How to reduce investment needs

An anonymous reader* writes:

A Political Economy of Access: Infrastructure, Networks, Cities, and Institutions by David M. Levinson and David A. King
A Political Economy of Access: Infrastructure, Networks, Cities, and Institutions by David M. Levinson and David A. King

Your recent post[s] regarding transportation “needs” and the ASCE scorecard was right on target.  It is unfortunate that ASCE can’t seem to present a more balanced assessment of the transportation funding situation.  The big gee-whiz numbers they come up with are taken as fact by the usual interests campaigning for a big federal infrastructure package. Before congress jumps on the spending bandwagon they should take a hard look at what the last stimulus accomplished, and the perverse incentives created by Federal programs that the stimulus didn’t fix.  They should also ask themselves what no-cost reforms could be enacted that would improve outcomes.  For instance, the FTA New Starts program has given local agencies a huge incentive to build costly rail systems rather than improving bus service.  The rail project under construction in Hawaii is yet another sad example.

By the way, in 2010 the Congressional Budget Office did a study of “Public Spending on Transportation and Water Infrastructure”.  That report contains some interesting information that is relevant to the current infrastructure discussion.  It also notes (on page 17) that:

“…the estimates of economically justifiable spending would be considerably lower if the amount of infrastructure provided accounted for its economic cost, which could be accomplished by charging for its use when that is feasible.  For example, the Federal Highway Administration has estimated that widespread use of congestion pricing – which would result in motorists paying higher fees to drive on a given road during peak hours and lower fees during off-peak hours – would reduce by almost $41 billion and $52 billion, respectively, previous estimates of the annual investment required to maintain serves as current levels…”

Congress and the incoming administration really ought to look at how reforms could reduce needed investment by $41 – $52 billion.  That would produce a return on investment that even Donald Trump would envy, and the savings estimated by FHWA probably don’t even include benefits in the form of positive externalities that would be gained from congestion pricing.

[I]n an earlier post you pointed out the Trump infrastructure program relies on private investment which may not be forthcoming if the entities putting up the money can’t benefit from the tax credits (e.g., pension funds, etc).  The best way to attract private investment is to create incentives for public entities to charge market prices (or something reasonably close) for use of highways and other public facilities where demand exceeds efficient capacity.  This would have several advantages.  For starters, by balancing demand with capacity it would increase system efficiency.  It would also generate a stream of revenue that would be attractive for public/private partnerships. This is another argument in favor of focusing infrastructure legislation on institutional reform rather than more pork-barrel spending.

This point cannot be repeated enough. Without properly pricing roads, we cannot know how many roads we need.


* The reader says: ‘Better go with the anonymous reader.  If there is a Federal stimulus package I expect my agency will be lining up with all the others to get a piece of it.’