To the Congress of the United States:
Our Federal pay-as-you-go Highway Program is in peril. It is a peril that justifies a special message because of the vital contribution this program makes to our security, our safety and our economic growth. Timely completion of the full program authorized in 1956 is essential to a national defense that will always depend, regardless of new weapon developments, on quick motor transportation of men and material from one site to another.
American lives are also dependent on this program in a more direct sense. Better, more modern highways--with less congestion, fewer dangerous curves and intersections, more careful grades and all the rest--mean greater highway safety. It has been estimated that more fatalities will be suffered in traffic accidents between now and 1975, when the new system is fully operative, than were suffered by American troops in every conflict from the Civil War through Korea. Last year witnessed 38,000 traffic fatalities and 1.4 million personal injuries. But on our new expressways the ratio of accidents and deaths per mile driven is only a fraction of what it is on ordinary roads. The Interstate System when completed, it is estimated, will save at least 4,000 lives a year.
Finally, proceeding with this program at least as fast as originally scheduled is essential to our economy. This is true not only in terms of the stimulus and employment it provides now, in a time of recession, to such vital industries as steel, construction, cement and others. It is also a key to the development of more modern and efficient industrial complexes--turning marginal land or clogged cities into attractive sites for commercial or industrial development--and to lower motor transportation costs generally.
The Bureau of Public Roads estimates that users of the completed Interstate System will save 42,000 years of travel time every year. The elimination of stop-and-go driving will save users 9 billion costly stops and starts every year.
A study, for example, of a 16-mile section of the Schuylkill expressway in the Philadelphia area showed direct savings to motorists of over $18 million per year, enough to pay the entire cost in three years. Even less tangible, but equally important, are the widened horizons a modern highway network affords the individual and the family--greater recreational opportunities, greater freedom of choice in places to live, work and play--and less time and effort spent in getting there.
It has always struck me as ironic that so many of our citizens--so ingenious in quickly devising ways of ending almost every minor irritant--would so readily tolerate every morning and evening the. incredible congestion of our antiquated highways that takes a heavy toll in automotive costs and depreciation, to say nothing of human nerves and tempers. By 1975--and the Interstate System is required by Congress to have enough lanes to move safely all the vehicles expected in 1975--there will be an estimated two or three times as many vehicles as use those roads today. Even though some expressways now seem excessively large, an emergency program then will be too late--we must continue to build those highways now at a steady rate sufficient to assure completion on schedule.
As early in the era of the automobile as 1916, Congress recognized the Federal responsibility in this area--to promote the national defense, interstate commerce, farm and resource development and postal service. The pay-as-you-build 41,000 mile program initiated in 1956 was the most notable and far-sighted recognition of this responsibility in history.
But now, as stated at the outset, that program is in trouble. Revised cost estimates submitted to the Congress early in January reported pursuant to law that to complete the Interstate System on schedule (while meeting the needs of the regular ABC and related primary, secondary and urban Federal aid program) would require, over the life of the program, additional authorizations of $11.56 billion--which means additional revenues to the Highway Trust Fund totaling $9.74 billion, or about $900 million more a year through fiscal 1972 to meet the higher level of expenditures on a pay-as-you-go basis.
The engineering and construction resources are readily available to absorb this increase and step up the program. To deny the increase would postpone completion of the system to five years beyond the original target date. Moreover, the 1956 Highway Revenue Act sought to implement its pay-as-you-go intention with Sec. 209(g)--generally known as the Byrd Amendment--which requires the authorized apportionments to each state to be reduced whenever Trust Fund revenues are estimated to be insufficient to cover them in any individual year. It is now clear that, despite the scheduled diversion, even the 1963 authorizations under present law, which should be apportioned to the states in July of this year, will have to be substantially cut-back below currently authorized and desired levels by this provision unless Congress acts to increase revenues.
I am wholly opposed to either stretching out or cutting back our highway program, and urge the Congress not to rely on either solution. Either step would be unwise at a time when our slump-ridden economy needs greater, not less, construction activity. Either step would be unfair to the individual states who have proceeded in good faith, and in reliance on the Treasury's certification of adequate funds, to make plans and expenditures looking to receiving their full apportionment this July. And to postpone the completion of the Interstate System only further postpones the day when our highways will be adequate to meet our defense, economic and general population increase needs.
I. A NEW PLAN TO FINANCE, THE HIGHWAY
Under present law, the highway use taxes (by which the Highway Trust Fund has been financed in accordance with the 1956 pay-as-you-go intent) are scheduled--not for an increase to meet the problems described above--but for a decline: a drop in the gasoline, diesel and related fuels tax from 4¢ a gallon to 3¢ a gallon on July 1.
Such a tax reduction at this time--causing a loss of some $600 million a year--would be wholly contrary to the basic premise on which the 1956 Highway Act was agreed to. Cost reappraisals since enactment of the temporary one cent increase in 1959 demonstrates conclusively that it must be continued, if not further increased. Nor can a reduction now be justified on anti-recession grounds. If tax reductions are deemed necessary to reverse the recession or promote long run economic growth, other tax cuts might prove more effective, or have higher priority.
The scheduled reduction in the gas tax, in short, is fiscally unwise. It was vigorously opposed by the previous Administration. It is opposed by this Administration with equal vigor; and I ask the Congress to prevent this gas tax reduction from taking effect on July 1.
Those favoring the reduction, or opposed to any increase, cite two principal alternative sources of revenue:
(A) Diversion From General Revenues. Under present law, the revenues from certain excise taxes totalling over $800 million a year are scheduled to be diverted from the General Fund to the Highway Trust Fund for a three-year period beginning July 1.
It is asserted by its advocates that this amount will compensate for the reduction in the gas tax. But we are not better able to pay our bills as a nation by merely shifting money from one pocket to another. I am pledged, barring a worsening economy, to submit to the Congress programs (aside from any new Defense outlays) which of and by themselves will not unbalance the Budget previously submitted. This will not be easily done. There will be no margin to spare. Congress, by diverting $800 million of badly needed funds from the General Fund, will be deliberately unbalancing the Budget and creating an $800 million deficit. This is a decision which, if it is taken at all, should be taken on its merits, in relation to the state of the economy and the budget as a whole, not as an accidental by-product of the highway program.
The total diversion for three years amounts to some $2.5 billion--and the precedents and pressures to make it permanent through 1972 could cost the General Fund (and cost the general taxpayers, including competing forms of transportation) approximately $10 billion.
It is argued that highway use is related to these excise taxes that are to be diverted (portions of the taxes on the sale of automobiles, parts and accessories). But this program was approved in 1956 on the assumption that these revenues (from taxes which had been in effect in war and peace for more than ten years before the Highway Program was enacted) would remain as always in the General Fund, along with similar excise tax revenues (all of which can theoretically be related to some Federal program but cannot be diverted to support such program). To change the intent of the 1956 Act now only creates a Budget deficit that eventually must be met through new taxes on the general population or a Treasury bond-issue--thus departing from the Program's principle of being financed on a pay-as-you-go basis by the user tax sources then agreed upon.
A new argument in favor of this diversion is based upon a Commerce Department cost allocation study stating that 8% of the program's benefits accrue to others than those whose taxes now finance the Trust Fund. The basis of this part of the study is open to serious challenge; but even aside from that, it must be remembered that:
(a) The Federal Highway Trust Fund is not paying for 100% of this system. A normal portion of ten percent is already borne by the States, reflecting the benefits they receive, and which they are free to raise from non-users if they choose. The Commerce Department Study "makes no suggestion as to the source or level of government which should supply the revenues" for the 8%.
(b) The proposed diversion of more than $800 million cannot possibly be justified by the 8% figure--which equals only $250 million.
(c) The Trust Fund already receives nearly $60 million income from non-users: vehicles used off the highways, motor boats, and the like; and at the same time it is not charged with some $140 million worth of other road programs benefiting the highway user but now charged to General Revenues, though their users must pay gas and other taxes into the Trust Fund.
In short, there is no justification for unbalancing the Budget by the scheduled diversion of more than $800 million from the General Fund to the Highway Trust Fund; and, again maintaining the position strongly taken by my predecessor, I ask the Congress to prevent this diversion.
(B) Federal Highway Bond Issues. The other method of financing most commonly suggested in place of the pay-as-you-go principle in this program is the issuance of a special highway bond series. This proposal has important disadvantages.
--At the present time, by increasing Government demands on long-term money, special highway bonds would make more difficult the current efforts of the Government to reduce long-term rates to promote economic recovery.
--Not only do special bond issues inevitably cost more than regular public debt issues, but such a step would also cost the program an estimated $6.6 billion additional in interest payments ($6.6 billion that would not build a single road), and keep the Trust Fund in being and its revenues tied up through most of fiscal 1981. It is unrealistic to assume that those revenues will not be needed for new. highway needs from 1972-1981. As a spokesman for the previous Administration earlier testified in connection with highway financing: "We ought to pay our own way and leave future revenue sources available to meet future needs."
--Finally, it is clear that Federal Highway bonds are merely a device to avoid the appearance of deficits and evade the pay-as-you go principle in this program. A special bond issue is not the answer.
Nor is the answer to be found in any other form of Treasury loan--or in charging tolls on roads that ought to be free--or in raising the 10% share of the program now borne by States with no adequate means of paying a higher share. A national program should not be dependent upon the ability and willingness of every State Legislature to increase its contribution.
Our objective is to finance this program on a pay-as-you-go basis from those user taxes so designated in 1956, at rates sufficient to pay the full cost of the program, without charge on general Federal revenues.
In the absence of a finding that the economy needs stimulus beyond the measures proposed in my previous messages, I cannot recommend that Congress suspend the Byrd Amendment and permit apportionments to be made without reference to estimated revenues.
The pay-as-you-go principle, the basic premise of the Act, requires an increase in the revenues from user taxes this year instead of a reduction. Although reduction in these taxes is sought by many State Governments, motor carriers, oil producers and motorists, it is nevertheless clear that a program essential to the nation, and to their own welfare, requires that they cooperate in determining how present sources are to yield the additional revenues needed.
--The previous Administration recommended an increase in the present 4¢ tax on gasoline to 4.5¢ a gallon. This is clearly acceptable, and would have my support. However, I prefer not to raise taxes on the general consumer at this time, and to emphasize instead a fairer allocation of the burden among those who use the highways.
--I propose as a substitute means of obtaining the same revenue:
--Retaining the present gas tax of 4¢ a gallon; and
--Increasing the following taxes:
Tax Present Proposed
Diesel fuel 4¢ a gallon 7¢
Trucks over $1.50 per
26,000 lbs 1,000 lbs $5.00
Highway tires 8¢ 10¢
Inner tubes 9¢ 10¢
Tread rubber 3¢ 10¢
Practically all of the increase in revenues (replacing the general 1/2¢ rise in gas tax) would come from the heavier trucks that use diesel fuel and weigh over 26,000 lbs. when loaded. This is only fair. Indeed, technical experts in the Bureau of Public Roads advise me that even this increase would not charge heavy trucks their fair share of the cost of this program.
Methods of allocating highway costs and benefits among various classes of users have always varied widely. But previous state and Federal studies, as well as those new Commerce Department studies thus far completed, all assign to heavy trucks and tractor trailer combinations a share of the cost far exceeding that assigned to automobiles and other users. Their size and weight require a thicker surface or structure, a wider pavement and shoulder, more careful grading and more expensive bridges. The 5-axle combination with full trailer was responsible for some 12 times as much of the cost per mile of travel as automobiles traversing the same highways as analyzed by the new study requested by the Congress.
In terms of ton-miles traveled, as expected, the study again showed heavy trucks to be the primary beneficiaries of the system. But even in the study of benefits received, there was a large gain to the trucking industry from these new highways: less gas, oil and depreciation expense, less strain on the driver, fewer accidents, and much shorter distances and travel time over improved and widened surfaces with fewer sharp grades and curves, less congested traffic and fewer stops, intersections and access roads. In this study also, truck combinations benefited many times as much as the average automobile driver.
Still to be completed is the final study on how much more wear and tear, maintenance and construction costs are due to the large trucks. But on the basis of these three and other studies, it is already clear that passenger cars are paying more than their fair share now--and, as stated in that Report (submitted by Secretary Mueller on January 13, now House Doc. 54),--"There is a definite indication in the results of all three allocation studies that the heavier trucks and combinations (particularly the latter) should be paying considerably more, in relations to the payments by the lighter vehicle groups, than they do now."
I urge the Congress to adopt this alternative. If it is rejected, the Congress should be prepared to increase gasoline taxes on all users as recommended by my predecessor. What is essential is that one alternative or another must be adopted to raise the revenues this program needs to go ahead as scheduled without draining general revenues.
II. OTHER TAX AND COST ALLOCATIONS
The Budget and Trust Fund programs of the previous Administration included two long-standing recommendations on which the proposal submitted above is also based, and in which I join:
(1) That the Congress retain aviation fuel tax receipts in the General Fund instead of transferring them to the Highway Trust Fund as is presently done. This is not a highway use tax in any sense--and it is both fair and logical to devote these tax receipts ($22 million for fiscal 1962) to the General Budget which is in need of all available revenues.
(2) That the Congress transfer the financing of forest and public land highways to the Highway Trust Fund. There is no reason why this program, of benefit primarily to users, should not be supported by users in the Trust Fund established for that purpose, instead of imposing an estimated $37.5 million burden on general revenues.
III. INCREASE LEVEL OF ABC APPORTIONMENTS
The financing plan described above and in tables to be submitted to the Congress also provides for a small but significant increase in the authorization of funds for the more traditional highway program--the regular ABC systems of primary, secondary and urban roads. A trunk line network of modern controlled access highways is only as efficient as its connections to home, office, factory and farm. Now fixed at an annual level of $925 million, I recommend that this authorization be increased by $25 million every two years beginning in 1964 until the $1 billion level is reached and maintained.
IV. COORDINATION WITH URBAN DEVELOPMENT
A Federal Highway program of this scope cannot be isolated from other programs for social and civic improvement, particularly our progress in urban renewal and planning. More effective use of both highway and urban renewal funds can result from increased coordination--as Pittsburgh's Golden Triangle so strikingly demonstrates. I am directing the Secretary of Commerce and the Housing and Home Finance Administrator to increase their joint planning at every level, to improve coordination of urban renewal and freeway construction plans in the same area, and to invite the cooperative efforts of State and local highway and housing officials and private experts.
More specific and urgent, however, are the problems of families displaced by new highway construction. As more and more rights-of-way are acquired and construction begins, tens of thousands of families are required to move from their path and find new places to live--more persons displaced, it has been estimated, than are displaced by all our urban renewal and slum clearance programs combined. For many families of modest income, especially those displaced by expressways in congested urban areas, adequate housing is often difficult, if not impossible, to locate at prices or rents which they can afford, or in places reasonably convenient to their jobs. As a result, many are compelled to accept substandard accommodations. Others, by overcrowding otherwise adequate housing, help to create new slums. Those already in substandard housing--crowded into a tenement in the path of a new expressway, for example--are hard-put to find any housing at all, yet are given no help or priority by existing Federal Housing programs.
To date this serious problem has been largely overlooked. Neither the Federal Government nor the State highway departments have assumed any positive or explicit responsibility for meeting these needs.
In contrast, the Federal urban renewal law, enacted in 1949, requires that every contract for Federal assistance include provisions assuring the availability of decent, safe and sanitary housing at prices they can afford and in suitable locations for all families displaced by urban renewal projects. I urge that the Federal highway law be amended to require similar assurances of help in finding reasonable housing at reasonable costs for all those displaced from their homes by future Federal-aid highway projects.
Such a step will lessen costly resistance to needed highway projects and their proper location. We must not allow needed progress in highways to come at the expense of unnecessary personal hardship to American families.
V. BILLBOARD CONTROL
The Interstate Highway System was intended, among other purposes, to enable more Americans to more easily see more of their country. It is a beautiful country. The System was not intended to provide a large and unreimbursed measure of benefits to the billboard industry, whose structures tend to detract from both the beauty and the safety of the routes they line. Their messages are not, as so often claimed, primarily for the convenience of the motorist whose view they block. Some two-thirds of such advertising is for national products, and is dominated by a handful of large advertisers to whom the Interstate System has provided a great wind-fall.
The Congress took a wise though very modest step in 1958 by authorizing, through Section 122 of the 1958 Act, the control of outdoor advertising within designated limits of the routes of the Interstate System. States electing to comply with the Federal standards promulgated under that section were to receive an incentive payment of an extra one-half of x percent of the cost of interstate highway projects within the State.
Unfortunately that provision expires on June 30th of this year, and a variety of pressures has prevented all but one state (Maryland) from taking advantage of this provision. I urge the Congress to extend this billboard control section for four more years; and to increase the incentive bonus from 1/2 to 1% of a State's allotment. Should this measure still prove to be insufficient, it may be necessary to adopt more direct means of control, or to at least charge the billboard owners for the benefits they are receiving.
VI. THE HIGHWAY PROGRAM AND THE
As mentioned in my message of February 2nd to the Congress, I ordered at that time the immediate release of $724 million of Federal highway funds which would not normally have been available to the States until April 1st. This was only a first step toward speeding up the highway program. Its effects are limited in terms of new construction immediately put under way but it permitted a number of States to let contracts in March that would have been held up until April or May.
If economic conditions warrant, additional steps can be taken by Congress and the Executive, including additional authorization for temporary acceleration for which we already have the plans, men and material ready. Particularly useful at that time, in view of the harsh winter's effects on so many streets and highways, would be authorization of Federal funds for road repair in areas of substantial unemployment. But because of the tight condition of the Trust Fund and General Fund, I shall not make recommendations along these lines unless later appraisal of the state of the economy indicates the necessity of such actions.
The program outlined here faces up to our responsibilities for meeting the highway needs of the nation, while maintaining the original concept of a highway program financed by highway users. It is a realistic program designed to meet an urgent problem. I urge its prompt and impartial consideration.
JOHN F. KENNEDY