NCPA - National Center for Policy Analysis

Political Incentives Harm Transportation Funding

July 17, 2015

Politicians often promise the public large benefits from transportation projects without fully explaining the projects' costs. Legislators embrace inefficient transportation projects because the benefits of a project accrue to their constituents while the costs are spread out nationwide, and local taxpayers do not pay the full cost of a local infrastructure project. Projects often move forward even when the total cost of the project exceeds total benefits:

  • Federal funding of state and local highways results in an inefficient use of transportation dollars. For example, at the federal level, project benefits are concentrated in a state or district, whereas tax costs are spread out nationwide.
  • As long as projects deliver benefits to a particular congressional district while dispersing the cost throughout the country, members of Congress are likely to vote in their favor.

Two reforms could help reduce the political incentives to spend taxpayer money on inefficient transportation infrastructure projects:

  • Compare Proposed Project Estimates to Previous Project Estimates and Outcomes. The comparison to previous projects must also be transparent and open to public review, so that citizens can decide whether the range of projections for possible project outcomes is reasonable.
  • Shift Highway Funding from Federal to State and Local Governments. This reform would result in a greater concentration of both the benefits and costs at the local level, which would increase the focus on the costs of infrastructure projects.

Transportation project justifications are severely biased and legislative voting behavior helps certain interest groups at the expense of the average voter. Instead of spending more money on more inefficient projects, the government should reform how transportation spending is determined and allocated.

Source: Robert Krol, "Political Incentives and Transportation Funding," Mercatus Center, July 14, 2015.

 

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