Reducing the Department of Transportation's Role in Funding and Regulating Transportation

October 3, 2013

Many Americans take it for granted that the federal government should regulate the transportation sector in the United States and continue to provide funding for transportation infrastructure, particularly highways and urban mass transit. Yet an economic and historical analysis raises questions about how much government safety regulation is necessary and whether private firms or state and local governments could provide infrastructure more efficiently, say Tracy C. Miller and Brian Deignan of the Mercatus Center.

While the U.S. transportation system still facilitates Americans' mobility to a high degree and has seen declining fatality and injury rates for almost every mode of transportation, the federal government does not fund transportation efficiently and creates unnecessary costs through regulation. Apart from a very limited role in facilitating interstate commerce by harmonizing policy and regulation between the states and working to limit the harmful impact of other federal regulatory agencies, most Department of Transportation activities should be relegated to the private sector or to state and local governments.

Whether or not the market would fail in providing infrastructure, government failure may be worse. The government often does not use tax revenue efficiently in funding transportation infrastructure.

  • Even when governments choose the most urgently needed highway projects, expansion of highway capacity does not usually lead to anticipated reductions in congestion.
  • Expansion of capacity reduces the cost of traveling during peak periods so that peak demand increases almost as much as supply. The result is that highway lanes, though underused at other times, continue to be gridlocked during rush hour.
  • During peak periods, each motorist pays much less than the marginal cost of driving on a congested freeway, so the quantity of space demanded exceeds the quantity supplied.
  • Below-market prices for highway services have the same effect as any other price ceiling: they lead to shortages.

Source: Tracy C. Miller and Brian Deignan, "Why the DOT's Role in Funding and Regulating Transportation Should Be Reduced," Mercatus Center, September 24, 2013.

 

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