Testimony: Mr. Buechner provided some general comments on the appropriate way to finance Federal government expenditures . He then discussed why the American Road and Transportation Builders Association (ARTBA) supports a Federal capital budget and deems it an appropriate way to finance Federal investment in transportation infrastructure.

Mr. Buechner pointed to the Government's overriding preoccupation with balancing the Federal Budget and paying for all Federal expenditures with current tax receipts instead of bonds. This has resulted in an underinvestment in projects with long-run economic consequences. The guiding principle for Federal financing should be achieving the combination of taxes and bonds that imposes the minimum burden on the economy. Both taxes and bonds impose real costs on the economy, but the use of bond-financing by municipal governments and in the private sector suggests that the Federal government should not rely solely on taxes.

According to Mr. Buechner, bond-financing is appropriate for long-lived assets and the investment should generate a stream of income or benefits to pay for assets as they are used. Among the Federal expenditures which meet these criteria is transportation infrastructure. ARTBA advocates the use of capital budgeting for transportation programs for a number of reasons: 1) transportation investments have a long lead time and require funding stability not available in the current budget process, 2) transportation programs fund long-lived assets that have a major impact on the performance of the U.S. economy, and 3) transportation infrastructure generates income as it is used.

Mr. Buechner concluded by noting that ARTBA has been pursuing other budget options, besides a capital budget, to improve Federal policy on transportation investment. One option is to take the transportation trust funds out of the unified budget. Another option is to create a new revenue constrained fund budget category for the Highway Trust Fund.

Questions from the Commissioners:

Q.    What changes to the current Federal budget structure are needed to implement your proposal for separate highway financing?
A.    Transportation capital would be financed outside the unified budget. Borrowing would be repaid through revenue generated by the dedicated stream of user fees.

Q.    You make a reasonable case of financing highways by borrowing, but isn't it hard at this point to make a case for financing the Federal government as a whole by borrowing?
A.    The whole government wouldn't be financed this way. I'm focusing on transportation because it is long lived and has a dedicated trust fund financed by user fees.