Wednesday, November 5, 2014

Four Fiscal Flashpoints await a GOP Congress

With control of Congress seemingly within their grasp, Republicans are looking forward to showing that they can govern.
But a series of budgetary time bombs — four potential flashpoints that are likely to spark clashes with the White House but may also expose rifts within the GOP — will complicate their ability to set the agenda.
Highway Trust Fund
The first will come by May when the last fix for the Highway Trust Fund, a $10.8 billion infusion approved in July, runs out of gas.
It's far from clear how that next tank will get filled. It took a $6.4 billion gimmick called pension smoothing to pay for the bulk of the current patch. Budget analysts slammed the provision which raises money in the near-term — but not in the long-term — because tax revenue will suffer later on when corporations have to plow more pre-tax dollars into pensions.
While a divided GOP didn't stand in the way of the short-term fix last summer, the next one may require real money — and more of it.
"There is a giant gap," said Chris Edwards, director of tax policy studies at the Cato Institute. "It's not something you can use smoke and mirrors to close," he said.
Bridging the gap will require some $15 billion a year — the difference between the $38 billion in gas tax revenues that flow to the highway fund each year and the $53 billion it spends.
"I don't know what the political solution is going to be," Edwards said.
In July, Sen. Bob Corker, R-Tenn., reached across the aisle to propose hiking the gas tax by 12 cents a gallon over two years and indexing it to inflation thereafter.
While there isn't broad GOP — or even Democratic — support for a gas tax hike, the plan pushed by Edwards, along with groups like the Club for Growth, may also be a hard sell.
His solution is to close the gap by sending the Highway Trust Fund revenue to states and letting them decide, on an individual basis, how to meet their unfunded transportation infrastructure needs, such as via public-private partnerships.
Find out the other 3 Flashpoints and read the rest of the story HERE.

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