Pensions or potholes? Congress chooses potholes

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Which is in greater need of repair—the pothole-riddled nation's highways or underfunded corporate pension funds?

According to Congress, which last month approved a $10.8 billion patch to prevent the Highway Trust Fund from veering into insolvency, the answer is potholes.

The White House on Wednesday held up the short-term fix as an example of congressional gridlock, as Vice President Joseph Biden ripped Congress for kicking the Highway Trust Fund can just a few miles down the road.

"Hell, Congress can't even decide on a gas tax to keep the highway system going," he said.

But even the White House has stopped short of proposing a hike in the 18.4-cent a gallon federal gas tax—last raised in 1993.

Instead, more than half of the latest stop-gap funding will come from a change in the way companies are allowed to account for the future cost of paying pension benefits to retirees. Known as "smoothing," the gimmick lets companies cut back on pension contributions.

That, in theory, lets more money fall to the bottom line. The way Congress sees it, those higher profits will generate higher corporate tax bills, which will help pay to fix America's crumbling highways.

But the bill—which is still waiting for President Barack Obama's signature—also created a $51 billion corporate piggy bank. That's how much Moody's figures companies will save in lower pension fund contributions thanks to the road repair bill.

"In effect, it allows (companies) to borrow cash from their pension plans," Moody's analyst Wesley Smith wrote in an analysis of the bill's impact.

Overall, U.S. pension funds have been gradually recovering from the financial meltdown of 2008, which left a giant crater in their investment balances. That shortfall has gradually receded as rising stock prices and a bottoming in interest rates have helped them rebuild their portfolios.

But the largest 100 U.S. pension plans were still underfunded to the tune of $122.3 billion in 2013, down from $301.6 billion in 2012, according to a survey by Pensions and Investments.

The Highway Trust Fund, meanwhile, continues to lose ground as spending power of the gas tax steadily erodes because it's not indexed to inflation. Declining fuel consumption has also reduced tax receipts and left the federal funding for road repair and construction running on empty.

"There is still no long-term certainty, and this latest Band-Aid expires right as the next construction season begins," Secretary of Transportation Anthony Foxx posted on the department's website, promising to convene a "town hall of business leaders, transportation advocates, state and local government officials, and everyday Americans" later in August to work for a long-term plan to rebuild the nation's crumbling infrastructure.

But a long-term solution is looking as rare as a stretch of freshly paved highway.

This is the fifth time in the last five years that Congress has patched the road repair fund with a grab bag of budget tricks designed to avoid raising the gas tax. The latest patch is expected to run out by next summer.

—By CNBC's John Schoen