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"Clearly Vicious as a Matter of Policy": The Fight Against Federal-Aid

PART FOUR: President Eisenhower Takes Charge (Page 1 of 5)

In the election year of 1952, Congress approved the Federal-Aid Highway Act of 1952, authorizing $1.3 billion for national and international highway development in FYs 1954 and 1955. For the first time, Congress included funds for the Interstate System, but only $25 million a year to be matched on the standard 50-50 Federal-State ratio. During House discussion of the measure, Representative George H. Fallon (D-Md.) of the Subcommittee on Roads told his colleagues:

We are a nation on wheels and the number of automobiles continues to increase each day. With the seriousness of the road conditions today, it is absolutely necessary that we have all the funds possible to put our roads in a condition where they are not only safe but where we can move commerce.

President Truman approved the bill on June 25, 1952. By then, he had announced that he did not intend to run for reelection.

A week later, during the 44th Annual Governors Conference at the Shamrock Hotel in Houston, Texas, the Governors took direct aim at the Federal-aid concept, spanning highways, airports, maternal and child health, hospital construction, and aid for the aged, blind, and children. They also took aim at one of their longstanding targets, the Federal gas tax, which had been made permanent in 1941 at 1.5 cents a gallon. It had been increased temporarily to 2 cents a gallon under the Revenue Act of 1951, signed by President Truman on October 21, to support the Korean War.

Governor Walter J. Kohler, Jr., Republican from Wisconsin, began the debate during the opening business session by suggesting that the States abandon all Federal-aid (amounting to $2 billion a year) in return for a shift of Federal taxation powers to the States. The States would collect all the revenue that was currently going to the Federal Treasury from taxes on gasoline, beer, liquor, wine, cigarettes, and possibly automobiles. He told the Governors:

In its tax philosophy, the Federal Government has become a voracious monster, overlooking nothing in its insatiable hunger for greater revenue. We in Wisconsin are, frankly, sick to death of Federal interference in the administration of programs which should be, and have traditionally been, the responsibility of States.

According to a chart Governor Kohler displayed, only seven States would receive less revenue under the plan, and if the tax on automobiles were included, only two would receive less.

Host Governor Allan Shivers of Texas, a Democrat, had raised the theme in general terms during his welcoming speech, saying, "As a stronghold of States' rights and of the belief in man's inalienable right to be left alone, Texas is the appropriate place for this meeting." After Governor Kohler raised the idea of a tax turnback, Governor Shivers endorsed it. "Get the Federal Government," he said, "out of the road mess business."

Governor Val Peterson of Nebraska, the Conference Chairman and a Republican, addressed the theme in his opening address:

It seems perfectly fair to say that the States lost much of their sovereignty (and there are degrees of sovereignty) when each took the first dollar of Federal Aid. Employing this technique, the national government has entered into nearly every phase of state activity. In my judgment, this entry has not been conducive to efficiency and economy in Government. The power will never be returned to the State if we continue always to approach Washington with our hands out.

Responding to the Kohler tax proposal, Governor Peterson said the highway field was a good place to start. "Are we willing to tell the Federal Government to retire from the field of highway taxation and controls? If no, then we are not being honest. We are just making speeches." He added, "How many Governors would oppose a resolution telling the Federal Government to get the hell out of the road-building business?"

Governor J. Bracken Lee, Republican of Utah, was undeterred by the fact that his State would lose revenue under the Kohler turnback plan:

The State of Utah now takes in more money (in Federal Aid) than it pays out, but I, for one, am willing to take a loss on that.

The Governors adopted a resolution, similar to resolutions adopted in past years, urging the Federal Government to withdraw from gasoline taxation "as soon as may be consistent with the needs of national defense." The resolution noted that gasoline taxes are paid by highway users for roads "which are rapidly deteriorating because the funds needed to develop and maintain a modern highway system are not available."220

President Eisenhower Takes Over

Although the Governors' comments and its resolution were the big news of the conference within the highway community, the national news was made by the Republican Governors. They were heading to the Republican National Convention, set to begin on July 7, 1952, in Chicago. Reporters covering the Governors Conference described efforts by supporters of General Dwight D. Eisenhower and Senator Robert A. Taft of Ohio as they jockeyed for positions, particularly on delegate recognition, favorable to their candidate.221

General Eisenhower would emerge as the candidate of the Republican Party, with Senator Richard M. Nixon of California as the Vice Presidential candidate. On November 4, 1952, the American people went for Eisenhower - 33.9 million votes to Illinois Governor Adlai Stevenson's 27.3 million. The electoral vote was even more lopsided - 442 to 89. Eisenhower won all but nine States.

The election of Dwight D. Eisenhower, the first Republican President since Herbert Hoover was defeated by Roosevelt in 1932, revived the hopes of those who believed the States had been deprived of their authority under the Constitution during the Roosevelt and Truman Administrations. In many ways, the new President agreed with them, but when it came to highways, he had his own ideas.

Eisenhower's experiences on the U.S. Army's first transcontinental motor convoy via the Lincoln Highway in 1919, as well as his observations of the autobahn in Germany before, during, and after World War II made him a strong supporter of highway investment. In a pre-election statement issued at the request of Hearst Newspapers, candidate Eisenhower explained his views:

The obsolescence of the nation's highways presents an appalling problem of waste, danger and death.

Next to the manufacture of the most modern implements of war as a guarantee of peace through strength, a network of modern roads is as necessary to defense as it is to our national economy and personal safety.

We have fallen far behind in this task - until today there is hardly a city of any size without almost hopeless congestion within its boundaries and stalled traffic blocking roads leading beyond these boundaries.

A solution can and will be found through the joint planning of the Federal, state and local governments.222

Inauguration Day was January 20, 1953, with Chief Justice Fred Vinson administering the oath of office. The new President's Inaugural Address was a commitment to "the abiding creed of our fathers" and to engagement in world events. "Destiny," he said, "has laid upon our country the responsibility of the free world's leadership." He added:

Knowing that only a United States that is strong and immensely productive can help defend freedom in our world, we view our Nation's strength and security as a trust upon which rests the hope of free men everywhere.223

As President Eisenhower began his first term, the annual report of the BPR for FY 1953 summarized the status of the Interstate System:

There has been a progressive increase in the mileage completed each year. At the close of the FY [June 30, 1953] a total of 6,417 miles of system improvements had been completed with Federal funds made available since World War II. Total cost of these improvements was $954,756,415, including $489,364,199 of Federal funds... In a survey of the condition of rural portions of the interstate system it was found that only 24 percent of the mileage was adequate for present traffic and 76 percent was in need of improvement or reconstruction. On 16 percent of the mileage the need was considered critical.

The report added:

A much more rapid rate of construction is required if the 37,800-mile system is to be made adequate within a reasonable period of years.224

Moreover, much of the improvement had occurred on the existing U.S. numbered highways in the Interstate corridors, rather than on new location, and had satisfied design standards developed by AASHO and adopted by the PRA for the Interstate System in 1945. As a result, the improved routes often retained the location and design deficiencies of the original route.

Although the new President would eventually demonstrate that his campaign statement reflected his personal views, his first priority was ending the war in Korea. From the start of the Administration to the end of the war in July 1953, the President and his staff did not formulate a policy on the highway program.

The Governors Take a Stand

While the Administration put the issue off, the Nation's Governors were making the Federal-aid highway program one of their top targets.

On January 21, 1953, the day after the President's inauguration, Governors Kohler and Dan Thornton of Colorado, also a Republican, met with the President at the White House. In addition to a lunch of fried chicken, the President gave the Governors a White House tour. During the visit, the Governors discussed several topics with the President, including mining, reclamation, and other natural resources problems affecting the West. The Governors also discussed the conflicts between Federal and State taxes on the same products, including gasoline, income, and automobiles. Governor Thornton suggested that the Federal Government get out of these fields of taxation, which he said traditionally belonged to the States.225

That same day, the Governors' Conference Committee on Intergovernmental Relations and Tax and Fiscal Policy met at the Mayflower Hotel in Washington. In addition to Governors Kohler and Thornton, the committee included its chairman, Governor Alfred E. Driscoll of New Jersey (R); James F. Byrnes of South Carolina (D); John D. Lodge of Connecticut (R); G. Mennen Williams of Michigan (D); William S. Beardley of Iowa (R); and Lee of Utah. The committee had been convened because the Governors' Conference had concluded that, "The tax policies of the federal government have made it virtually impossible for the state and local governments to obtain the revenues which they require." The Governors were particularly concerned about the "levying of taxes upon identical products by both state and federal governments" and wanted the committee to explore the proposition that:

... more efficient service to the citizens could be rendered at lower cost if certain of the taxes now levied by the federal government were abandoned to the states in lieu of federal grants-in-aid.226

The committee decided that it would first consider Federal grants for highways and the 2-cent Federal gas tax. It directed the Council of State Governments to review the issue and provide a report for further consideration.

The Council's report, completed on February 20, 1953, stated:

It is proposed that the Congress reduce federal expenditures by discontinuing the grant-in-aid program for highways, making special provision, however, for those states with large public lands and sparse populations. It is further proposed that at the same time legislation be enacted repealing the federal gasoline tax, thereby permitting the adoption of the two-cent tax in the several States.227

This change, if enacted, would result in a short-term loss of Federal revenue. The Council calculated the initial loss:

If this were accomplished it would mean, using United States Bureau of the Budget estimates for fiscal 1954, that the national government could save $575,000,000 while losing in gasoline tax revenues approximately $920 million - a net loss in federal revenue of some $345,000,000, less than one-half of one per cent of estimated national revenue in fiscal 1954... As an immediate effect, the re-enactment of the two-cent tax by the states would provide about $345 million in additional revenue for roads based on state gasoline tax collections in fiscal 1952.228

Part of the Federal Government's loss would be made up by the efficiency of eliminating "the administrative duplication which now is part of the Federal Highway Act." Also counter-balancing the loss, in philosophy if not dollars, would be the affirmation of the States' responsibilities:

Every state now has a highway department with engineering and construction talent of a professional nature... Competent professional people are... being attracted and are increasingly being paid salary schedules to insure their retention in the states. With these conditions, many Governors, expert consultants and state legislators are convinced that standards and specifications for road construction and maintenance will be kept at a high level.229

That would be "the primary gain to the nation," according to the Council.

Further, the Federal and State duplication of effort was "often a waste of engineering personnel." The report amplified this thought:

Countless hours of conference between state personnel and federal officials in approving highway construction and maintenance result in a waste of time on matters which state administrators are capable of deciding for themselves.230

The BPR would, of course, be weakened by the proposal, and this was recognized as a potential problem, especially for the Interstate System:

This raises the issue whether the states, acting jointly, cannot themselves supply the necessary coordinating mechanism. Consideration could be given to forming compacts among neighboring states to consult and plan highway programs affecting their regions. A further possibility is the proposal for a compact among all forty-eight states in the highway field.231

Another acknowledged concern was that pressure might be brought on the State legislatures to build local and rural roads, rather than the important, heavily traveled roads:

This, however, is a matter for the individual state legislatures to decide responsibly and responsively. No gains to democratic state government can be achieved by irresponsible appeal to high levels of government in order to avoid making necessary local decisions.

The solution to these problems can be found in the determination by the states, acting singly and in concert, to modernize and maintain a system of highways adequate to support present and emerging highway needs.232

The Governor's Conference adopted the proposal that the Federal Government should relinquish the gas tax in favor of the States.

On February 26, Governor Kohler returned to the White House for a conference with the President on Federal-State relations and reducing or eliminating costly programs and duplicate taxation. Joining the meeting were congressional leaders, Texas Governor Shivers, now president of the Governors' Conference, and Governors Driscoll and Byrnes. The President participated in the conference from its start at 10 a.m., until he departed at 1:45 p.m. for a golfing holiday in Augusta, Georgia.

Participants agreed on formation of a tripartite commission consisting of members representing the President, the Congress, and the Governors. According to Senator Taft, the Majority Leader who had been the President's chief rival for the nomination, the commission would survey health, welfare, education, and road programs, with the Social Security program as a primary target. The Governors, noting that the States were generally in better financial condition than the Federal Government, offered to contribute $50,000 as well as staff members to get the commission started.233

The President, according to a White House statement after the conference, favored a bipartisan commission that would propose legislation "to eliminate hodge-podge duplication and waste in existing Federal-state relations affecting governmental functions and taxation." The President outlined the purpose of the meeting:

For a long time I have thought that there must be a clarification of the responsibilities of the state and federal governments in many fields of public activity. The federal government has assumed an increasing variety of functions, many of which originated or are duplicated in state government.

Another phase of this problem relates to taxation. The existing systems of taxation, both at the federal and state level, contain many gross inequalities insofar as the tax burden between citizens of different states is concerned. There is often a pyramiding of taxation, state taxes being super-imposed upon federal taxes in the same field.

The goal of the commission, the President said, would be "to safeguard the objectives" of joint Federal-State programs "from the threat imposed by existing confusion and inefficiency."

On March 30, the President sent a message to Congress on Federal Grants-in-Aid. He was seeking a way "of achieving a sounder relationship between Federal, State, and local governments." The present division of activities had developed over "a century and a half of piecemeal and often haphazard growth." In recent decades, this growth had "proceeded at a speed defying order and efficiency." Reacting to emergencies and expanding public needs, the Federal Government had launched one program after another, without ever taking time to consider the effects of these actions on "the basic structure of our Federal-State system of government."

The Federal Government had entered fields that the President felt are primarily the constitutional responsibility of local governments. More than 30 Federal grant-in-aid programs existed, involving Federal expenditures well over $2 billion a year. The result was "duplication and waste." The impact of Federal grant-in-aid programs on the States, he believed, had been especially profound. Whatever good the programs accomplished, they also complicated State finances and made it difficult for the States to provide funds for other important services.

The President believed that "strong, well-ordered State and local governments" are essential to the Federal system of government. "Lines of authority," he added, "must be clean and clear, the right areas of action for Federal and State government plainly defined."

While concerned about this "major national problem," he did not want any confusion about the purpose:

To reallocate certain of these activities between Federal and State governments, including their local subdivisions, is in no sense to lessen our concern for the objectives of these programs. On the contrary, these programs can be made more effective instruments serving the security and welfare of our citizens.

To address these issues, the President recommended that Congress pass legislation to establish a Commission on Governmental Functions and Fiscal Resources. He said:

The Commission should study and investigate all the activities in which Federal aid is extended to State and local governments, whether there is justification for Federal aid in all these fields, whether there is need for such aid in other fields. The whole question of Federal control of activities to which the Federal Government contributes must be thoroughly examined.

The matter of the adequacy of fiscal resources available to the various levels of government to discharge their proper functions must be carefully explored.234

The President asked Congress to take prompt action so the Commission could complete its report in time for consideration by the next session of the Congress in 1954.

Transport Topics, the weekly newspaper of the motor carrier industry, speculated that the President's decision to call for a commission, thereby delaying action, was "in line with White House policy not to seek the reduction or elimination of any federal taxes until the budget is balanced." The newspaper added:

Presumably it will take some time for the Congress to act on the proposal and then it will be necessary for the advisory group to make a study of the entire fiscal relationship between the federal and state governments.235

Engineering News-Record was even more explicit:

The President this week took action to forestall the demand of state governors for federal withdrawal from the use of gasoline taxes and other revenue sources where national and state governments are in competition... The move is designed to stall off any hasty action in the present session of Congress.236

The New York Times stated that privately, some conferees conceded that many of the programs in question were here to stay:

They saw, however, a prospect of at least achieving substantial economies by ending federal participation in some programs. Such a result not only would cut operational costs but also would save the cost of a bureaucratic unit in Washington that allocates the money used by the counterpart bureau at the state level.237

The President's message did not mention the Federal gas tax or the Federal-aid highway program, but both fell within the purpose of the proposed commission. Moreover, the Federal-aid highway program was the Federal Government's largest grant-in-aid program and State officials had long maintained that taxes on gasoline were a State responsibility.

The National Highway Users Conference had reported earlier in the month on "an avalanche of renewed opposition to Federal Automotive Excises." The conference newsletter indicated that dozens of State legislatures had acted on or were about to act on proposals to "memorialize" Congress to get the Federal Government out of the highway tax field. Members of Nebraska's legislature, which had memorialized Congress several years in a row on the subject, were signing a petition asking for immediate repeal of Federal automotive excises.238

The newsletter reported that other groups also had recently gone on record favoring Federal withdrawal from automotive excise taxes: AAA ("The Federal Government should retire immediately from the field of automotive taxation"); the Truck-Trailer Manufacturers Association; the National Automobile Dealers Association (the group's president, J. Saxton Lloyd, denounced "excessively high Federal excise taxes on the essential automobile"); the American Farm Bureau; and the National Grange.

State Highway Officials Take a Second Look

State highway officials were beginning to reach the opposite conclusion. Many had wanted the Federal Government to drop the gas tax, but now they realized there was no guarantee that any State legislature would increase its tax by 2 cents if the Federal Government stopped collecting the 2-cent gas tax. State highway officials also had in mind their bureaucratic rivals in the growing number of State toll authorities who used bonds instead of taxes to finance highway construction and had tolls as a steady revenue source. If a State highway agency lost Federal-aid income that was not replaced by increased State tax revenues, tollway officials would benefit because the toll authorities would be the only source of revenue to build expressways.

The alternative to abandoning the Federal excise tax on gasoline was to link it to expenditures for the Federal-aid highway program. Linkage, as Rose pointed out, "offered financial security and vastly expanded opportunities to build roads."239

During AASHO's annual meeting in December 1952, AASHO president Bertram D. Tallamy addressed the issue in his message to the members. As Superintendent of Public Works for New York and chairman of the New York State Thruway Authority, Tallamy was in a unique position to understand the concerns of State highway departments and toll authorities vying for the opportunity to meet the Nation's highway needs. He conceded that Federal activity in "the financing field" is vital for certain highway systems, but said, "the Federal Government is not now paying its share of the highway costs on those systems, particularly when their activities in this field are viewed in relation to the $2 billion that flows into the national treasury each year from road use taxes."

Despite this Federal role, the basic responsibility for highway financing, Tallamy said, "is a local one." He reported that New York had established a commission to study new financing methods for a long-range, expanded highway program. Tallamy recommended that every State establish such a commission and that the Congress initiate a survey at the Federal level:

To correct the deficiencies in our highway system will require not only money, but a high degree of cooperation among all levels of government. One thing that such a Congressional study should consider is the amount of highway use tax they are now collecting and returning to the States for highway construction.

Referring to the half cent added to the gas tax to help finance the Korean War, he asked, "Where shall the line be drawn?" Imposition of highway user taxes, Tallamy said, falls within the proper jurisdiction of the States. He did not, however, go so far as to call for abolition of the Federal tax:

There is strong support for the argument that the Federal Government should abandon this tax field, at least in major part, to the States. The proposal merits careful study. In the meanwhile, I believe this Association should oppose vigorously any further increase in the imposition of Federal highway use taxes. In the critical years ahead the States will have urgent need of their full taxing powers. Any further intrusion by the Federal Government into this field would have the practical effect of circumscribing these powers. Whatever solutions we propose for the highway problem at the State level, might well founder on the shoals of inadequate finances.240

Some Members of Congress were beginning to support linkage between Federal highway user tax revenue and highway expenditures. Senator Warren Magnuson (D-Wa.), for example, introduced S. 216 on January 7, 1953, to set aside revenue from excise taxes on automobiles, tires and tubes, gasoline, and lubricating oil for the Federal-aid highway program. All revenue collected from these sources would be "appropriated" to the "Federal-Aid Highway Trust Fund" and all trust funds would be for highway projects. The funds would be apportioned among the primary system (45 percent), the secondary system (30 percent), and the urban system (25 percent).

On March 3, 1953, Representative John C. Kluczynski (D-Il.), a member of the Committee on Public Works, introduced an identical bill designated H.R. 3637. As he did so, he commented on the condition of the Nation's roads:

In 1941 we began running out of roads when we had 32 million motor vehicles registered. Our main highways were bursting at the seams. To the present time roadbuilding and maintenance has been interrupted and so today with 52 million vehicles using the highways our whole economy has and is being built around motorized transportation of both people and property.

The result of the increasing number of vehicles, while highways remained static, was that the main highways were "badly congested, being too narrow, too winding, and antiquated."

He explained the logic of the trust fund idea:

Why should not the public that pays the tax from motorized traffic then have the full benefit and assistance that tax can provide?

He added:

Our whole economy and federal defense must have this aid. It is the only way we can keep America on the move.241
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  1. "Governors Demand Federal Surrender of Road Building Job," Transport Topics, July 7, 1952; "State Governors Urge Federal Govt. to Withdraw From gasoline Tax Field," Highway Builder, July 1952.
  2. For example, see White, William S., "3 Governors Back General on Texas," The New York Times, July 2, 1952, and White, William S., "23 Governors Ask G.O.P. Ban on Votes by Contested Delegates," The New York Times, July 3, 1952.
  3. "Ike Understands Road Problem We're Facing," Road Builders' News, November-December 1952, p. 7.
  4. Eisenhower, Dwight David, Inaugural Addresses of the Presidents of the United States from George Washington 1789 to Richard Milhous Nixon 1973, U.S. Government Printing Office, 1974, p. 257-262.
  5. Annual Report, Bureau of Public Roads, FY 1953, p. 5-6.
  6. "President's First Day: Up at 7:30, He's Busy," The New York Times, January 22, 1953. "Ike Displays Interest in Proposal to Return User Taxing to States," Transport Topics, January 26, 1953.
  7. Resume of Meeting, Governors' Conference Committee on Intergovernmental Relations and Tax and Fiscal Policy, Mayflower Hotel, Washington, D.C., January 21, 1953, p. 1.
  8. Memorandum Proposing the Discontinuance of Federal Highway Grants and the Repeal of the Federal Gasoline Tax, Council of State Governments, February 20, 1953, p. 1.
  9. Council of State Governments, p. 1-2
  10. Council of State Governments, p. 8.
  11. Council of State Governments, p. 9.
  12. Council of State Governments, p. 14.
  13. Council of State Governments, p. 15.
  14. Leviero, Anthony, "Eisenhower Starts Wide Study to End U.S.-State Conflict," The New York Times, February 27, 1953.
  15. "Federal Grants-In-Aid - Message from the President of the United States", Congressional Record, March 30, 1953, vol. 99, no. 54, p. 2560.
  16. "Eisenhower to Seek Study of Proposal to End U.S. User Taxes," Transport Topics, March 30, 1953.
  17. "Federal Grants," Engineering News-Record, April 2, 1953, p. 22.
  18. Leviero, Anthony, "Eisenhower Starts Wide Study to End U.S.-State Conflict," The New York Times, February 27, 1953.
  19. "Fresh Opposition to U.S. Automotive Taxes May Flood Congress," Highway Highlights, February-March 1953.
  20. Rose, Mark H., Interstate Express Highway Politics 1939-1989, The University of Tennessee Press, Revised Edition, 1990, p. 46.
  21. Tallamy, B. D. "President's Annual Address," American Highways, January 1953, p. 28.
  22. "Automobile Excise Tax to Aid Federal-Aid Road Program," Congressional Record, March 3, 1953, p. 1569.
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