A 'Grand Swap' For Transportation Funding

This post was originally published on National Journal‘s Transportation Experts Blog. You can read the full forum here.

Background and Question

In the search for a transportation funding solution, an old idea is getting new play: hand responsibility for Medicaid fully to the federal government, freeing up state resources to take on education and infrastructure.

The proposal dates back to at least 1980, when Tennessee’s Republican Gov. Lamar Alexander reportedly proposed to President Ronald Reagan a Medicaid-for-education “grand swap.” Reagan supported the idea, but it never went anywhere. Now a senator, Alexander revived his push in May. And Washington Post columnist Robert Samuelson recently proposed adding transportation funding to the mix.

“Slightly modified, the switch still works,” he wrote. “In 2012, states will spend about $200 billion on Medicaid. Against that, federal aid to states for schools and training totals $105 billion and construction grants (mostly for highways and transit systems) amount to $96 billion,” Samuelson argued, citing a recent report on state budgets penned by former Federal Reserve chairman Paul Volcker and former New York Lt. Gov. Richard Ravitch.

It’s an idea that shows bipartisan promise: Alexander still backs it, as does Samuelson, and The New Republic‘s Timothy Noah offered up his support, too.

As we saw in Atlanta this week, even a one-cent tax increase with bipartisan and business backing couldn’t get enough voter support. Is a shuffling of resources, and not new taxes, the right solution? What do you think? Could a “grand swap” work? Or is the risk of devolution too strong? (Maybe the federal government could retain some role in projects of regional or national significance?) Is this solution too blunt or just right?

Response

Define Interests, Rather Than Grand Swap

By Emil Frankel

In the present atmosphere of partisan and ideological stalemate, it is hard to imagine that a “grand swap” of transportation and Medicaid programs would have much chance of enactment. Moreover, this particular swap would appear to lack a driving logic: there is little nexus between the two program areas, and both state and national interests are involved in many transportation projects and programs.

To be sure, federal funding for surface transportation has stagnated, and may even decline, in the context of persistent annual budget deficits, a growing national debt, and the continued unwillingness of Congress even to consider increasing user-based transportation-related taxes and fees. In these circumstance, it is almost certain that states and localities will have to bear more of the burden of maintaining and restoring transportation assets, despite their own very serious fiscal challenges. The recent results in Georgia notwithstanding, there is a great deal of evidence that state and local referanda and initiatives to increase and dedicate specific taxes to transportation can succeed, even when there is general resistance to tax increases, as long as those taxes are related to specific investments and projects.

However, these are not sufficient reasons for the federal government to transfer all of its transportation funding and investment responsibilities to the states. There remain important national purposes and interests in transportation—some as old as the Republic itself — connectivity, economic growth, energy security, safety, and environmental sustainability. As the Birpartisan Policy Center’s National Transportation Policy Project (NTPP) and others have stated consistently over the last few years, we have lost sight of these national goals and purposes, when considering federal surface transportation legislation in the most recent past, and, as a result, support for federal funding has declined.

“Shuffling” resources does not seem an appropriate response to these circumstances. Rather, difficult as it will be, it continues to be necessary to identify and define clearly the national interests and purposes in the transportation sector (perhaps more narrowly drawn than has been the case recently) and then to put in place sustainable and, preferably, user-based revenue streams to support those interests.

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