Congress. Asserting that it would cost $12 billion in bond interest, Senator Dennis Chavez of New Mexico called the Administration’s bill a “bankers bill” rather than a road bill. Rural interests branded the Administration’s proposal to pledge all Federal gasoline tax revenue above $622 million per year to back the Federal Highway Corporation's bonds as a 32-year strait-jacket for rural highways.
The Engineering News-Record came out strongly for the Administration bill, and particularly for the 10-year limit on completion of the Interstate System. “The real crux of the matter rests in the fact that we need a whole new system of highways just as soon as we can get it, and no adequate pay-as-you-go plan has yet been seriously proposed to assure that result.”[1] Proponents of pay-as-you-go financing, the article continued prophetically, were gambling that there would be no inflation in the 30 years or more it would take to build the Interstate System from current revenues.
Defeat of the President’s Plan
Tossing the President’s Grand Plan aside, the Senate passed the Gore bill, somewhat modified, by 60 votes to 31. As passed, the bill provided $13.2 billion of Federal aid over a 5-year period, financed in part by a 1-cent boost in the Federal gasoline tax. State matching would be $4.8 billion in the 5-year period, or $960 million per year.
The House Subcommittee on Roads chaired by Congressman George H. Fallon brought out a measure that was somewhere between the Gore bill and the Administration bill. It provided $24 billion of Federal aid over a 12-year period, with increases in Federal fuel and rubber taxes to provide the additional revenue. The Fallon bill and the Administration bill came before the House in the last days of the session, but both went down to defeat—a stunning setback for the supporters of the President’s Grand Plan.
A New Highway Bill
Although the President’s plan had been defeated, there was still tremendous popular support for an accelerated highway program when the 84th Congress returned for the 2d session. The Administration jettisoned the Federal Highway Corporation and endorsed the pay-as-you-go principle. The House Subcommittee on Roads then undertook to put together a new road bill, while the Ways and Means Committee studied the financial aspects of the program. Eventually, the Senate Subcommittee on Roads and the Senate Finance Committee also became involved with the highway bill. The legislation drafted by these four committees contained some notable departures from previous highway policy.
The most radical innovation was the earmarking of Federal highway-user revenues for Federal highway aid. Congress accomplished this by creating a Highway Trust Fund and appropriating into it the proceeds of all Federal taxes on motor fuel, tires and tread rubber and a portion of certain other excise taxes such as those on automobiles, trucks and buses.
Another innovation, sought by organized labor, was a provision that the Davis-Bacon Act of 1935 should apply to all contracts for the Interstate System. This Act, passed during the Depression, required that the Secretary of Labor determine the prevailing wage rates paid for similar work in the area where the proposed Federal project was to be built. These rates were then set forth in the contract and became the minimum rates for that job. The purpose of the Act when originally passed was to give local workers a chance to compete for jobs on Federal projects without lowering their wages to match those of cheap imported labor. However, its detractors said the Act was applied during the Roosevelt Administration to force prevailing wages in outlying rural areas up to the level of those won by unions in the big cities.
Heretofore, the Davis-Bacon Act had applied only to the Federal Government’s own contracts. Those contracts entered into by the States for Federal-aid work were subject only to the regulations the BPR had made pursuant to the original Federal Aid Road Act of 1916. These left the predetermination of job labor rates up to the States, whose labor laws, according to the Engineering News-Record, were “as heterogeneous as their liquor laws.”[2]
Introduction of Federal wage-fixing into the Federal-aid program was bitterly resisted by AASHO, the Associated General Contractors and the American Roadbuilders’ Association who claimed that the Davis-Bacon Act had the potential of boosting highway construction costs 15 to 40 percent. Inevitably, they said, contracts for other Federal-aid and State work, not covered by the Davis-Bacon Act, would be drawn into its orbit, and there would be a general inflation of wages in the highway construction industry. Spokesmen for labor asserted that since the proposed matching rate for the Interstate System was 90 percent Federal and 10 percent State funds, the real employer was the Federal Government, and, therefore, its laws should apply. In the end, the Davis-Bacon Act became the price for labor’s support of the highway program, and it was incorporated in the final bill.
The third innovation proposed by the legislators was to treat the Interstate System as a single huge project, comparable to an irrigation or flood control scheme, and provide in one authorization for its inception and completion. Previously, Congress had viewed Federal aid as an open-ended program of assistance to the States that would continue forever at a pace determined from time to time as circumstances might dictate. In hard times highway construction was stepped up to “prime the pump,” and at other times cut back to balance the budget. Now the committees proposed that a limited national system of special highways be built within a fixed time period of 13 years. In concept, this scheme was practically identical to that of the Pacific Railroads 100 years previously, and for its time, was on about the same scale.
This single huge project concept affected the apportionment of the Federal funds among the States. When Congress earmarked funds for the Interstate System in 1954, it changed the apportionment factor to give more of the money to the more populous States.[N 1] The framers of the new bill provided that
- ↑ According to this formula, half of the funds were to be apportioned in the ratio of each State’s population to the total national population; the other half was to be divided according to the classic Federal-aid formula of 1916.
