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The Independent Institute
Commentary

The President’s Road to Nowhere


In his address to Congress earlier this month, President Obama asked: “Where would we be right now if the people who sat here [in Congress] . . . decided not to build our highways . . . our bridges, our dams, our airports?”

The president seemed unaware that private companies and entrepreneurs, rather than government, have provided much of America’s infrastructure. And they could do so again, rather than asking our cash-strapped governments—and tapped-out taxpayers—to foot the bill.

In the 19th century, for example, private investors provided more than 10,000 miles of toll roads in the Eastern United States, under conditions immeasurably more difficult than today’s. Early in the 20th century, entrepreneur William Vanderbilt built the world’s first toll expressway—the Long Island Motor Parkway.

Modern federal financing of roads started when the Highway Trust Fund was established in 1956 to finance the Interstate Highway System. The original legislation stipulated that Highway Trust Fund revenues had to come entirely from road users, via taxes on diesel and gasoline. It also stipulated that the fund, and the taxes that feed it, would be abolished within three years of the highway system’s completion, with funding responsibilities returned to the states.

As is usually the case with government programs, the Interstate Highway System was long ago completed, while the taxes and “trust fund” live on.

According to House Transportation and Infrastructure Committee Chairman Rep. John Mica (R-FL), Congress has transformed the Highway Trust Fund into a “slush fund,” with less than 65 percent of its receipts dedicated to highway construction and maintenance. The remainder, he says, is largely funneled into federally mandated programs that states and localities don’t want to finance, such as highway beautification.

The president also mentioned his intention to “set up an independent fund”—which the White House previously has referred to as an “infrastructure bank”—to finance infrastructure projects. A bank specializing in lending for infrastructure might be a good idea, but if it’s a good idea, why does it need government financing: to ensure that its projects employ only high-paid unionized labor?

Financially viable projects can be financed commercially. For example, in the 1990s a private consortium, with no federal funding, built the first electronically tolled express lanes in the United States, on Southern California’s State Route 91. Tolls on the 10-mile stretch of SR 91 now vary from $1.30 during much of the night to $9.45 at the start of the rush hour, at 4:00 p.m., on Thursdays. People at all income levels use the toll lanes, with 10 percent more women than men switching to them. Those who choose not to pay stay on SR 91’s non-toll lanes.

The privately financed express toll lanes provide the operator with steady profits; others could be built elsewhere to similarly relieve traffic congestion. Transportation experts Robert Poole and Kenneth Orski already have sketched out such toll-lane networks for Atlanta, Dallas/Ft. Worth, Houston, Los Angeles, Miami, San Francisco, Seattle and Washington, D.C.

Congress is deeply divided about highway policy, with conservatives seeking to confine federal spending to support federal objectives (such as maintaining the Interstate Highway System), and many liberals seeking to expand the federal role—to include “livability” objectives, for example, which could get Congress involved in local land-use decisions.

There are also divisions on funding. The Republican-controlled House wants to confine surface transportation spending to money paid into the Highway Trust Fund, while the Democratic-controlled Senate seeks to spend more, with the shortfall coming from general funds. The funding issue has been temporarily resolved by extending the current legislation until the end of the year.

While infrastructure certainly is important to the economic well-being of the United States, Congress should concentrate on more important matters, such as reducing the federal deficit, and give the states authority to deal with their own infrastructure issues, without federal interference.

The operable rule should be simple: The federal government should not be involved in financing any infrastructure project that can be provided commercially. (This could even include air traffic control. The feasibility of this is evident to our north, in Canada, where air traffic control is provided by NAV CANADA, a private corporation.)

Transfer of highway funding responsibilities to the states would help job creation by reducing both costs and bureaucratic delays. It would also encourage the involvement of the private sector and spur innovation, as companies seek better ways to move people and goods safely and profitably.


Gabriel Roth is a transport and privatization consultant and a research fellow at the Independent Institute. He is the editor of the new book, Street Smart: Competition, Entrepreneurship, and the Future of Roads.