Question

Although the United States is one of the world's wealthiest nations, some federal government's budget decisions are severely constrained by scarcity. Can you think of one such decision that was in the recent economic news?

Answer 1

Surface transportation investment in the United States has been declining in real terms and faces a future of budgetary stringency. It is essential that any future investments go towards programs and projects that offer the greatest economic returns per dollar. Unfortunately, there is limited strategic allocation of transportation capital funding in the United States, and most investments in transportation are made without the use of economic analysis.

The federal government, states, and localities play important roles in funding surface transportation. And their financial contributions are not only substantial, but also deeply intertwined. This multilayered funding system has encountered major challenges in maintaining
investments in surface transportation at a time of broad consensus among experts that funding needs exceed
the current level of investment. These obstacles result, in large part, from the fact that gas and vehicle taxes,
major sources of surface transportation revenue, have been declining in real terms in recent years because
of trends such as improved fuel efficiency and changing driving habits, as well as decades of stagnant tax
rates. Complicating efforts to address these challenges are the broader fiscal difficulties confronting the
federal government and the states, which leave policymakers with hard choices about how to pay for surface transportation in the years ahead. Ultimately, understanding the role of each level of government in funding transportation will help policymakers address the nation’s needs while navigating the larger fiscal landscape.