearly discussions we have with them and the mutual interest we have in a variety of different natures would bring us together to have—I hope—fruitful discussions on this.
Mr. LAHOOD. I, as one member, Mr. Basso, would tell you that I am not satisfied with the idea that you come here and offer this raft of information, these beautiful charts that show us what will happen, and yet the Administration is not full force in saying they are opposed to the reduction of this. I don't quite get it. It is a little puzzling to me.
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Apparently the jawboning that is going on with OPEC by Secretary Richardson and others has not been effective because I don't think the price of a barrel of oil has gone down. I hope that the talks this weekend will be effective, but I think the message ought to be clear here.
It seems like you want to have it both ways here. I don't quite get it. I think your explanation is inadequate, from my point of view.
Thank you, Mr. Chairman.
Mr. PETRI. Thank you.
Representative Millender-McDonald?
Ms. MILLENDER-MCDONALD. Thank you, Mr. Chairman.
Thank you, Mr. Secretary, for being here.
As you spoke about $1.8 billion lost to California, obviously I sat straight up because that is my State and we recognize the myriad of commerce that travels from the ports of Los Angeles and Long Beach—which I represent—across interstate lines and the trucks that carry these types of goods throughout the Nation.
I am certainly concerned about the OPEC issue that is before us. But we have to look at something in the immediate as well as in the long-term. When you speak of the fact that we will look at relief to small businesses—I am the Ranking Member on Small Business—clearly this will affect not only the truckers but small businesses and others who depend upon the truckers to provide the goods and services.
You stated that you are in favor of the Nation's strategic petroleum reserve to increase the supply of fuel to markets, while others favor the excise taxes on certain fuels. Are we looking at both of those proposals? Are we looking at one opposed to the other? Just give me your take on it.
Mr. BASSO. The Administration clearly wants to get the strategic petroleum reserve reauthorized. That is an excellent hedge against these types of issues when you can use those reserves basically to be a force in the market. And that is really crucial to us doing.
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On the question of the excise taxes, throughout the written testimony and what I testified to earlier, we pointed to all the areas of trouble that would cause with that reduction. But I think this is all part of putting together a package of things as opposed to any one individual action.
Ms. MILLENDER-MCDONALD. So you would use those in an alternate fashion to try to see whether we can curtail this crisis?
Mr. BASSO. I think the Secretary of Energy has spoken to using the petroleum reserves, using negotiations, using a whole combination of things that are within the purview of the Energy Department and the Administration to try to bring these things down. And I know the President, as he spoke eloquently on Saturday, is very committed to dealing with this issue. So we are trying to take a whole series of steps.
Ms. MILLENDER-MCDONALD. And I am certain that the President is trying to do as best he can, given this. But my thought on this is that when I was an administrator in the educational arena, we had certain projections. And there were some things that we could see that were coming forward that we could perhaps deal with before it reached certain crisis.
Is there any way that we can do those types of projections? All of a sudden, we looked up and the prices began to rise. Are there any projections one would have looked at to see if this is going to be such a crisis that has now come before us?
Mr. BASSO. Congresswoman, you have raised a very good point. I have looked at some of the data again from the Energy Department. I think there have been a number of different projections of what would happen when production is reduced. The one thing I don't think anybody can predict on the long-range is when those reduced production levels are going to be invoked and the kinds of things that happen.
I think you can create—one of the things I do well as an old budgeteer—I can create many, many scenarios, but until somebody actually takes an action, the scenarios become theoretical. I think that plug was pulled in a sense on us. Reductions in production, which came very quickly and which had a relatively immediate effect given the amount of consumption we have in this country.
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Ms. MILLENDER-MCDONALD. And indeed California does consume quite a bit in our transportation.
Another question I have is, How will the alternative fuels help to offset this oil crisis in the short-term and the long-term and when will that kick in?
Mr. BASSO. Actually the Administration is pursuing vigorously alternative fuels programs. In fact, Administrator Browner yesterday spoke to the composition of gasoline changes and increasing alternative fuels as a way of offsetting this dependence on foreign oil. The Administration is working immediately and vigorously on those. I could get you for the record more specific data from EPA and I would be happy to do that.
[The information received follows:]
[insert here]
Ms. MILLENDER-MCDONALD. I would like to receive that so I can talk with my truckers and others in California about this crisis.
Mr. BASSO. I would like to do that. And perhaps I can brief you personally on that.
Ms. MILLENDER-MCDONALD. Could you please do that?
Mr. Chairman, thank you so much. I do have a statement for the record that I would like to submit with your approval.
Mr. PETRI. Without objection, your prepared statement will appear in the record.
Mr. LaTourette?
Mr. LATOURETTE. Thank you very much, Mr. Chairman.
Mr. Secretary, I think all of us on this committee and most of us in the Congress were overjoyed and excited by TEA–21. Just speaking parochially for a moment, in Ohio for years we sent our money down to Washington and got about 63 cents on the dollar back, 86 cents when you put in transit. Although some of us struggled over here on the House side to get that up to 95 percent, we were still overjoyed when it went to 90.5 percent.
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Particularly in a State like Ohio, I was shocked when I was talking to our ODOT director to find out that we have the largest inventory of bridges in the United States. They made a movie, ''Bridges of Madison County'', but I think they are really all in Ohio. And we have over 43,000 bridges in Ohio. The studies are that over one-third of them are 50 years old. They are rated in poor or critical condition.
I was struck by Mr. Rahall's pack of gum observation. I do not know any taxpayer in Ohio that wouldn't trade a pack of gum a week for the opportunity to have a safe bridge when he or she is driving his or her family over some of these bridges in a mini-van on vacation, or to work, or to anywhere else. I am just wondering if the Department has taken a look at the numbers as to whether or not we are going to go backwards. If this 4.3 cent scheme is realized, Ohio or any other State—has the Department taken a look at in the outyear, 2003 of TEA–21—are States actually going to be doing worse than they would have done under the old ISTEA formula?
Mr. BASSO. The simple answer is yes. The way I looked at these numbers—and I will talk a little bit about the Bridge Program in a minute—but if our numbers with these reductions take us back to the fiscal year 1992 level under ISTEA, that takes us down to about a $16 billion program versus the almost $30 billion we put out this year. I think we can all see what that would do to the whole program, and explicitly the Bridge Program, which is a very expensive program. We are finally turning the corner and overcoming this huge backlog of deficiencies we have had.
Mr. LATOURETTE. And just for the record, could you describe what it is that the Bridge Program does, and how it is that you are improving safety for Americans with the Bridge Program?
Mr. BASSO. Yes, sir.
The Bridge Program provides both by formula and discretionary bridge funding several billions of dollars over the life of TEA–21 to repair and reconstruct bridges that are deficient across the country. The way it is put together, that funding is first and foremost provided based on a bridge inventory of the most deficient bridges in the country. So we really have a push-pull situation. Where the deficiencies are, the money tends to go under this program. And that has done us a lot of good because we are finally getting to the point where our conditions on those bridges are not continuing to go negative, but to actually move to the positive side of the ledger.
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Mr. LATOURETTE. Let me ask you one quick question since Ms. Millender-McDonald asked you about alternative fuels.
It has been our experience in Ohio as getting spanked because we use a lot of ethanol. About 40 percent of the fuel we purchase in Ohio is ethanol. As you know, the tax structure is different on ethanol than it is on gasoline. Those of us in Ohio who think we should do good things for the environment encourage ethanol use. Alternative fuels make us less dependent on foreign sources of oil.
I am just wondering if the—I know there is an ethanol subsidy and I will go fight with my corn friends about that another day—but I am just wondering whether or not the Department and the Administration have taken a look at—since we still have a shortfall in the Bridge Program and mass transit—whether or not the Administration would ever join with us to return the 2.5 cents of tax that is now being imposed on ethanol and return that to the Transportation Highway Trust Fund as we did with the 4.3 cents a few years ago under the direction of the leadership of this committee.
Mr. BASSO. Let me just say that we haven't, to the best of my knowledge, given that any consideration at this point in time. On the other hand, one of the things we are doing is very seriously pursuing increases in alternative fuel uses for the reasons we are discussing here today. But at this point, we haven't given that consideration.
Mr. LATOURETTE. But don't you think you could encourage States to use more alternative fuels if in fact the system didn't penalize them because while they are paying 18.3 cents on a gallon of gasoline, the effective tax into the Trust Fund is about 10 cents on a gallon of ethanol. Ohio is being shortchanged. Really, it would be in our highway interest to guzzle more gas than ethanol that pollutes the air and do everything else.
I think, as my grandmother used to say, we have it ''bass ackwards'' and I would hope you would take a look at giving us the 2.5 cents and let us put that in the Trust Fund so this committee could build a bigger and greater America along with whatever Administration takes over in the next year.
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Thank you, Mr. Chairman.
Mr. PETRI. Thank you.
Mr. Cummings?
Mr. CUMMINGS. Thank you very much, Mr. Chairman.
Mr. Secretary, as I was sitting here listening to the responses, I could not help but think about the constituents in my district who, when they have to put an $8, $10, or $12 in the tank a week to get to and from work—unfortunately, because so many of them are coming from welfare to work or they are the working poor, we don't hear a lot about people who struggle from day to day. That little bit of money to some of us really kind of hurts their budgets.
As a high-ranking official in our Department of Transportation, what do you say to them? It seems like the cost of gas is going up. They are trying to figure out how to make ends meet. When they say to you and to us, What are you doing about it? Talk is nice, but I still have to get through the week, feed my children, pay for prescriptions, and I still have to do all these things, and I still want to take a little vacation. I am not talking about people who fly off to Paris. I am talking about the ones who go 150 to 200 miles to spend a few days.
What do you say to those people? Those are the people that I represent.
Mr. BASSO. Congressman Cummings, you touch on something that I think is very close, certainly, to me personally and Secretary's Slater's concerns and the Administration's concerns.
I think what I have said previously about what we are trying to do in the geopolitical world, to negotiate down the price of a barrel of oil, to get the price of gasoline prices down is one aspect. Other things that we are doing under TEA–21—and we would like to do more and propose to do in fiscal year 2001 budget—is to put more money into programs that can actually assist people in those circumstances such as access to jobs programs, programs that will support jobs in the construction industry that are meaningful jobs to people are very important.
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I think those are the things that we have to do. I understand exactly what you are saying. I won't go over the history, but I personally understand what you are saying.
Mr. CUMMINGS. The other group that I look at are the truckers. They tied me up twice now on the roads of Washington, but I really couldn't get upset with them because I understood their situation. These are very brave people, many times in business for themselves. I have always said that anybody who goes into business for themselves I admire. I take my hat off to them, because they are putting their family and everything on the line.
Have you all had any discussions with them at all? Has the Department?
Mr. BASSO. Yes, sir, we have.
Mr. CUMMINGS. Could you share some of the salient points?
Mr. BASSO. Sure.
Last week, in particular, when the truckers were here, the Independent Truckers Association and others met with a number of high-ranking officials in the Department for our policy—the Assistant Secretary, our motor carrier folks, and so forth. I wasn't going to announce this today, but the Secretary is planning to have a listening session this Thursday with many of the interests in the trucking industry.
The Independent Truckers Association vice president who spoke to me that day said something that I thought was particularly meaningful. We were talking about the tax and one of the descriptions he used I thought was particularly poignant. He said, ''We're independent businessmen and we're trying to make it. One thing we're not trying to do, though, is to pick up 4.3 cents,'' which is to him like burning the furniture in the house to heat the house. The roads, the bridge conditions, and all those things are really more important to their productivity—ability to reduce congestion, better mileage, and so forth—to make it in that industry.
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This immediate problem, though, requires clearly getting the oil prices down.
Mr. CUMMINGS. The truckers I have talked to seem to have a firm understanding of that also, that they need the roads.
But do you have an opinion with regard to their proposals for some type of tax credits to reimburse them for lost income due to the high gas prices?
Mr. BASSO. Yes. And I listened to that proposal. One of the things the Administration's hasn't done is really to at this point take any position on that. I guess we need to some specific proposals. Right now we are talking about a mandatory pass-through surcharge, but not very well-defined. We would want to look at the context of that if it were put forth. What is it actually doing? Does it have a negative or positive consequence? The gods are in the details, and you need the details.
Mr. CUMMINGS. Thank you very much.
Mr. PETRI. Thank you.
Mr. Thune?
Mr. THUNE. Thank you, Mr. Chairman.
Mr. Basso, it seems that most of the groups who are going to be testifying today—and I share their concern—feel that a temporary or permanent reduction in the fuel tax would have a permanent and detrimental effect on the Highway Trust Fund and the programs it funds through TEA–21. There are those in Congress that have suggested that if there is a suspension in the fuel taxes, the Trust Fund should be held harmless with an infusion of general fund revenues.
With you knowledge of the budget and funding of DOT programs, is there any scenario that you could envision that would hold the Trust Fund harmless and still provide for a temporary repeal of all or part of the tax?
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Mr. BASSO. Let me suggest this. Going to the general fund to replace the Trust Fund—as long as the budget is a unified budget, it is still the same. It is like taking the money out of the left pocket and putting it in the right pocket. I don't really see where—with the kind of analogy Congressman Rahall made to a pack of chewing gum, or 79 cents a week—this does much for anybody. I don't really see that as a productive way of dealing with this. I think again what I said earlier, getting the price of a barrel of oil down, will do far more than any of this.
And TEA–21 did something that I think is critically important. Through its assurance of spending the receipts coming into the Trust Fund put us in a position to make the investments we need to make. So I think that kind of movement within the budget really doesn't solve much of anything that I can see at this point in time.
Mr. THUNE. And you don't see anything—obviously, the general fund would be the most likely scenario—but any other scenario whereby you would be able to replace the dollars that are going in there?
Mr. BASSO. I would have to give that some further thought, sir. Not coming to mind immediately, but I do think clearly with what we did in TEA–21, staying the course is probably the best thing we can do at this point in time.
Mr. THUNE. I come from a State where we rely heavily on transportation. We have farmers who are going to be going into the field to plant, with obviously long distances between points. We also have a heavy dependence on tourism, which will be powering up here in a few months, too. So people in my State are very concerned about this issue, and understandably so. The natural short-term reaction is to cut the gas tax to hopefully get some relief. But I guess what we are trying to get at from a policy standpoint is, What is the right course of action? And what will protect the integrity of the changes that were made, thanks to the work of Chairman Shuster, Chairman Petri, and others? In the highway bill a couple of years ago, we were able to make the necessary investment to get our roads and bridges back in a condition that I think was long overdue.
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But the point that you made about energy policy I think is a relevant one. I didn't see any indication in the testimony that the Secretary of DOT was aware of the current oil price spike before it set in. To what extent has the Department been involved in the establishment of an energy policy to foresee these kinds of things prior to the last 3 months, when obviously everybody became aware of it? What recommendations might you have to the Administration on energy policies?
Mr. BASSO. The Secretary obviously plays a vital role through the transportation network in questions of energy, which are linked hand in hand.
As to seeing the spike coming, I can only tell you that I don't think we had data, or certainly I was not aware and I don't think the Secretary was aware of an expected spike. The Department of Energy probably has vastly more information on that. Secretary Richardson I know testified on this within the last week or so.
As to the future, certainly the Secretary plays as a key member of the cabinet in a vital role of coordination, considerations. And we have a process in the Executive Branch when major proposals come around where key cabinet agencies do participate. So we clearly have the opportunity to play a role in that, and certainly will.
Mr. THUNE. And I think you should. Obviously, yours is an agency that has a great deal to say about this. Unfortunately, I feel that it would at least appear on the surface, as was indicated by Secretary Richardson, we were caught napping. I would hope that that doesn't happen again.
But is there anything specific you would recommend to the Administration in terms of a national energy policy?
Mr. BASSO. I think at this point in time both the President and Secretary Richardson have outlined actions to be taken. We obviously are looking day to day at things that we could contribute to those discussions. The Secretary will continue to do that. I don't have any specific recommendations today to offer the committee, but we are certainly engaged in that hour by hour, I can assure you.
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Mr. THUNE. I would hope that would be the case.
Thank you, Mr. Chairman. I have no other questions.
Mr. PEASE [ASSUMING CHAIR]. Have all members of the committee had the opportunity question Secretary Basso?
Mr. LAHOOD. Mr. Chairman, could I ask another question?
Mr. PEASE. Without objection.
Mr. LAHOOD. Mr. Basso, let me just continue the point that I made previously.
My thinking is this—and I am going to say what I said before. You made a great presentation today. You have beautiful charts. And it looks like you're right at the point of saying that the 4.3 should not be repealed.
One of the easiest ways to kill bills around here is to have a veto threat from the President. I didn't hear the President's radio address last Saturday, and I know you said that he laid out several things.
Mr. BASSO. Yes, sir.
Mr. LAHOOD. I think one of the easiest, quickest ways to squelch this whole notion that we're going to repeal the 4.3, is to have the President at some point say that he is going to veto a bill that would repeal the 4.3.
Again, I am not quite sure why you come right to the brink, but the Administration can't say that, or can't say that they are for that, or can't be for that. Just about every word of your testimony would lead one to believe that, except that you haven't said it.
The problem here is that a lot of people out there who buy a tank of gasoline that are under the impression that if we eliminate the 4.3 gasoline prices will go down. You know how we can send those folks a strong message? In part, by what we're doing with C-Span and televising this. The other part is to have the President of the United States say that reducing or eliminating the 4.3 does not reduce the price of a gallon of gasoline. It won't do it. It doesn't have that much impact on it.
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Mr. COBLE. Would the gentleman from Illinois yield to me?
Mr. LAHOOD. I would be happy to.
Mr. COBLE. I thank the gentleman.
Mr. Secretary, let me try this from another angle. Can you say to us today that the Administration favors the retention of the 4.3 or favors the repeal of it? Can you give us one of those two answers?
Mr. BASSO. I think I can answer it best this way. The Administration, by coming up and presenting both written and oral testimony that presents facts on the importance of the 4.3, clearly has said that this is a very important issue for us.
And let me just clarify one thing for Mr. LaHood. There have been no discussions of vetoing any legislation that I am aware of in the Administration, so I want to be clear on that point.
Mr. LAHOOD. I know there hasn't. I am saying that there should be. There are bills out there pending. We are going to have testimony here—Mr. Pombo has a bill to repeal it along with some other people. Maybe there are some bills pending in the Senate. I don't know. There is an impression out there among constituents that if we repeal the 4.3, the price of a gallon of gasoline is going to go down. People don't realize that the 4.3 is put on at the wholesale level, not the retail level, and there is no guarantee that if you reduce it or eliminate it that will get passed on to people at the gas pump. But there is an impression out there that it will be.
I am saying that if the President did send a veto message on these bills, that would send a very strong message. This is not the approach that is going to help us with high gasoline prices.
I thank you for your indulgence.
Mr. PEASE. Without objection, the Chair recognizes Mr. Baldacci for a follow-up.
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Mr. BALDACCI. Thank you very much, Mr. Chairman.
I just want to take a couple of minutes and assure you that my constituents in Maine have it pretty well figured out that if this is ever repealed or if there is a reduction in the tax, it is not going to be immediately reflected in the pumps. They have an expression that it goes up by telegraph and it comes down by pony express. So we are not going to be holding out much hope at that matter.
I think the point here is the need for some legislative vehicle to be able to address the spike that took place and the hardship that caused families and small businesses. It is this kind, careful consideration that the Administration is undertaking.
The second issue—I would like to refresh some of those that may not have remembered that the Administration's veto threat earlier, when we were trying to divert the 4.3 from the Deficit Reduction Act to the dedicated Trust Fund was one in which they may have not thought that was such a wise idea at that time and expressed an interest that they may be weighing in, but because of so much bipartisan support in an overwhelming committee membership, we basically were able to marshall the support to divert that needed gas tax revenue into the Trust Fund.
So I think a lot of the leadership that is being espoused probably would need to come from those that were the ones leading that charge to make sure that it was diverted to the Trust Fund and not the deficit reduction.
Mr. Secretary, I would be very interested in you being able to tell me—I have a math professor at the University of Maine. As a class project, he developed off-the-shelf equipment to create a solar-powered truck. It cost $7,500. He was able to power this truck without any gasoline for 25 or 35 miles. He came to me asking me if there was any Government research that was available so that we would be able to explore the potential of this kind of source of energy. Recognizing what we were talking about—cities burning fossil fuels and the air pollution in major urban areas—we had a very hard time in trying to find any resources at the Federal level.
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Would you be able to help my constituent out, and others that may be in a similar situation?
Mr. BASSO. Yes, Congressman. I think we can.
We have been proposing programs, we have research programs. I would like to get some specifics and get in touch with you at your office and bring some of our people. We would be happy to get very specific about that and try to be directly helpful on that issue.
Mr. BALDACCI. Thank you very much, Mr. Secretary.
And thank you very much, Mr. Chairman.
Mr. PEASE. Thank you so much, Mr. Secretary, for being with us today.
Because our testimony has taken a bit longer than anticipated, we are going to make some adjustments in the schedule. The second panel will include the following: Hon. Joan Bray from the Missouri State House of Representatives on behalf of the National Conference of State Legislatures; Mr. John Horsley, the Executive Director of the American Association of State Highway and Transportation Officials; Mr. William Millar, President of the American Public Transportation Association; and Mr. Stephen Sandherr, the Executive Vice President of the Associated General Contractors of America.
In order to accommodate schedules, we will begin with Mr. Sandherr.
TESTIMONY OF HON. JOAN BRAY, MISSOURI STATE HOUSE OF REPRESENTATIVES, ON BEHALF OF THE NATIONAL CONFERENCE OF STATE LEGISLATURES; JOHN HORSLEY, EXECUTIVE DIRECTOR, AMERICAN ASSOCIATION OF STATE HIGHWAY AND TRANSPORTATION OFFICIALS; WILLIAM W. MILLAR, PRESIDENT, AMERICAN PUBLIC TRANSPORTATION ASSOCIATION; AND STEPHEN E. SANDHERR, EXECUTIVE VICE PRESIDENT AND CEO, ASSOCIATED GENERAL CONTRACTORS OF AMERICA
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Mr. SANDHERR. Thank you, Mr. Chairman. I appreciate your indulgence in being flexible.
Good afternoon, Mr. Chairman and members of the committee. I am Stephen Sandherr, Executive Vice President and CEO of the Associated General Contractors of America. AGC is the Nation's largest construction association with 33,000 members in 100 chapters in every State and Puerto Rico. AGC represents the leading transportation construction firms in the Nation.
While we are generally pleased to have the opportunity to testify on issues affecting the construction industry, I regret that this hearing is even necessary. Two years ago, the members of this committee, working together in a bipartisan fashion, crafted the most significant public works bill since the creation of the interstate highway system, TEA–21. The centerpiece of that legislation was the return of trust to the Highway Trust Fund. Against formidable odds and numerous shortsighted editorial commentaries, the members of this committee held firm in their desire to return the user fee concept to transportation funding. Through your efforts, the gas tax is and will be spent on its intended purpose: to pay for road, bridge, and transit improvements.
This is responsible public policy. Those who use the transportation networks, pay for it through a user fee. And it is clear that when the public is informed of this policy, they support it. A poll conducted last year by Luntz Research for the Rebuild America Coalition found that 69 percent of the public supports the concept of gas taxes paying for transportation improvements.
The reason that I regret the need for this hearing is that there is a hue and cry that we need to suspend or repeal all or part of the Federal user fee because the price of gasoline and diesel has increased dramatically. In no way do I wish to minimize the financial impact that the dramatic increase in fuel prices has had on businesses and consumers. In fact, it is having a profound effect on construction firms across the country who are heavy users of gasoline and diesel fuel. For example, the price of asphalt has increased 160 percent in the past 12 months, increasing the costs of highway construction. The reality, however, is that the gas tax is not the cause of the problem and the elimination of it will not provide the solution.
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For those who say that the suspension or elimination of the gas tax is good politics, my advice is to look before you leap. Gasoline prices have, on the average, increased by 55 cents in the past year. Eliminating 4.3 cents would still result in increased prices of more than 50 cents per gallon. And that is assuming that the wholesaler will pass on the tax savings to the consumer. How would Members of Congress respond to the fact that consumers are still paying more? The American public will see through that transparent political gimmick very quickly and will hold spin doctors who apply a symbolic band-aid to a gaping policy wound accountable for political malpractice.
Politics aside, there are serious policy reasons for not tinkering with the user fee. The 4.3 cent gas tax accounts for approximately $7.2 billion a year, while the 24.4 cent diesel fuel tax contributes $8.8 billion to the Highway Trust Fund. The loss of that combined $16 billion will have a devastating impact on all 50 States. Transportation planning will be hampered and needed projects delayed.
Meanwhile, the traveling public, who the tax measure is intended to help, would be the ultimate losers. The money that is lost to highway and transit construction will result in fewer improvements to our Nation's roads, bridges, and transit systems. Consequently, the driving public will encounter declining road conditions that will result in additional wear and tear on cars and trucks. The repair costs will far exceed the potential pennies per gallon saved because of a reduced tax.
Finally, let us not forget that the money spent on road and bridge improvements reduces injuries and saves lives. Thirty percent of all traffic fatalities nationwide—more than 12,000 a year—are the result of poor road conditions. This figure would undoubtedly increase if needed road and bridge improvements are not made.
The bottom line is that you have developed an equitable method to pay for transportation programs through the user fee. Elimination of the user fee will not result in any real savings for consumers, but will ultimately increase their travel costs, delay safety improvements, and increase traffic congestion. The members of AGC will work with you to preserve the integrity of the Highway Trust Fund.
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Thank you for this opportunity, and I look forward to any questions you might have.
Mr. PEASE. Thank you, Mr. Sandherr.
Representative Bray?
Ms. BRAY. Thank you, Mr. Chairman and members of the subcommittee. I am Joan Bray, a member of the Missouri House of Representatives. In the Missouri House, I serve as Chair of the Ways and Means Committee. I was also Chair of the National Conference of State Legislature's Energy and Transportation Committee last year. It is on NCSL's behalf that I appear before you today.
I want to thank you, Mr. Chairman, for offering NCSL an opportunity to participate in this hearing. NCSL represents the State legislatures of the 50 States and the Nation's Commonwealths and territories.
Congress made exceptional strides in 1998 when it enacted TEA–21. Now proposals were being made to strip away some of the funds needed to accomplish TEA–21's goals. In 1997, NCSL supported the 4.3 cent Federal gas tax transfer to the Highway Trust Fund. State legislators knew it would help and believed it was publicly acceptable. Therefore, NCSL strongly opposes a repeal of any portion of the Federal gas tax as proposed in several bills or in any fiscal year 2001 budget resolution.
As a legislator, I, like you, must be responsive to my constituents. Therefore, I understand the pressure that you must be feeling to act and somehow reduce the price of gasoline. However, I submit that by repealing the 4.3 cent gas tax, the financial hurt caused to State transportation projects would be greater than the questionable financial gain to consumers. And there is no certainty that repeal of the gas tax would translate into lower prices at the pump.
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The 4.3 cent tax on gasoline and diesel produces about $7.2 billion each year for the Highway Trust Fund. A proposed repeal would cost States $18.9 billion through fiscal year 2003. That would impact highway planning and construction, transportation enhancements, and high-priority projects.
Safety and repairs would also be compromised as each year about 12,000 highway deaths are due to unsafe conditions. Also as a result of the repeal, an average of 420,000 high-paying jobs could be sacrificed each year in 2002 and 2003.
TEA–21 and the formulas it established for returning gas tax revenues to States were negotiated in good faith and agreed to by all parties concerned. A repeal of the gas tax would undermine that process and could jeopardize the results.
Another major negative consequence would be that the Mass Transit Account of the Highway Trust Fund would be without funds in 2003. And in addition to the revenue losses in highway and transit funding, the repeal of the tax on aviation fuel would reduce the Aviation Trust Fund by $700 million. Small State-run airports depend on the Trust Fund and it is likely that they would be the hardest hit by such a reduction.
I testified here last year in favor of H.R. 1000. Taking into consideration that position and the recently negotiated, bipartisan aviation agreement, I strongly caution the subcommittee against taking any action that could undo or undermine the good that could be accomplished through AIR–21.
Now I would like to tell you what the impact of the proposed repeal would be for my State, Missouri.
The United States Department of Transportation says we would lose $460 million over fiscal years 2002 and 2003. Missouri is already contending with transportation funding shortages that will only worsen if the gas tax is repealed.
In 1992, the Missouri Department of Transportation embarked on a 15-year major highway program, primarily in the rural areas. Over the past few years, that program has been revealed to have been woefully over-promised and dramatically underfunded in the amount of about $15 billion. As a result, the Department has suffered a huge loss of credibility and Missourians are angry at what they perceive to be State deceit and mismanagement.
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It would be a further blow to the Department's efforts to restore trust in its work to have projects delayed even longer by a significant cut in Federal money. MODOT tells me that the cut in funding for the Saint Louis region under this scenario could be about $110 million over the 2 years, 2002 and 2003.
I represent a district in the core of the region. Fifty years ago, my community of Richmond Heights was severed in two by construction of U.S. Highway 40, now Interstate 64. That aging, deteriorating freeway, whose design causes significant congestion and the resulting dirty air, is due for major renovation in the next 5 years. Plans for design options and community involvement in the process are underway. While these activities cause enough anxiety among my constituents, delaying the project for lack of Federal money would be even worse. My constituents, whose lives and property are affected, need to have ambiguity replaced by certainty. And all of us who live in the region, a non-attainment area for ozone pollution, whose health is affected by the foul air, need relief.
Cuts in funding for transit would also have significant ramifications for the Saint Louis region. We are expanding our highly successful light rail system with Federal, State, and local money on the Illinois side and with local money on the Missouri side. Our fear is that this gas tax cut could endanger completion of the Illinois project and would slow plans for extensions with Federal help in Missouri.
Again, Mr. Chairman, I thank you for this opportunity to appear before you on behalf of the National Conference of State Legislatures. I welcome any questions.
Mr. PEASE. Thank you, Representative Bray.
Mr. Horsley?
Mr. HORSLEY. Mr. Chairman, my name is John Horsley.
While it is a pleasure to appear before you as the Executive Director of the American Association of State Highway and Transportation Officials, it is with great frustration that I have to ask, What are we doing here?
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Only 2 years ago, the congress, as a result of the leadership of the members of this committee, enacted the Transportation Equity Act for the 21st Century. You increased Federal funding for highways and transit by 40 percent so that we in the States could begin to tackle the congestion and the deterioration that plagues our transportation system.
Mr. Chairman, for the record, AASHTO is adamantly opposed to bills recently introduced in the House and Senate that would temporarily suspend the diesel fuel tax, eliminate the 4.3 cents of the Federal gasoline tax, and other motor fuels tax reduction proposals. We are particularly alarmed with the recklessness and speed with which these proposals are being bandied about, with little or no consideration of the implications to our Nation's transportation system resulting from the loss of revenue which the Congress committed to the Highway Trust Fund just a few years ago.
AASHTO recognizes the economic hardships caused by the sharp rise in the price of oil to independent truckers, to the motoring public, and to the economy. But the rush to produce an immediate solution has spawned a host of rash, ill-considered proposals. For example, cutting the gasoline tax by 4.3 cents would do little, if anything, to alleviate any financial distress, but it would cannibalize the transportation programs that support the very infrastructure on which the Nation's economy, the public, and trucking industry depend.
Mr. Rahall, you waved your pack of gum a few minutes ago. Over the weekend, I took a non-scientific survey of the pricing of regular gasoline in Virginia. I live in Fairfax and I went as far away as Centerville, just a couple of miles away from my house. The price of fuel ranged from $1.47 to $1.56, a 9-cent spread. I saw two gas stations side-by-side with a 4-cent spread. So as you pointed out, Mr. Chairman, there is no guarantee that when it is charged by the wholesaler, a nickel, a dime, a penny would be passed on to the consumer. But you are all aware of the consequences to the States and to the transportation system that we are trying to deliver.
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TEA–21 was constructed by this committee and enacted by Congress to give the States the funding, flexibility, and innovative financial tools to begin to shrink our backlog of highway and transit needs. TEA–21's 40 percent record increase in Federal funding for highway and transit has meant that the States have been able to accelerate their highway programs and to more quickly deliver critically needed safety, preservation, and new highway construction projects.
For example, the Texas Department of Transportation was able to leverage the $700 million increase they received on average each year of TEA–21 to increase the lettings in 1998 from $2.1 billion to $3 billion in 1999. And Wes Heald, the Director of Transportation in Texas, told me that TEA–21's 40 percent increase allowed him to meet 43 percent of his State's needs rather than their previous level of just meeting 30 percent of their State's needs.
Similarly, in Wisconsin, that Department has been able to accelerate their program by 22 percent above the last year of ISTEA because of the increase. Wisconsin, West Virginia, across the board would all suffer a dramatic decrease were this reduction to go into effect.
So the $5.8 billion that would be lost to the highway system, the $1.4 billion that would be lost to the transit systems are of deep concern to States. We wanted to put it in fairly dramatic terms because it's hard to get your arms around it.
What does this $7.2 billion cutback mean? If you had an entire elimination of the Bridge Program that Mr. LaTourette referred to, that would be $3.5 billion. The entire elimination of NHTSA, the National Highway Traffic Safety Administration. That would be included in the figure. The entire elimination of the Congestion Mitigation Program would be $1.4 billion. In the Motor Carrier Safety Assistance Program, $240 million. This reduction would wipe out each and every one of those programs, and you would still have to go back for an additional $87 million before you would get to the $7.2 billion figure.
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No single State is going to take the total hit, but the examples of the reductions that I have cited all reinforce the conclusion of the State Association of Highway and Transportation Officials that the concept of reducing the 4.3 is bad policy and the consequence to transportation is something we simply can't afford.
Mr. PEASE. Thank you, Mr. Horsley.
Mr. Millar?
Mr. MILLAR. Thank you, Mr. Chairman and members of the committee.
I am William Millar, the President of the American Public Transportation Association.
We appreciate so much the work that this Committee has done to try to build up investment in America, and now there are those who would put forward misguided proposals, in our judgment, that would tear down that investment. We are here today to urge Congress not to jeopardize the important policies and investment programs that originated in this committee by reducing the gas tax.
Our members are particularly concerned about the negative impact such a reduction would have on public transportation. The members of my association serve 90 percent of all the people who use public transportation in America every day. It just so happens that last week our members were in town for our annual legislative conference and our 117-member board of directors that is drawn from all parts of our industry, from all parts of the Nation, passed a resolution opposing this reduction in the gas tax. That resolution is a part of my written testimony today.
All across the country it seems to us that every community is struggling to improve mobility, give people choice, and decrease traffic congestion. And it just doesn't seem that this would be the time—if ever—that our commitment to investment in surface transportation infrastructure should be reduced, and particularly not for infrastructure that serves public transportation, which can play a key role in reaching our national energy conservation goals.
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DOT Assistant Secretary Basso earlier today told us that he didn't know exactly how all this tax reduction would fall out, but some work that we have done indicates the following could happen if it were implemented. And I am going to speak just to public transportation.
We believe that over the next 3.5 years this could result in some $5 billion less in Federal money being invested in public transit, along with billions more in State and local matching funds that might not be invested. This would result in 157,000 jobs lost in our industry alone, some $15 billion in private industry business sales, some $7.5 billion increase in highway and transit congestion costs. Something people don't think about, almost $1 billion would be lost in non-transportation-related tax collections to State and local governments. And the list goes on and on indeed.
Mr. Chairman, the Congress' investment in public transportation is paying off. Over the last 4 years, we have seen over a 16 percent increase in transit usage in this country. And that is in a period when gas prices were the lowest in history, according to what economists tell us. All around the country, transit agencies are gearing up for further increases in ridership. We are investing in new capital investment and facilities to meet the growing demand that is out there. Clearly, now is not the time to reduce investment.
Even though we welcome the increases in investment that this committee has made possible, experts agree that the capital investments are still not keeping pace with the $14 billion a year that should be invested in public transit alone, just to stay even and make modest improvements to our Nation's public transportation infrastructure.
In fact, if you look over the next 15 years, we understand highway travel is expected to increase by some 40 percent. If current trends hold, transit use will increase by 60 percent. Clearly, more money needs to be invested in both highways and public transit facilities. This proposal would certainly take us in the wrong direction.
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We believe that if this proposal were enacted there would be a substantial negative impact on the Mass Transit Account. Again, earlier speakers have spoken about how the congressional rules could mean that we would see the end of new start investments long before the money actually runs out due to the Byrd Amendment. We are very concerned that just now, when our industry is moving along quite nicely and ridership is growing, this would be a major interruption that we simply shouldn't tolerate.
Mr. Chairman, we believe that this proposal really wouldn't have any impact on what I thought was the real issue, which is reduction in price at the pump to the consumer. Of course, others have documented for you today why we don't believe that even if this cut were made the consumer would ever see much of it. Also, we believe that we need to have long-term policies in place that would end America's dependence on foreign oil so that every 10 years or so we don't have to come back and again relearn all the lessons we had learned the years before. And certainly part of that is an increased investment in public transit.
Looking at it another way, let us suppose we are wrong. Let us suppose that they do in fact pass on the kind of savings we are talking about. The numbers I have looked at say that the average American automobile uses about 548 gallons of fuel a year. If you look at that at 4.3 cents, that is about $24 a year, or $2 a month. Not even two bus rides a month would make a difference there.
So it seems to me that when people are paying $20,000 on average for new cars and over $40,000 for SUVs, whether we give somebody a $2 per month savings, I don't think it's anything people will notice, let alone thank the Congress for.
So Mr. Chairman, the American Public Transportation Association is here today to oppose these proposals. We are also here today to thank this committee for its leadership in this investment and in this area. And if there is anything we can do to assist in making this case clear, we certainly want to do it. I would be pleased to answer any questions the committee may wish to pose.
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Thank you very much.
Mr. PETRI [RESUMING CHAIR]. Representative Bray and gentlemen, thank you for your testimony.
Mr. Rahall?
Mr. RAHALL. Thank you, Mr. Chairman.
Representative Bray, we appreciate your taking the time to travel here and be with us today and present your testimony. I want to commend you and all your colleagues in the State legislatures for being truly on the front line of elected representation.
Ms. BRAY. Thank you.
Mr. RAHALL. You have given us some good examples in your testimony of the devastation to your highway programs and transit programs a repeal of the 4.3 that would occur in your State of Missouri. In the unlikely event that a repeal were to be passed by the Congress and enacted into law, is it conceivable that your State could come up with funding from other sources to replace the 4.3?
Ms. BRAY. I do not see that happening. We operate under a revenue limit imposed by our constitution. This year, because of the economy, we had to cut—we just finished our budget process in the House and we have had to cut $150 million from our core services, essentials that we provide to people. General revenue would be the only source. We do not have the money.
Mr. RAHALL. There are probably a number of other States who have those type of State constitutional limits as well.
Ms. BRAY. I think there are, yes, unfortunately.
Mr. RAHALL. Thank you.
I have no further questions. I just thank the rest of the panel for their testimony as well.
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Mr. PETRI. Representative Terry?
Mr. TERRY. I will just ask one question to our State folks.
I do want to make one comment before I ask a generalized question.
I hate the pack of gum argument. No offense, Mr. Rahall. But it has kind of been raised up the flagpole. Part of the problem is that we have thousands of packs of gum that taxpayers have to pay for. That is a problem when it is compounded.
But let me just state though, the reason we are here today is so the American public can really understand what the issue is in repealing not only the Federal excise tax, that there will be real costs associated with it. When I was back home this weekend going to the Saint Anne's corned beef and cabbage lunch on Friday afternoon and the fish fry at night, if I was asked once, I was asked 100 times to do something and get rid of that 5 cents. In 3 years, no one has ever brought up a 4.3 excise tax to me. And the reason why is because people are being hurt by the price of gas now, and they want something to be done.
So for those people who do want action, this has been one of the few tangible things that has been put out there to them. So I don't think they are being shortsighted, or some of the other uncomplimentary things that are being said about them. But maybe they aren't provided all the information yet, and that is what we are doing today. This excise tax is one of the few user fees. It is not just being thrown into a pot of money, into a general fund, and then spent unwisely. This is infrastructure in our own cities and in our own States. So when people are then asking us so passionately to do something and repeal it, they need to know what the other side of it is.
So today has been good for those folks. But it still leaves us with the nagging question. We have a problem. Our consumers have a problem. Our economy has a problem if we don't do something about the price of gas. It is a simple supply and demand. It is domestic production of oil.
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Representative Bray and Mr. Horsley, working on a State level, are there some insights you could give us of how we can lessen demand and increase supply domestically so that we don't have to go through this every 10 years because of our 56 percent reliance on imports.
Representative Bray, would you help us?
Ms. BRAY. I will try.
I do think that the word conservation needs to be brought up a little bit more. People need to think about the impact of their continual use of gasoline and its effect on lives and congestion and that type of thing. I think the alternative fuels discussion, research, and use should absolutely be racheted up. I think we have to do that.
Mr. TERRY. I am glad that you bring that up because that is the one area where States can be very helpful. My State of Nebraska is looking at how to increase the use of ethanol. Even though we are a corn-producing State, the volume of ethanol used by our drivers is pretty minimal. How do we bring that up? And how do we bring up other alternative fuels? And really that is more a State issue than a Federal.
What is Missouri doing?
Ms. BRAY. We are struggling with that. We are working with it, I assure you. We don't have the answers, but we are.
Mr. TERRY. Mr. Horsley?
Mr. HORSLEY. Mr. Terry, one of the things that I am gratified about is that this committee has shown the leadership in recognizing the vital importance of investing in transportation. I think the consensus of the testimony you have heard today is that reducing the 4.3 isn't the answer. But you are asking, What other proactive measures can States take to be helpful?
On the front page of USA Today today there are two interesting articles: one bemoaning the fact that we need to invest more in our urban area transportation system, and just below that an article ''White House seeks ban on Gasoline Additive'', which opens the door for greater ethanol investment in lightening fuels, especially during the summertime.
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So that regulatory change may open the door for greater production in Nebraska and other States going into ethanol. Our petroleum producing States, because of the higher attractiveness of price per barrel, may very well free up American reserves and increase supply. And that would be helpful in those American-producing States that produce petroleum.
But you probably have the wrong array of witnesses here who can deal with this broader question of increasing world supply, which will then decrease prices again. So it is a little bit beyond the States, per se, to do it. But we stand ready to invest in long-term solutions that will decrease reliance on fuel and increase the efficiency of the overall system. But we need these resources to do that.
Mr. PETRI. Representative Clement?
Mr. CLEMENT. Thank you, Mr. Chairman.
Panel, it is good to have all of you here today.
Mr. Millar, I first want to congratulate you and the American Public Transportation Association for your fairness and working for equity in a lot of different ways.
Mr. MILLAR. Thank you, sir.
Mr. CLEMENT. On page two of your testimony, you seem to imply a relationship between rising gasoline prices and transit ridership. Can you be more precise in documenting that relationship? What do your studies show?
Mr. MILLAR. We learned, particularly back in the 1970's, that there was a clear relationship between how much the price of fuel went up and people's tendency to have an option and use public transit. While I can't quote those numbers off the top of my head, I will be glad to go back and have our research staff pull some information together and share it with you and the other members of the committee.
Mr. CLEMENT. That would be very helpful.
I would also like to ask you about an opening statement where Congressman Oberstar suggested the need to reinvigorate the Clean Fuels Formula Grant Program and to redirect funding in that program to alternative fuels and to other low-emissions technology and away from conventional diesel. Would you care to comment?
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Mr. MILLAR. Yes, sir. I would be happy to comment on a couple of different perspectives.
We have supported the Clean Fuels Initiative. We have supported alternative fuels. In fact, even without mandates, some 30 percent of the buses that are on order in this country right now are for alternative fuels.
We believe, however, that these programs need to be better coordinated so we learn the most we can possibly learn out of this technology and then share that technology and those benefits of technology widely. In that regard, we are cooperating with the Federal Transit Administration on a Clean Fuels Initiative to try to see what are the lessons learned so far and the investments made.
Finally, we do want to remind everyone that while it is very important to clean up the tailpipes of buses—and we are certainly doing that—simply moving from driving alone to taking a bus or a rail car can reduce emissions dramatically and can reduce gasoline consumption each year by a minimum of 200 gallons per year.
We think there is much that public transit has to offer in this particular area and we were appreciative that the Congress saw fit to include that in the legislation.
Mr. CLEMENT. Mr. Horsley, a repeal of the 4.3 cent motor fuel tax would result in many States having to revise State-wide transportation improvement plans and programs. It is my understanding that there are 11 States who now have variable rate motor fuel taxes because of enabling legislation.
If that is the case, could it be that some of the States very well could end up with more revenue rather than less revenue if they collect it rather than the Federal Government?
Mr. HORSLEY. Mr. Clement, that is a very good question.
This last Friday we sent out a survey to try to elicit for the committee what the situation in the various States would be were the 4.3 to be eliminated federally. What are the consequences? The results from the survey we launched Friday are still spotty and we will get to the committee the full results. But in California, Nevada, Oklahoma, and Tennessee—Tennessee being a situation you are directly familiar with—the State tax rises to the level of the Federal tax decrease. So there is a direct offset planned, according to the scheme your Legislature has adopted in Tennessee.
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In Oklahoma, the Secretary called me—it is a similar scheme. In California and Nevada, it is not quite triggered by the 4 cents, it is a lower trigger. It would have to be up to 9 cents to trigger in those States. But for the other States you mentioned of the eleven, we will have to get you the details on how that trigger mechanism works that would have the State pick up and offset the reduction in Federal fuel taxes.
One thing I would add, Mr. Clement, there are apparently around 10 States that are similarly trying to address the crisis in high fuels by reducing their State fuel taxes. So some States would see prices rise, perhaps. Some States would piggyback on the Federal decrease, were it to take place, and have an even more devastating effect on their own State transportation system.
So there's clearly concern over the high fuel prices. Hopefully the cure is not to cannibalize the transportation system.
Mr. CLEMENT. Thank you.
Thank you, Mr. Chairman.
Mr. PETRI. Thank you.
Thank you all.
I would like to expand on the last question a little bit with Mr. Horsley before we conclude with this panel.
You indicated that somewhere between four and eleven States have some sort of a recapture mechanism so if the Federal Government were to cut or reduce the 4.3 cents, they would capture that so they could at least, in theory, keep their programs in tact. What about the other States? Will this throw the programs into disarray? Or will States be able somehow to keep things together, even if there is a fluctuation in the Federal tax?
Mr. HORSLEY. Mr. Chairman, let me give you two areas of concern that we have long those lines.
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Number one, when you reduce a State's program by 25 percent or more—and in some cases the impacts are even greater than 25 percent, especially in the second year of the reduction—what that does is causes contracts to be canceled, projects that have been on the drawing board and were about to go to let to be delayed, it can totally discombobulate the planning for a systematic capital improvement program. The whole beauty of the Federal-Aid System is that it is steady, long-range, something that we can plan against. This would throw all that into a hat.
But for some States it is even worse than that. Many States have taken advantage now of the innovative financing techniques, the advanced construction, or in some cases bonds and made commitments assuming that they could rely on a steady flow of Federal assistance. For example, in Arkansas they are planning a $900 million interstate reconstruction program based on the debt service on bonds being paid by Federal proceeds over time. And if the State loses 25 percent or more of their program, that may put in jeopardy those bonds they are just about to issue.
Mr. PETRI. Thank you very much.
Thank you all very much. We appreciate your willingness to come before this committee today.
The final panel is made up of Ms. Susan Pikrallidas, who is the Vice President, Public and Government Relations, American Automobile Association; Mr. James Johnston, President, Owner Operator Independent Drivers Association; Mr. Walter B. McCormick, Jr., the President and Chief Executive officer of the American Trucking Association; William D. Fay, the President of American Highway Users Alliance; Mr. Edward Wytkind, the Executive Director of the Transportation Trades Department of the AFL-CIO; and Dr. T. Peter Ruane, the President of the American Road and Transportation Builders Association.
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We are very happy to see you all. We will begin with Ms. Pikrallidas.
Mr. RAHALL. Mr. Chairman, before we begin this panel, I would like to ask unanimous consent to include in the record a letter from the President of the Building Construction Trades Department of the AFL-CIO, in opposition to the repeal of the Federal fuel tax.
Mr. PETRI. Without objection, the referenced letter will appear in the record.
[The information follows.]
[insert here]
TESTIMONY OF SUSAN G. PIKRALLIDAS, VICE PRESIDENT, PUBLIC AND GOVERNMENT RELATIONS, AMERICAN AUTOMOBILE ASSOCIATION; JAMES J. JOHNSTON, PRESIDENT, OWNER-OPERATOR INDEPENDENT DRIVERS ASSOCIATION, INC.; WALTER B. MCCORMICK, JR., PRESIDENT AND CEO, AMERICAN TRUCKING ASSOCIATIONS; WILLIAM D. FAY, PRESIDENT AND CEO, AMERICAN HIGHWAY USERS ALLIANCE; EDWARD WYTKIND, EXECUTIVE DIRECTOR, TRANSPORTATION TRADES DEPARTMENT, AFL-CIO; AND T. PETER RUANE, PRESIDENT, AMERICAN ROAD AND TRANSPORTATION BUILDERS ASSOCIATION
Ms. PIKRALLIDAS. Thank you, Mr. Chairman.
I am Susan Pikrallidas, AAA's vice president for public and government relations. In the interest of time, I have submitted a written statement, which I request be included in the record, and I will try to shorten my remarks.
Mr. PETRI. Without objection, your prepared statement will appear in the record. We look forward to you summarizing it in about 5 minutes.
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Ms. PIKRALLIDAS. As you can well imagine, with 43 million members, most of whom are motorists, AAA is particularly interested in the issue of gasoline prices and we very much appreciate this opportunity to testify today.
As you have heard over and over today, gasoline prices are breaking records nationwide. In fact, they have registered their biggest 12-month increase in history. While we enjoyed unexpectedly low prices last year, we have been jolted by the unpredictable and mercurial nature of oil prices when oil supply is controlled by a cartel. But we have also been reminded of this Nation's dependence on a finite resource.
During the past several weeks, several proposals have been floated to deal with the spike in gas prices, one of which is to reduce the Federal gasoline tax. AAA would like to focus our remarks today on that particular proposal.
The proposal to reduce the Federal gas tax by 4.3 cents per gallon, while attractive at first glance, has a problem in that it really will not address the root cause of the problem. That problem is lack of supply due to the OPEC cartel. The benefits to motorists from reducing the gas tax are, at best, minimal. Repealing the 4.3 cents would amount to about $1 a week for the average consumer. And you have heard that referred to in various ways today.
However, the resulting loss of revenue to the Highway Trust Fund would be disastrous to the important work of fixing the Nation's highways and bridges and to improving safety.
Mr. Chairman, you have heard ample testimony today concerning the infrastructure needs of this country. Earlier today, The Road Information Program, or TRIP, released a report stating that one-third of the major roads in our Nation's cities are in disrepair. These are the roads most likely to have or develop cracks and potholes. According to TRIP, the average motorist in our 550 largest metropolitan areas is paying $142 annually in extra vehicle operating costs, a cost that far outweighs the modest benefits of proposed gas tax reductions.
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Mr. Chairman, this committee recognized the importance of properly investing gas tax dollars by working hard to enact TEA–21 several years ago. Because of that historic legislation, motorists now trust that their taxes are invested appropriately in mobility, highways, bridges, public transit, and safety.
It is highway and traffic safety that is of most concern to AAA. Lower receipts to the Highway Trust Fund compromise the safety of the travelling public. We take these roads back and forth to work and on vacations. Our children take these roads to school, and our public safety officials use these roads to respond to emergencies. In short, AAA believes that reducing investment in highway and traffic safety is unsound policy.
AAA met last week with Energy Secretary Bill Richardson to express our concerns about the high gas prices. We also expressed AAA's serious concerns about reducing the Federal gasoline tax for the reasons we have outlined today. But we also made clear to Secretary Richardson that AAA recognizes that part of the supply and pricing problem is rooted in the U.S. consumption of oil products and, in particular, gasoline. AAA believes motorists need to understand that the behaviors surrounding their driving have an impact on gasoline consumption. To help educate our members and other motorists, AAA is today releasing the Gas Watcher's Guide, which details the many ways in which motorists can conserve fuel. We have made this available to the subcommittee members.
The Gas Watcher's Guide stresses to motorists that how you use your vehicle can be just as important as which vehicle you use. For example, slowing down can conserve gasoline. Consolidating trips and errands, keeping tires properly inflated, and maintaining cars properly can all save gasoline and money. A four-wheel-drive vehicle will burn more gasoline than a smaller vehicle and may not be the appropriate choice for running errands.
Mr. Chairman, particularly in this time of high prices, we need to be smarter, more informed consumers. AAA is committed to educating motorists on how they can do their part to conserve gasoline.
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Mr. Chairman, you, Mr. Rahall, and the bipartisan committee leadership were instrumental in establishing the direct link between user fees paid by motorists and the Highway Trust Fund. And for reestablishing trust in the Highway Trust Fund, AAA commends you. Because of TEA–21, the Trust Fund is now dedicated to providing Americans the safe and efficient transportation system for which they have paid on which they rely.
AAA urges the subcommittee to recognize that a gas tax reduction, though well-meaning, will provide little, if any actual relief to motorists; not solve the real problem, which is supply; and cause real problems as our highways and bridges continue to deteriorate. Short-term fixes, while politically popular, are not in the best interests of highway safety and the overall economic well being of the Nation.
Again, Mr. Chairman, thank you for this opportunity to share AAA's views on this important subject.
Mr. PETRI. Thank you.
Mr. Johnston?
Mr. JOHNSTON. Thank you.
Mr. Chairman and members of the committee, I am grateful for your initiative in holding this hearing and for providing me the opportunity to present you with information on the serious—in fact, devastating—effect of the current fuel situation on small business truckers.
Simply put, the skyrocketing cost of fuel and the inability of small business truckers to pass on these increased costs is causing financial ruin throughout the industry. You may have seen the coverage of the trucker rally on the mall last week. Many truckers could not arrange to be here and many others simply could not afford to make the trip.
I have attached to my written testimony a few examples of the communications we received from truckers who couldn't attend but watched the rally on C-Span. I would like to quote to you some excerpts from those communications because they describe in their words the severity of the problem far better than I can in my words.
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Mr. Ray Wothe from Minnesota wrote: ''Thank you, OOIDA and drivers that went to the Capitol yesterday on behalf of the trucking industry. Had I been aware of the gathering sooner I would have joined you one way or another. I had just completed 54 days on the road trying to make up for lost revenue because of the rising cost of fuel. All for not. If I break even, I'll be lucky. About 45 minutes before C-Span began live coverage I had called the finance company to tell them I could no longer afford to make my payments because of the high cost of fuel and to find out where to turn in my equipment and what actions would be taken against me once I defaulted on my loans. The person I needed to speak with was busy, so I left a voice message for her to return my call.
''After 30 minutes of listening to you and the legislative representatives speak my eyes were starting to water and it was getting hard to swallow. I was starting to feel that maybe someone was trying to help. You and the Members of Congress gave me hope for the future of the industry.
''I told the finance company I wanted to keep my truck and continue being an asset to my country. We came up with a 90-day plan and hopefully by then the Congress and the President will have done the right things.''
Another said: ''I just got through watching you on T.V. I just want you to know how much I appreciate what you and everyone else is doing at OOIDA for the independent trucker. Unfortunately, it is too late for me. I had to sell my truck and trailers last week. I just couldn't hold out much longer without losing everything I had worked for.''
Unfortunately, these examples are typical of the current plight faced by many thousands of small business truckers today. A recent article in a trade publication captioned ''Truckload Carrier Increases Paycheck for Drivers'' exemplifies the severity of the real problem. The article mentions driver pay increases, then goes on to state, ''not to leave out its owner operators, the company will add a fuel surcharge of 3 cents a mile, which will raise rates from 82 cents to 85 cents a mile with the addition of the safety bonus.'' The 82 cents was far from adequate in the first place, and the 3 cents a mile amounts to 15 cents a gallon when fuel price increases, long before this adjustment, averaged 50 cents a gallon.
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By the way, 15 cents is far more than the 4 cents we are discussing here.
Some people have called for a reduction in the tax of 4.3 cents per gallon. Others are calling for a 39-cent reduction. The average price of fuel, however, has gone up in the past few months by over 50 cents per gallon. Not only would these tax reduction proposals not compensate truckers for the full increase it has seen in fuel prices, we remain unconvinced that the full amount of the tax reduction would be passed along and reflected in the price of fuel at the pump.
I confess to being the one that coined the phrase ''burning your furniture to heat the house'' and that is exactly what it is. No one likes to oppose a tax reduction. No one likes to pay taxes. But the fact is that the fuel tax that goes into the Highway Trust Fund is the purest form of taxation. It goes into building the highways and maintaining the highways that we all have to use and that the industry has to use as a work place.
The highways are our work place. And with the poor condition of many roads today, OOIDA is not going to embrace proposals that will slow their construction or repair. But we will consider them and our members will take them in this time of desperation unless another solution is forthcoming.
We have proposed a mandatory fuel surcharge with a mandatory pass-through to the party who bears the cost of fuel. For some small business truckers, it is already too late. Many thousands of others are rapidly approaching the point of no return. The loss of this significant and vital segment of the transportation industry will have a profound short-and long-term ripple effect on the entire economy and it is already being felt by truck manufacturers, component suppliers, and dealerships throughout the country.
I urge the Congress to act quickly to address this devastating situation before it is too late for many more thousands of small business truckers who are counting on you for solutions to a problem that is beyond their ability to cope with.
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Thank you, Mr. Chairman.
Mr. PETRI. Thank you, Mr. Johnston.
Mr. McCormick?
Mr. MCCORMICK. Mr. Chairman and members of the committee, on behalf of the Nation's responsible motor carriers, I want to thank you for the invitation to be here. The roads are where we work and therefore we are the first to understand just how important it is to keep the Highway Trust Fund intact, and I would be happy to answer any questions you might have on that subject.
But given the crisis in the country today regarding runaway diesel fuel prices, I want to make clear once again that the trucking industry is facing a fuel crisis and the only thing that can save hundreds of companies and preserve this historic economic expansion is immediate and strong action from the Federal Government.
The prices at the pump are hurting the men and women who move this economy. Our drives are paying on average $150 more every time they fill up. These are hard-working people who make their living off a 2 to 4 percent profit margin which has now been erased by the price of fuel.
In less than a month, we have witnessed the growing frustration around the county with two truck rallies here in our Nation's capital and another set for tomorrow. They are put together by truck drivers, and Jim's testimony a moment ago was poignant.
I am concerned for these drivers and their families. And I know that you are as well. I am also deeply concerned for the country because if America's trucks are forced to the side of the road, it will strand not just books and toys, but our economy. Mr. Chairman, these still are good economic times for most of the country. But the trucking industry is the canary in the coal mine. As goes trucking, so eventually goes the country.
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Simply stated, this historic economic expansion today is running on fumes. Today the national average retail diesel fuel price is about $1.50 per gallon, the highest price since the Energy Department began collecting price data. This price is a 50 percent increase over last year. A few weeks ago the crisis was concentrated in the northeast, but now it has spread to all regions of the country.
Right now, in Maine potatoes are sitting on the loading docks because it is just too expensive to go get them. Girl Scout cookies are waiting to be picked up and delivered to the northeast. This is just a hint of what is to come if we do nothing. More than 70 percent of U.S. communities rely solely on trucks to deliver their goods. If trucking breaks down, so does the transportation backbone of the country.
Fortunately, today's crisis can be promptly addressed. I have brought with me copies of a letter to President Clinton outlining what needs to be done. First and foremost, we need to open the strategic petroleum reserve. The 9.6 million trucking taxpayers helped buy that oil, now they ask that a small portion of it be used to protect U.S. economic stability.
Just last week, the President acknowledged that we need to do more. So turn on the spigot. Open the reserve. It can be done today with an Executive Order.
Mr. Chairman, I will end my formal remarks simply by saying that the ability of trucking to keep consumer costs down has been a driving force behind this economic expansion. We don't want this booming economy to go bust. It is time we stand up and act to save a vital U.S. industry and protect this strong economy.
Again, thank you for having us here today.
Mr. PETRI. Thank you.
Mr. Fay?
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Mr. FAY. Mr. Chairman and Mr. Rahall, the last time that I testified here I told you that we lose 42 people every day because of outmoded roads. That's 281 each week, and 15,000 each year because our roads are not up to par. I told you that our roads and bridges are crumbling from underinvestment and that our failure to invest adequately in them is slowing our Nation's air quality progress and taking time away from our families. I told you that because of the dramatic progress we have made in cleaning our air and water, it may be that the greatest environmental threat that is facing us today is increasing traffic congestion.
Because of this committee's bipartisan leadership—and both of you, in particular—TEA–21 may actually turn that around. Nonetheless, all the above concerns are still true.
I am William Fay, President and CEO of the American Highway Users Alliance. We are a consumer's group representing motorists and truckers who care about and rely on safe and efficient highways to transport their products, their families, their customers, and their employees. Our members pay the taxes that will finance a top-quality road system in the United States.
At the outset, I want to say that The Highway Users is deeply concerned about the adverse impact that higher fuel prices are having on America's truckers and businesses. With fierce competition, high and rising operating costs, and intense Government regulation, it is increasingly difficult to break even, let alone turn a profit in those industries. Yet as the previous witnesses testified, both sectors are absolutely vital to our economic productivity, to our tourism, and to recreation.
But as much as we sympathize with their plight, we are equally convinced that proposals to reduce fuel taxes, by cutting highway investments will be detrimental in the long run. Specifically, we believe these proposals are shortsighted for the following reasons.
First, reducing the fuel taxes that would have been reinvested in better roads and reduced congestion is going to thwart improved fuel economy. It is tantamount to cutting off our collective nose to spite our face. Attached to my testimony is a study that we commissioned and released last November called Unclogging America's Arteries: Prescriptions for Healthier Highways. It found that improving the worst bottlenecks in the country are going to prevent 287,000 injuries over the next 20 years, slash carbon monoxide emissions by 45 percent and volatile organic compounds that cause smog by 44 percent, save truckers, buses, and commuters travelling through those bottlenecks an average of 19 minutes per trip—which by saving fuel is also going to lower their fuel prices, regardless of the pump price.
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But we will achieve those investments only if we have the backbone and the resources to improve the bottlenecks. And the greatest impediment to those improvements is whether or not we have the funding. A $19 billion cut in the revenues available would undoubtedly delay those improvements even longer.
Second, if the reason for these fuel supply shortages and resulting higher prices is OPEC, why should Congress start a precedent of reducing fuel taxes to, in a sense, bail OPEC out? This point was made persuasively by economist Paul Krugman in a guest editorial in the New York Times last week, which I have attached to my statement. ''If the price of gas at the pump were to fall, motorists would buy more gas. But there isn't any more gas, so the price at the pump, inclusive of the lowered tax, would quickly be right back up to the pre-tax-cut level.'' In other words, fuel tax cuts would give OPEC more leeway to keep fuel prices high by constricting oil supplies.
Third, even if Congress acted immediately to reduce Federal diesel taxes from 24.4 to 21.1 cents, there is—as many witnesses have mentioned—no guarantee that the consumers are actually going to benefit from that tax cut.
And fourth, while this tax has been called Al Gore's tax—alluding to the 4.3 cent gasoline tax increase that was passed in 1993 as a part of President Clinton's deficit reduction package—the tax is no longer used for the purposes that President Clinton had in mind. If you want to call it anyone's tax, you should call it Phil Gramm's tax. He is the one that authored the amendment that moved it into the Highway Trust Fund. So politicizing this tax is not only harmful to our Nation's roadway safety and efficiency, it is absolutely wrong.
As highway users, we opposed the initial 4.3 cent tax as vehemently as we support it today.
There are some excellent solutions out there, and they have been brought up by some of the previous witnesses. We believe strongly that increasing oil supply is the key. We may need to rethink some of our public policies that restrict the exploration and development of public lands. We think Congress should consider direct tax credits to the small and large trucking companies and bus operators that are most severely affected by this unanticipated jump in fuel prices.
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And I think if you want to really help keep the future cost of America's truckers and motorists down, you may want to consider enacting S. 947, which would limit States' authority to impose tolls on the Interstate Highway System.
Mr. Chairman, thank you for inviting me to testify today. I am looking forward to answering any questions.
Mr. PETRI. Thank you, Mr. Fay.
We are pleased now to hear from Mr. Ed Wytkind, AFL-CIO.
Mr. WYTKIND. Mr. Chairman, thank you again for having us. It is always a pleasure to work with you and Mr. Rahall on these kinds of issues. Your record in working with transportation labor and the 29 unions we represent is unparalleled. And I thank you for that.
The Nation is gripped in a crisis. Everybody knows that. We have heard about it. This committee has taken a leadership role in pointing that out. Home heating costs are off the charts. And in just a few months we have seen the price of fuel at the pumps rise to unparalleled levels. For working families, it is affecting them in their pocketbooks. I don't think you need to be a scientist to figure out that when you have to pay that much more for gas, people who work for a living are going to struggle to do so.
Transportation companies of all sizes are reeling from fuel price increases that have doubled in some regions in just a year. Many carriers are being forced to impose fuel surcharges that translate into some of the higher costs that are forcing others to struggle.
Another point is the port truck driver issue. It is something that the Teamsters Union has been talking about. These drivers are trying to recoup their increased costs, 60 percent just since last month. And those efforts have been largely unsuccessful. James P. Hoffa, President of the Teamsters Union, has been leading the Port Trucker Bill of Rights Campaign to improve wages, working conditions, and rights for some 40,000 port drivers nationwide and to give them a union voice that they so desperately need but are being denied because of perversions in the law and the way they are being interpreted.
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Mr. Chairman, while our Nation must act now to deal with the crisis, we must avoid politically convenient proposals that sound good but will have almost no effect on fuel prices. Others have alluded to it, and perhaps others have come close to saying it. I will say it. As reflected in Mr. LaHood's comments earlier, the tax repeal idea that is before this committee is a cruel hoax on the American people because it raises false expectations that everyone knows will not be realized.
In the end, if politics prevails over good public policy, it is most unfortunate that the victim of the game will be our Nation's transportation system, its users, and its workers. Let me explain.
First, the repeal of the tax, as we have heard, will not translate into savings at the pump. Past experience shows that, and I think this committee did a tremendous job in pointing that out. Moreover, if the benefits are realized, they will amount to very little. Back to my earlier comment, it is a sinister attempt to raise an issue that may score political points but won't solve the problem that we are all committed to solving.
The minuscule and typically very illusory benefits consumers may enjoy, when weighed against the $5.8 billion and $1.4 billion lost annually to highway and transit programs should make everyone's decision on this 4.3 repeal an easy one. The Federal surface transportation program also includes billions for safety programs, which also would suffer from this repeal. In its totality, this trade-off is just not a good idea and doesn't pass the common sense test.
Second, the TEA–21 balance that this committee fought to achieve in this landmark bill—we fought with you to get enacted—cannot be dismantled. We know that all the money that flows into that program is directly proportionate to the revenues that come into the Trust Fund. The DOT's estimate of $20 billion over the next couple of years is just staggering to our minds considering that we get literally millions of jobs across America because of the TEA–21 Program and because of all the other transportation infrastructure programs this committee has advanced.
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Third, again, while politics is unfortunately playing a role here, Congress transferred that money back to the Trust Fund where, I might add, they belong and they should stay. Repeal of this tax, in our judgment, is also an idea that would be viewed by us and by many people across this country as a very ominous reversal in policy because we as a country are just beginning to reap the rewards.
Of course, the crisis is before us and we implore the Congress and the Administration to do what it takes to force OPEC to reverse its decisions to take away literally millions of barrels a day out of the marketplace. This act is strangling the U.S. economy and it has to stop. That is really the crux of the issue.
We also support drawing down the strategic oil reserve. And we support, as the Administration has led, efforts to help working families pay for the large increase in heating oil costs.
Let me conclude by reiterating our strong support for port truck drivers, who make $7 to $8 per hour, have no pensions, have no health care, and they are a good example of what we are talking about here, the victims of this fuel crisis. Something has to be done to take care of them.
Finally, we look forward to working with the committee to protect the integrity of the nation's Federal highway transit investment program that we have all fought to build. We look forward to working with you to carry that out.
Thank you.
Mr. PETRI. Thank you.
Dr. Ruane?
Mr. RUANE. Chairman Petri, Mr. Rahall, I am Tail-End Charlie, sometimes known as Pete Ruane, the President and Chief Executive Office of the American Road and Transportation Builders Association. Since 1902 ARTBA has represented the consensus views and interests of the U.S. transportation construction industry here in the Washington, D.C.
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Our industry generates more than $175 billion in U.S. economic activity annually and provides employment for over 2.2 million Americans. ARTBA's more than 5,000 members come from all industry sectors, both public and private.
Once again, we appreciate the opportunity to provide our views on recent proposals to suspend, rollback, or repeal portions of the Federal motor fuel tax excises.
This is 1996, right? Deja vu all over again. Mr. Chairman, as you recall, ARTBA testified several times before this subcommittee on the need to redirect the revenue stream from the 1993 4.3 cent Federal motor fuel tax to the Highway Trust Fund to meet highway capital needs identified by the U.S. Department of Transportation. We certainly recall with vivid memory the leadership of you, Chairman Petri, and Ranking Democrat, Dick Rahall, who were the original sponsors of legislation to do just that.
The committee's leadership in this area has been stellar. It is very disappointing, however, that some in Congress apparently think it would be OK to diminish—or in the least disrupt—the collection of Federal highway user fees that finance improvements in the Nation's roads and mass transit systems. This means some Members of Congress still don't get it. They still don't understand the value of highway investment to the public health, the economy, the quality of American life. And certainly they don't understand the business implications such proposals would have on State highway programs and firms in my industry.
The Federal Highway Program is one of the Nation's most important weapons in the fight to improve public health and safety. Traffic accidents are the leading cause of death of Americans 6 to 28 years of age and result in more permanent disabling injuries to young people than any other type of accident. Traffic accidents—not air pollution or a host of other, although important, national issues that the White House, Congress, and the national media often focus on—traffic accidents are the leading cause of death of young people.
The U.S. Department of Transportation tells us that poor road conditions or alignments are the contributing factor in approximately 12,000 American deaths each year. And motor vehicle crashes cost American society over $159 billion each year. That is more than five times what the Federal Government is now investing annually in the Highway Improvement Program.
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ARTBA's past analysis of the relationship between public highway investments and traffic fatality and injury rates over the past 40 years shows a two-for-one public health return on investment. Every $1 billion invested by the public in Government-financed road improvements since 1950 has to this point helped prevent 1,400 premature deaths and nearly 50,000 injuries and helped save the American society over $2 billion in health care insurance and lost wage and productivity costs.
I trust you have seen our editorial and our ads in local newspapers and national press in the last few weeks. But Mr. Chairman, when politicians talk about cutting back Federal highway investment, they are really talking about delaying highway improvements that save lives and prevent injuries. There should be no mistake about that.
Is our industry concerned about the recent rise in the cost of motor fuels? Of course, we are. Most of the equipment that our contractor material supply firms operate use diesel fuel. So do the trucking fleets used by our manufacturers.
We believe, however, this issue should be put in perspective. In some ways, people's displeasure about today's motor fuel prices is the result of unrecognized good fortune in the past rather than their misfortune in the present. Earlier witnesses have referred to recent Wall Street Journal and New York Times articles that show the disparity of fuel prices around the Nation.
What our industry really wants is stability and predictability in Federal funding. Uncertainty on funding causes a chain reaction that delays decisions on the public side. It stops or delays projects and that forces negative consequences on the private sector side, consequences like laying people off and delaying purchasing decisions, which result in more people being laid off down the chain.
We estimate that over time repealing just 4.3 cents of the Federal motor fuels excise tax would result in over 650,000 lost American jobs. Our advice to Congress is to stay the course on Federal highway funding. The Federal motor fuel excise tax, as others have noted, is a pure user fee. Those who pay it—motorists and truckers—get a direct benefit: safer and more efficient roads. The negative consequences of reducing the revenue stream to the Highway Trust Fund in terms of public policy, jobs, economic growth, and productivity far outweigh the short-term financial relief, if any, that might accrue to users of gasoline and diesel motor fuel.
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In terms of short-term relief, in addition to suggestions made by others, Congress might also look at the USEPA's regulations under the Clean Air Act that require gasoline refiners and service stations to change their inventory from winter gasoline to summer gasoline. It is our understanding that that process happens in late winter/early spring time frame and could act to tighten market supplies, thus causing a short-term rise in motor fuel prices. To our knowledge, very little attention, if any, has been paid to this market reality. Perhaps the committee could suggest this to other committees in the full Congress, given your strong, historic, bipartisan leadership, as some kind of market relief to those affected.
And as someone who represented the trucking industry for nearly 10 years—the Nation's moving and storage industry—I fully understand, appreciate, and empathize with the earlier remarks of our colleagues from that industry. We would respectfully suggest that serious consideration be given to tossing aside this season's 4.3 cents gas tax repeal, the political football that is being tossed around. This is Congress' version of March Madness. You consider targeted tax relief to the trucking industry and to those members of our economy who are disproportionately affected by this rise in diesel fuel prices—that would be the alley-oop pass, the slam dunk, as our version of March Madness.
I will be glad to answer any questions. Thank you, Mr. Chairman.
Mr. PETRI. Thank you, Pete.
Mr. Rahall?
Mr. RAHALL. Thank you, Mr. Chairman.
I don't have a direct question, but I would like to commend the gentlelady from AAA for the position that she has expressed today on behalf of her membership. I think that shows that those who are most directly affected by this 4.3 recognize that it is a user fee that goes back into transportation improvements and it is something from which the motoring public does benefit.
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We have heard this proposal called a lot of different names throughout the course of today's hearing, and I would just add one more: it is a Mickey Mouse proposal. I think the American people are smart enough to recognize it for that. I certainly commend AAA for taking the position they have.
Walter, you and ATA outlined three initiatives to address the fuel crisis in your testimony. You then noted that if you do not get economic relief quickly, tax relief must be considered. I would just like to explore that a little further with you and see what type of tax relief you specifically had in mind.
Mr. MCCORMICK. Mr. Rahall, as you well know, the American Trucking Association was formed with one purpose in mind: to lobby for the building of roads. For over 65 years what the American Trucking Association has done is lobby for the building of roads, the building of the interstate systems—in fact, just in the past decade, when the deficit reduction tax of 4.3 cents per gallon was enacted in 1993, the American Trucking Association never sought, in the wake of a budget surplus, to have that repealed. Instead, we sought to have that 4.3 cents dedicated to the Highway Trust Fund for the building of roads.
But Mr. Rahall, today we have a very, very significant economic situation. And the members of the American Trucking Association, who are in the business of trucking and have used those roads for their business, are now looking at perhaps having to go out of business if they do not get relief. So we have called for a release of oil from the strategic petroleum reserve. It is quick, it is consistent with law, and it is consistent with precedent.
Back in 1991 the Administration released 21 million barrels of oil from the strategic petroleum reserve because the price of oil had shot up to over $30 per barrel. That is the situation in which we are again and that is the situation we would like to have resolved.
You asked me what kind of tax relief? Any tax relief should come out of general revenues. Where we are right now is that the total projected budget surplus for fiscal year 2000 is $176 billion. So if we do not get relief quickly, then we think there should be tax relief and that that tax relief should come out of general revenues.
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Mr. RAHALL. You know that projected surplus can almost be as Mickey Mouse as this proposal is.
Where truly are you calling for tax relief? Out of general funds, you say. What specific proposal would you envision? A credit?
Mr. MCCORMICK. The specific proposal that we have asked for is not tax relief. The specific proposal that the American Trucking Association has called for is release of oil from the strategic petroleum reserve.
There are a number of tax measures that have been introduced. Senator Campbell has introduced a moratorium on all fuel taxes. Mr. Collins from Georgia, who is himself a trucker in the trucking business, has proposed a repeal of the 4.3 cent per gallon fuel tax. We have said that if there is tax relief, that that tax relief should come out of general revenues. But we really think the principal problem is a supply problem and it should be addressed as a supply problem. That has been the solution we have been proposing.
Mr. RAHALL. Mr. Johnston, let me ask you a question after I commend you wholeheartedly for the very dignified way in which your membership came to Washington, D.C. last week and presented their case and brought attention to the issue. It was a dignified manner in which they did it and I salute you and your membership.
I thank you as well for meeting with members of my staff on a proposal you have talked about, which is the fuel surcharge proposal. I find it to be something that should be given consideration.
If a mandatory fuel surcharge is imposed, how would it be enforced?
Mr. JOHNSTON. We are proposing that it be added to the provision of the ICC Transfer Act and that the private right of action encompass that amendment as it is placed over there so that the industry could enforce it itself.
With all due respect to Walter's comments, the real problem the industry has is not a supply problem. The industry has a problem passing through its costs. We believe that a fuel surcharge mechanism that is mandatory, that everybody charges, and that is mandatory to be passed through to the person who actually absorbs those fuel costs—we think that would go a long way toward solving the industry's problem without short-sighted tax breaks that don't really solve the problem or release of fuel from the reserve that the oil companies may not even bid on.
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Those are other problems. The industry has the problem of the inability to pass through its costs.
Mr. RAHALL. That sounds pretty good. So you are not then relying on Federal enforcement?
Mr. JOHNSTON. That is correct.
Mr. RAHALL. Any other positions? Walter?
Mr. MCCORMICK. Our organization has the strong support of the Teamsters campaign on the whole port truck driver issue. One of the things that President Hoffa has said in his public statement that reflect the views of the independent truck drivers who have been demonstrating and talking to Members of Congress over the last few weeks is trying to find a way to recoup costs that they otherwise have no way to recoup.
We have publicly said that we support any and all proposals and would like to look at them to review them to see how they are carried out. But our ultimate goal is a shared goal. They, like any other player in this industry that needs to find a way to recoup its costs, should have the ability to do so. And at the same time, if you look at it from a port truck driver's standpoint, those drivers also need a voice. That is part of the effort we are undertaking, which is trying to draw attention to the very basic fact. These drivers are screaming for a union voice and the perverted kind of way in which independent contractor laws are being interpreted is denying them that voice.
So if you put together the lack of representation that these workers have and that they want, and couple that with the proposal to recoup their costs, that would be the formula to giving the economic relief to these drivers that they need.
Mr. RAHALL. Would any other panelists wish to comment on it?
Dr. Ruane?
Mr. RUANE. I would like to refer to some other remarks in my testimony regarding the fact that this has already adversely affected a number of our member companies that are publicly traded. We have tracked this over the last several months and just the mere mention of this proposal has driven down the stock value of a number of companies. The uncertainty and instability it creates—it is continuing to affect that. And when you think about the investments many of them have made in the last 2 years gearing up for the benefits of TEA–21, the real impact is only now occurring in the marketplace. It did not occur in 1998. It started to occur in 1999. In the year 2000 and 2001, it is really gearing up.
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Yet these same companies invested millions and millions of dollars in building capacity, acquiring plants to deal with this, and now the Congress is sending the signal that maybe this isn't going to happen, that they might withdraw the steady flow of funding. The question asked earlier about whether the States could respond or not—the real question is, Would they spend the money in the same way? I would submit that many of them would not in the same types of programs that are in the Federal legislation if they realized their own gas tax. A lot of their taxes are diverted to non-transportation uses.
So there is no equivalency that I think would take place. And I think that is what John Horsley was alluding to in his own remarks.
Mr. RAHALL. Thank you.
Thank you, Mr. Chairman.
Mr. PETRI. Thank you.
I just wanted to end by saying that it seems to me that we don't have a 4.3-cent problem. We have a 50-cent problem. Even if we were to take this step, we wouldn't solve the problem. We would create a lot of other problems.
So where did this 50 percent increase in gas prices and diesel fuel prices come from? It didn't just happen. It happened because OPEC restricted supply.
I favor, as some of you have, at least keeping on the table and giving our negotiators a very strong bargaining chip by making it clear that I support—and I think we all should support—releasing in an orderly way supplies from the petroleum reserve if OPEC does not increase supply. Then if that is necessary, also taking steps to increase domestic production longer term.
I understand they have cut back OPEC production in the neighborhood of 4 million barrels a day and that it is possible to make up half of that each day from the strategic petroleum reserve for many, many months. Some say that it should just be used for emergency military purposes. But some others of it have some doubts as to how well this petroleum reserve will really work anyway. This can be a trial test to see if this is in fact a strategic reserve or if it is something that is not really there when we need it. Why not test it in an orderly way and at the same time solve a real problem for an awful lot of Americans and give our Government a bargaining chip in negotiating with OPEC to make it clear that if they get too greedy—which they are right now—we are going to act firmly to protect our interests and the American citizens who are paying our salaries.
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Can you expand on any of that? I would appreciate Mr. McCormick or any of the rest of you—we have to get back this 50 cents or as much of that as we can to really put things back on an even keel.
Mr. MCCORMICK. As you so well know, in a political environment, getting consensus on the problem is essential before you can get consensus on the solution. What you have heard here today are a variety of solutions to the individual problems that we are experiencing. Mr. Johnston's constituents want to recover their increased costs. If they do that through a fuel surcharge, the increased costs get passed on to the next person.
Mr. Ruane talked about the loss of stock value in some companies if there is a repeal of the 4.3-cent tax. And just a year ago, nobody was talking about a repeal of the 4.3-cent tax. Nobody was talking about a difficulty in paying.
All of this is traced to one problem. The problem is a constriction in supply. It is an artificial constriction in supply. It has been done by a cartel and it has been done purposefully. That is the reason we set up the strategic petroleum reserve. At the end of the 1970's we said, Never again will we be held hostage to the oil-producing nations of the Middle East if they want to take our economy and cause us problems.
So for us to now use the strategic petroleum reserve to address the supply problem is entirely consistent with why it was set up. It addresses everyone's concerns. And it puts our economy back on a stable course.
That is why we have called for addressing a supply problem with a supply solution.
Mr. JOHNSTON. We certainly agree that release of the oil from the strategic reserve could be somewhat of a help. We don't see it as being much more helpful than a 4-cent reduction in fuel taxes, which is almost zero helpful. By the time this increased fuel from the strategic reserve gets to the refiners, the refiners get it out to the public, and it has any impact on pricing, I think half my members will be out of business and I think the industry will be totally devastated.
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I think that should be a consideration as well as development of an energy policy that prevents people from holding us hostage every few years over a fuel supply. And I think not much discussion has occurred here about what I think the real problem is. It is not necessarily the price because a lot of experts have demonstrated that the price of fuel is not really that much more now, if as much, as it was 10 years ago taking into consideration inflation. We have serious problems.
If we are going to become self-sufficient in oil production, we have to find the incentives to get our small producers in the United States producing as well. And they are faced with some of the same problems that the trucking industry is with the fluctuation in prices.
Last year, their oil down there was selling for somewhere around $10 or $11 per barrel and they were closing down wells and their financiers were not allowing them the funds to open and produce from these wells. And this year, the price is up, but they still aren't allowing them to do it because there is no stability in those prices.
Mr. PETRI. Any other comments?
Yes, ma'am?
Ms. PIKRALLIDAS. Mr. Chairman, when we met with Secretary Richardson last week, we addressed the strategic petroleum reserve and supported the decisions on the reserve up to now. but we did make clear to the Secretary that if OPEC does not release the supply that we need to stabilize prices, we would support putting the SPR on the table for release of fuel.
Mr. PETRI. I think it would help him in negotiating if a lot of us were saying that this is what we think we ought to take very seriously. I wish him well in those negotiations because this is—we know what happened in our country the last time oil prices skyrocketed in the short-run. It destabilized everything, we ended up with high inflation, and pretty high unemployment, and a loss of national competitiveness. And we don't want to go that way again.
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Mr. WYTKIND. Mr. Chairman, if I could, I just wanted to briefly respond to your question and to another point made by another panelist.
First, the 13 million-member AFL-CIO supports the proposal on the strategic oil reserve. We, like you, want to see what kind of impact it would ultimately have because we would like to actually see it reduce prices. The only way to find that out is to use it for its purpose and demonstrate its capability.
But as Mr. McCormick said, if we deal with the supply issue, then everyone will have their various interests satisfied. I just want to correct one thing. If you turned the clock back and said that we would return our oil prices to where they were a year ago, yes, everybody would have a measured benefit, depending on who they are and who they represent. But those port truck drivers still make $14,000 to $16,000 a year, make $7 to $8 per hour, have no health care, have no pensions, and still are being forced to live and work in an environment that doesn't pass any of the economic boom that we're talking about on to them, as the drivers who deliver the goods to and from the ports.
I don't want to see us try to figure out a way to deal with this crisis—and I agree it is a crisis—but then lose sight of the fact that we still have a certain segment of this economy that is being left behind, that doesn't have representation, and that doesn't have a way to recoup its cost to make a decent living. And that is an important point.
Mr. RUANE. I would also point out that in our testimony we do address that. And the research we have found from the Energy Information Agency—their own testimony before several other committees 3 weeks ago indicated that they didn't think this problem would be solved until the end of the year. So what are you going to do for the next 6 months? If various industries are affected—including everyone at this table—it is going to continue to suffer.
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This to me argues for a multi-pronged approach trying for relief immediately and at the same time walking into OPEC on Monday saying, Guess what? Here is the order from the President opening up the reserve. What are you going to do?
That would get their attention, in my opinion.
Mr. PETRI. Thank you.
We very much appreciate your willingness to reschedule your week to be here with us today.
With that, this hearing is adjourned.
[Whereupon, at 5:16 p.m., the subcommittee was adjourned.]
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