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

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

The Clay Plan

By this time, General Clay had developed his plan for financing highway development. He had described the plan two days earlier, on December 1, at the 31st annual conference of the American Municipal Association in Philadelphia. General Clay developed the program during October and November 1954 to meet the criteria specified by President Eisenhower and it was consistent with the Governors' recommendations as reflected in the plan Governor Kennon submitted to the President.

Like the Governors Special Committee, General Clay relied on the $101 billion estimate from the BPR's survey of highway needs. However, current Federal-aid, State, county, and municipal programs were expected to provide for a $47 billion construction program over the next 10 years. That left a balance of $53 billion to bring all roads in the country up to standard. This included the $26 billion he estimated the Interstate System would cost ($13 billion for rural sections, $10 billion for urban sections, and $3 billion for "urban area feeder roads connecting the expressways").

Clay told the association that in determining how to finance the $26 billion, the committee faced certain constraints. The Administration was committed to balancing the budget, so an increase in annual appropriations was out of the question. The Administration was reluctant to approve an increase in the national debt for a bond issue. Further, the Federal Government was embarked on a program of decreasing, not increasing taxes, so "we could not look to an increase in tax rates for the money to support this program."

Estimating that the present Federal tax on gasoline and lubricating oil raised about a billion dollars a year, with the amount likely to increase over time, Clay had only one other alternative:

Our tables indicate that a federal commission, authorized to issue bonds in its own name and promised a revenue equivalent to that which the government will receive from the gasoline and lubricating oil tax, with $550 million of that amount still appropriated for federal aid to primary and secondary roads, would support over the ten years a bond issue in the neighborhood of $23 to $24 billion, to be paid for over a 30-year period. And remember, these roads are being designed to meet the traffic of 1986 and with at least a 30-year life. In point of fact, with proper maintenance their life is indefinite.

As for the States, General Clay explained that their share of the cost of the Interstate System should remain at current levels. To match the current annual Federal authorization of $175 million for the Interstate System, the States were expected to contribute $140 million, "and in this enlarged program we think they should continue that contribution." He also thought the cities which "would take advantage of the $3 billion program" of urban area feeder roads should be required to spend at least as much money as they had contemplated spending for road construction during the 10-year period.

General Clay explained the role of the commission:

If such a program develops, we would establish a five-man commission, with the director of the Bureau of Public Roads as its executive, which would be charged with the issuance of the bonds, the allocation of the funds, and the working out of programs with the states based upon programs worked out in the states, between the states, the cities and the counties. In such a way we believe a coordinated program would develop and for the first time we would have ten years to work on a program as a whole, the individual parts of which would fit into a real national highway system. The work would be carried out as it is now, by state highway, city highway and county highway departments. There would be no change whatsoever in the present relationships of the federal government and the states on primary and secondary roads.

He summed up the Interstate portion of the committee's recommendation:

So perhaps we may say that we are recommending, rather than a pay-as-you-go policy, a pay-as-you-use policy, capitalizing the revenue of thirty years over and above the money required for primary and secondary roads so that we may have in ten years a really and truly national system of highways feeding our principal cities throughout the country.

The committee also had considered the problems presented by the toll roads in Interstate corridors. The committee supported the Governors' views. Clay believed that where turnpikes had been or were being constructed, the States should be given credit for the funds used on these roads, with the Federal "credit funds" used to improve other types and kinds of roads. He felt the same idea should be applied where the States had already constructed toll-free sections of the Interstate System to desirable standards.302

On December 2, General Clay again outlined the proposal, this time during a panel discussion on highway construction and financing, before the 12th biennial conference of the Council of State Governments in Chicago. Just before the start of the 3-day conference, the Executive committee of the Governors' Conference had met to approve the special committee's highway financing report. The Governors' plan was presented to the conference during the panel discussion. The following day, the assembly voted to support the proposal. The Associated Press reported that, "Gov. Pyle of Arizona, chairman of the assembly, estimated that the show of hands was 10 to 1 in favor of the stepped up road building."

Thus, on December 3, as President Eisenhower accepted the Governors' proposal at the White House and passed it on to General Clay for consideration, General Clay had already adapted his proposal to the Governors' plan for the Interstate System. As Seely pointed out, the fact that the Clay Committee's plan was consistent with the Governors' proposal "was not a coincidence, because du Pont had worked with both groups," the Clay Committee and the Governor's Special Committee.303

The Governors' turnabout would not go unnoticed. On May 4, 1955, during testimony on the National Highway Program before the House Committee on Public Works, Governor Kohler would be asked about this change in position. Representative Fred Schwengel (R-Ia.) pointed out that for the past 10 years, the Governors had asked the Federal Government to yield the gasoline tax to the States. He continued:

I believe 2 years ago it was the unanimous opinion of the governors that that obtain... Now, I think I see a complete flip-flop in this whole philosophy, where you are saying let the Federal Government stay in it. Do you realize when you are taking this position on this bill that you are committing the Federal Government to this gasoline tax for 30 years?

Governor Kohler responded:

Mr. Schwengel, we realize that this is the case... I would like to point out that, so far as I know, the governors still, if polled, would adhere to their position as adopted at the Houston Governors' Conference in 1952, that the Federal Government should get out of the gas-tax field and leave that to the States.

The approach here is simply a realization of the practical political facts of life that the Government is not going to get out of that gas-tax field. So it is a question of relaxing and enjoying it, I think, rather than changing our minds.

Representative George interrupted to ask if the Governors' change of position was based on the fact that under the proposed program, all of the gas-tax revenue would be returned to the States for highway improvements, whereas before half the revenue went to the general treasury. Governor Kohler responded:

That is correct, Congressman George. That is correct.304

Brooks addressed the turnabout in his history of the Governors' Conference. He observed that some of the "staunchest advocates of states' primacy" had left office by the time of the report. Pennsylvania's Governor Fine, for example, did not run for reelection in 1954, and left office on January 18, 1955. Even the remaining old guard Governors had accepted the political realities and supported the increased Federal role in road building. Moreover, many Governors understood the political reality regarding what would happen at the State level if the Federal Government abandoned the gas tax:

One conservative former governor, who was a key member of the special governors' highway committee, explained the reversal in an interview. Congress, he noted, was under heavy pressure to enact the highway bill with federal financing. The governors knew that the national government would not, indeed could not, get out of the gasoline tax field without wrecking the highway program. State legislatures were not strong enough to withstand the pressures that would be exerted by the oil and gas interests to cut the gasoline tax if the national government withdrew. In other words, all parties concerned - the president, the Congress, and the governors, knew that the national government was the only government politically and financially capable of levying the necessary taxes for the highway program.305

Commission on Intergovernmental Relations

The 25-member Commission on Intergovernmental Relations, established in 1953 to study Federal-State relations, was headed by Meyer Kestnbaum, Special Assistant to the President. The commission completed its work in June 1955 with a report to President Eisenhower, who transmitted the report to Congress on June 28. His cover letter pointed out that 168 years earlier, the Founding Fathers had designed the Federal form of government "in response to the baffling and eminently practical problem of creating unity among the thirteen States where union seemed impossible." Since then, the Federal structure had been "adapted successfully" until recent years:

In our time, however, a decade of economic crisis followed by a decade of war and international crises vastly altered federal relationships. Consequently, it is highly desirable to examine in comprehensive fashion the present-day requirements of a workable federalism.

Given the "intricate interrelationship of national, state, and local governments," the President told the Congress that "it is important that we review the existing allocation of responsibilities, with a view to making the most effective utilization of our total governmental resources." He urged Congress to study the recommendations of the commission on Intergovernmental Relations, "the first official body appointed to study and report on the general relationship of the National Government to the States and their local units." To the extent that the recommendations entailed action by the Executive Branch, the President pledged to "see that they are given the most careful consideration."

In examining elements of government, the commission had established a Study Committee on Federal Aid to Highways, one of the perennial points of dispute between the Federal and State governments. The members were:

Clement D. Johnston, President, Chamber of Commerce of the United States, and Chairman of the Study Committee.

Governor Allan Shivers of Texas.

Frederick P. Champ, President, Cache Valley Banking Company, Logan, Utah.

Randolph Collier, State Senator, Yreka, California.

William J. Cox, former State Highway Commissioner of Connecticut.

Dane G. Hansen, President, Hansen Lumber Company, Logan, Kansas.

Major General Frank Merrill, Commissioner of Highways, New Hampshire.

Robert B. Murray, Under Secretary of Commerce for Transportation.

J. Stephen Watkins, President, J. Stephen Watkins Engineering Company, Lexington, Kentucky.

The study committee agreed about the need for better roads, but its report said "the real issue is not whether we should have better highways, it is how best to get them." Highways served different purposes and should be treated accordingly in sorting out Federal-State relationships. The greatest national responsibility for highways centered on expeditious development of the National System of Interstate Highways. The study committee rejected the idea that the Federal Government should build and operate the Interstate System; it recommended "concentration of Federal funds on construction of the Interstate System, together with State participation."

Substantial Federal financial support was essential, with the States bearing "not less than one-half of the construction costs." Toll financing could pay for about one-third of the Interstate System, but beyond that mileage, the Federal Government should provide Federal-aid sufficient "to accomplish its improvement at a rate commensurate with the national welfare and should be allocated in such a way as to give highest priority to correction of the most serious deficiencies."

For other roads, the study committee recommended eliminating Federal participation over time. The States could be counted on to address needs off the Interstate System because "the failure of any State or locality to provide adequate highways brings its own prompt and automatic penalties upon the areas involved." States would act in "their own intelligent self-interest" to provide adequate highways "when they understand the responsibility is theirs."

The study committee endorsed the States' long-sought goal of eliminating the Federal gas tax. The States, the study committee concluded, "have demonstrated ability to tax motor fuels effectively and economically." Repealing the Federal tax would give the States a potential tax increase of more than $800 million a year, assuming they increased State taxes by the same amount as the abandoned Federal tax.

At the same time, the study committee recommended "without qualification" the continuation of the BPR in a modified role that took advantage of its national perspective:

The Bureau should continue to conduct and integrate basic highway research, disseminate the results of research, assemble and collate statistics, and provide technical assistance to the States and their subdivisions.

The BPR also should help plan and stimulate "the articulated network of highways necessary to serve the Nation's productive and defensive strength." Moreover, it should help stimulate highway programs "to promote economic stabilization when appropriate." However, the report recommended that the BPR "substantially reduce most of the present close supervision and inspection of State highway activities."

In transmitting the study committee's report to the President on June 20, Kestnbaum explained that the commission rejected many of the study committee's conclusions and had "arrived at its own findings and recommendations." The commission rejected many of the study committee's recommendations. On the most basic issue of the Federal role, the commission's report said:

The Commission believes that there is sound justification for federal participation in the improvement of many highways. The Commission generally approves existing legislation, which provides federal aid for primary highways, including interstate routes and urban extensions, and for secondary roads, including farm-to-market roads.

The commission observed that the Federal-Aid Highway Act of 1954 had increased the Federal-aid highway program significantly:

However, there is abundant evidence that the current rate of highway improvement is not sufficient to meet current emerging demands. Failure to meet these needs will seriously affect the national security and the national economy. Humanitarian considerations alone, in terms of reducing the annual toll of highway accidents, call for vigorous action in revamping the unsafe segments of the highway network.

To finance the expanded program, the commission had been divided, with four members of the 25-member commission recommending bonds to pay for Federal financing. The remaining members, including the 10 Members of Congress who served on the commission, disagreed. The commission's report stated:

The Commission recommends that the expanded highway program be financed substantially on a pay-as-you-go basis and that Congress provide additional revenues for this purpose, primarily from increased motor fuel taxes.

The increased tax revenue was justified:

  1. to give recognition to the national responsibility for highways of major importance to the national security, including special needs for civil defense, and
  2. to provide for accelerated improvement of highways in order to insure a balanced program to serve the needs of our expanded economy.

As for the bonds favored by the President as a financing mechanism for the Interstate System:

An increase in taxes is preferable to deficit financing as a means of supporting larger highway outlays by the national government. The latter method would result in high interest charges and would shift the burden to citizens of a future generation, who will have continuing highway and other governmental responsibility of their own to finance.

The commission supported toll roads as a State and local prerogative, but opposed Federal-aid in development of toll roads.

The commission supported continuation of the BPR:

Over the years, the Bureau of Public Roads has made a notable contribution to highway improvement through technical leadership and the stimulation and coordination of State activity in this field. However, in the light of the maturity and competence of most State highway departments, it appears to the Commission that the Bureau of Public Roads could relax most of its close supervision of State highway work.

On August 2, Congress adjourned for 1955, shortly after the President transmitted the commission's report for consideration.306

Future Battles on Devolution

General Clay's plan, as reflected in the President's transmittal to Congress on February 22, 1955, failed. Even the President's staunchest congressional supporters gave only token endorsements to Clay's financing scheme. Other concepts also failed in 1955, much to the delight of the lobbyists who were determined not to let their clients be taxed for the Interstate System. The debates were resolved in 1956 after the interests agreed to share the cost. The Federal-Aid Highway Act of 1956, which the President signed on June 29, launched the Interstate construction program.

The legislation retained the structure of the Federal-aid highway program, but with construction of the Interstate System finally launched, the role of the BPR expanded. The importance of the Interstate System caused the BPR to expand its staff, not reduce it, while increased project oversight authority was delegated to its field office in each State, not decreased. The gas tax was increased to 3 cents, not eliminated as the States had desired.

Further, Congress passed legislation a few weeks later to create a new position, Federal Highway Administrator, to head the BPR. Unlike the Commissioner of Public Roads, the Administrator would be confirmed by the Senate. The goal was to elevate the position to equal status with the State highway agency heads who would be working with the Administrator on the expanded program. President Eisenhower signed P.L. 84-966 on August 3, 1956.

The President and the Congress had responded clearly and decisively to those who, just a few years earlier, had wanted to eliminate the Federal excise tax on gasoline, abolish or curtail the BPR, and sharply reduce the Federal-aid highway program.

The success of the Interstate System, built under the Federal-aid highway program, did not, however, end the struggle between the States and the Federal Government. In an article in the January 1991 issue of Transportation Quarterly, Elizabeth Parker of the U.S. Department of Transportation discussed attempts to return authority to the States under Presidents Nixon, Gerald Ford, Jimmy Carter, and Ronald Reagan. The article is reprinted, with permission of the Eno Transportation Foundation, at https://www.fhwa.dot.gov/infrastructure/restructure.cfm.

Although the Surface Transportation and Uniform Relocation Assistance Act of 1987 rejected the Reagan-era attempts to revamp the Federal-aid highway program, the proposals highlighted by Parker helped create a sentiment that the time had come to reevaluate the Federal role in highway and transit programs. With the Interstate System essentially complete, all parties recognized that the next reauthorization bill, needed in 1991, would set the new balance among Federal and State governments. The highway community and broader transportation interests, including environmental organizations, as well as the U.S. Department of Transportation, engaged in a multi-year rethinking of the balance of responsibility among Federal, State, and local officials for highways and transit.

The resulting Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA), approved by President George H. W. Bush on December 18, 1991, established that balance.307 Under ISTEA, the Federal Highway Administration was to focus on the National Highway System, a 160,000-mile network of the Nation's most important roads, including the Interstate System. Funds would continue for other roads, but under Section 1016 ("Program Efficiencies"), Federal oversight of projects off the NHS would be reduced significantly if State transportation departments followed State laws and regulations for design and construction of projects.

At the same time, Congress increased some of the "strings" that went with the funding. For example, ISTEA strengthened the statewide and metropolitan planning requirements to ensure State and local officials considered priority issues that Congress wanted to emphasize, such as preservation of existing facilities, relieving congestion, access to ports and other intermodal facilities, efficient movement of freight, expansion of transit, and the overall social, economic, energy, and environmental effects of transportation decisions. To help State and local officials set priorities for project selection, ISTEA required the States to establish "management systems" for highway pavements, bridges, highway safety, traffic congestion, public transportation and intermodal facilities. (After the States objected, Congress eased this requirement.)

In these and other ways, Congress altered the Federal-State balance while retaining a strong Federal presence in highway, transit, and safety programs.

Following the Republican takeover of both Houses of Congress after the November 1994 off-year elections, Congress debated the issues in the context of a broader devolution philosophy, embraced by many Republican members, of returning authority to the States for activities that were not seen as inherently Federal. The Departments of Commerce, Education, Energy, and Transportation were among the Federal agencies considered for devolution.

By 1996 and 1997, as discussions began about reauthorization of ISTEA programs, advocates of devolution targeted the Federal-aid highway and transit programs for elimination or sharp reduction. Devolution, however, had lost favor. The Governors, acting through the National Governors Association, supported the ISTEA structure and sought more Federal-aid funding as well as early approval of the reauthorization legislation to avoid project delays. Attempts by a few Governors to secure support among the Governors for devolution failed. As a result, the Transportation Equity Act for the 21st Century, approved by President Bill Clinton on June 9, 1998, largely followed the structure of ISTEA.


In the Constitution, the Founding Fathers had wrestled with the balance of power among the partners in the great experiment they were creating. Although the Constitution established the framework, it left sufficient flexibility that the struggle among the Federal and State partners, as well as the three branches of the Federal Government, has been continuous, with the balance of power shifting as events, trends, and individuals come and go. If history can tell us anything, it is that the struggle over the Federal-aid highway program, as over all Federal-State relations, will continue.

The Constitution assigned to the national government the authority to "establish... post Roads," a phrase that has been subject to varying interpretations since 1787. As James Madison explained in Federalist Paper No. 42:

The power of establishing post roads must, in every view, be a harmless power and may, perhaps, by judicious management become productive of great public conveniency. Nothing which tends to facilitate the intercourse between the States can be deemed unworthy of the public care.308

Initially, as Congress and successive Presidents debated the National Road and other Federal road construction, the question turned on whether the word "establish" meant the Federal Government had the power to construct post roads or only to designate existing routes.309 The Supreme Court, in 1893 and 1907, would end the debate by confirming the Federal role in road building under the "general welfare" clause of the Constitution.

How to exercise that authority has been the question ever since, for as Alexander Hamilton pointed out in Federalist Paper No. 7:

There is, perhaps, nothing more likely to disturb the tranquility of nations that their being bound to mutual contributions for any common object that does not yield an equal and coincident benefit. For it is an observation, as true as it is trite, that there is nothing men differ so readily about as the payment of money.310
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  1. Clay, General Lucius D., "A New National Highway Program," American Municipal Association, 31st annual conference, December 1, 1954, Reproduced by the Dwight D. Eisenhower Library.
  2. Seely, p. 215.
  3. Hearings, "National Highway Program," Committee on Public Works, House of Representatives, U.S. Congress (H.R. 4260, 84th Congress, 1st session, part 1, April 18-June 1, 1955), p. 371.
  4. Brooks, p. 81-82.
  5. The section on the Commission on Intergovernmental Relations is adapted from: Weingroff, Richard F., President Dwight D. Eisenhower and the Federal Role in Highway Safety, Federal Highway Administration, 2003. This document is available at https://www.fhwa.dot.gov/infrastructure/safetypr.cfm.
  6. For information on the origins of ISTEA, see "Creating a Landmark" in the November/December 2001 issue of Public Roads at https://www.fhwa.dot.gov/publications/publicroads/01novdec/istea.cfm.
  7. The Federalist Papers, p. 271. Historians consider this comment to offer general support of post roads rather than a contradiction of Madison's view that an amendment to the Constitution would be needed to permit Federal involvement in internal improvements.
  8. "Postal Power," The Constitution of the United States of America: Analysis and Interpretation, Congressional Research Service, Library of Congress (Senate Document No. 99-16, 1987), p. 319.
  9. The Federalist Papers, p. 65.
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