August 25, 2007 by Tom Armstrong.

Mary Peters, secretary of transportation, writes today:

Our system is failing because federal gasoline taxes are deposited into a centralized trust fund and allocated based on political will. Major spending decisions often have nothing to do with underlying economics, engineering realities or consumer needs. New programs and pet project earmarks have proliferated in recent years. The 2005 transportation funding bill, for example, included more than 6,000 politically driven earmarks reported to cost some $24 billion. That’s a staggering figure. The true price however is unfortunately much higher because earmarks typically represent only a fraction of project costs.

In addition to breeding wasteful spending, the gas tax does virtually nothing to reduce the explosion in highway congestion occurring in the past 25 years. Gas taxes are levied regardless of when and where someone drives, creating a misperception that highways are “free.” In turn, this encourages overuse and gridlock, often at precisely the times we need highways the most. The Government Accountability Office last month released a report arguing that gas taxes are fundamentally incapable of balancing supply and demand for roads during periods of congestion. We agree.

Read it all here.

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August 25, 2007 by Tom Armstrong.

From today’s WSJ (subscription required), notable:

It was supposed to have limits. Schip’s champions argued that the program would not be an open-ended entitlement, obligating the state (Texas) to pay for anyone who met eligibility requirements and signed up. Instead they promised to cap the costs at a specific dollar amount each year. If too many people sought to sign up, Schip administrators were to draw up waiting lists and halt enrollment.

It didn’t work out that way, of course. Once it was up and running, the program mushroomed in cost and few officials wanted to control its growth. In 2001, its first full year, Texas’s Schip cost $381 million. One year later, the program was up to $679 million and the state was headed into a $10 billion budget deficit. (The state has budgeted more than $900 million for the program for 2008.)

Not coincidentally, in 2002 Republicans won control of the legislature for the first time in more than 100 years. Shortly thereafter, Republicans cleaned up the Schip program by requiring that beneficiaries apply every six months instead of once a year (circumstances often change throughout year), and by mandating that those enrolled in the program meet specific income and assets tests. These reforms aimed to make sure the program really was a last resort for poor parents seeking health care for their children.

The assets test revealed evidence of abuse. Under the reforms, families were generously allowed to exempt up to $15,000 in value of one vehicle and up to $4,650 for a second. But several Texans were caught collecting Schip benefits while driving expensive, late model luxury cars. One person had three automobiles worth more than $50,000 after the exemptions. Another family was denied enrollment when found to have $150,000 in IRAs.

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