States Need Private Investment in Roads

August 22, 2013

This Congress has been criticized for not passing many laws, and praised for that in some quarters. It's true that in quantitative terms, its productivity has been low. A major case in point is transportation. Neither the Democratic-majority Senate nor the Republican-controlled House has passed a reauthorization of what was once known as the highway bill, which used to be done every five or six years, says Michael Barone, a senior political analyst for the Washington Examiner.

This failure can be ascribed in part to partisan warfare and to intraparty differences. But it's also due to the obsolescence of the federal funding scheme used since the Interstate Highway System was first authorized in 1956.

  • Several states had built limited-access toll roads, but there was an obvious need for coordination and for (disguised) subsidies for less affluent states.
  • So a federal gas tax, a kind of user fee, was enacted to finance 90 percent of the cost of interstate highways, with states paying the other 10 percent.
  • For a long time, the law worked as planned. Most of the interstate network was in place by the early 1970s. The last bit was opened in 1992.
  • In subsequent highway bills Congress added bells and whistles, such as funding for mass transit and bike paths, and authorization of a national 55 mile-per-hour speed limit.
  • Committee chairmen built support for the bill by allowing members to earmark funds for projects in their states and districts.

Now this politically congenial system is broken. One reason is that gas tax receipts are flat-lining or declining. Higher gasoline mileage requirements (something Congress has also blessed) are responsible.

  • The federal government and most states tax gas at a per gallon rate.
  • So higher gas mileage means less money for the Highway Trust Fund.
  • And in a time of recession and sluggish growth, people have been driving less.

The solution needs to be found outside the box. Federal funding may have been necessary to coordinate the design of the interstate system and to fund it in many states, but the interstates have been located and built, and differences in state income levels were much greater in the 1950s than they are today.

The point here is that states and localities know their needs better than the federal government can. Private capital is available for investment in toll roads and bridges, and can better assess profitability than logrolling members of Congress.

Source: Michael Barone, "Use Private Capital for Roads and Bridges, Not Taxpayer Money," Washington Examiner, August 16, 2013.

 

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