In late June of last year, to the dissatisfaction of conservatives and liberals alike, Congress passed a $128 billion legislative package that included the Federal Transportation Act of 2012. The Act sought to “[improve] the safety of public transportation systems,” establishing programs that would “assist public transportation systems in addressing the backlog of maintenance needs.” The American Society for Civil Engineers (ASCE)’s 2013 Report Card for America’s Infrastructure, which gave America a D+ and argued that we have to spend $3.6 trillion to fix the damage by 2020, highlights the Act’s failures. Despite the efforts that many in Congress lauded as proof that the federal government was not broken, the ASCE’s recent report tells another, less optimistic story: because the Act generated no new revenues, it left states without any other funding besides what they have managed to get from the private sector.
States, on the other hand, are taking creative steps to address the infrastructural needs of their communities. According to the pro-redevelopment Transportation for America, more states, like Iowa, Maryland, Vermont, and Wyoming, have looked at hiking gasoline taxes as a means of generating revenue, sometimes even indexing the tax to inflation. But Virginia, as NPR noted yesterday, is taking a potentially more realistic approach. With more efficient cars and fewer people driving all across the country, Virginia chose to eliminate its gas tax and raise its sales taxes and wholesale fuel tax. As Republican speaker of the Virginia house explained, “It was a true compromise…as with most any compromise, no one’s 100 percent happy with every feature of it. There are some things that I’m not crazy about. I’m sure there’s [sic] some features that other people don’t relish. But we had to do it.”
By Yoichi R. (Yoichi Robert) Okamoto. Creative Commons License.
Joshua Schank, president of the nonpartisan Eno Center for Transportation, has argued that Virginia is just substituting one tax for another. Others have pointed out that the Virginia model undermines the user-pays model, allowing people to drive as much as they want without having to pay for it. An alternative to both hiking the gas tax and eliminating it would be to create a tax per miles traveled, which could be calculated easily using technology similar to the E-Z Pass. Whatever the option, states are looking into ways of improving infrastructure without a federal government patently incapable of making the kind of compromises we are seeing emerge from states like Virginia.
Since 2007, public infrastructure projects have been dependent on private investors in largely unprecedented ways. In a story on the ASCE report, The Washington Post pointed out that most of the investments we have seen made in America’s infrastructure have come from the private sector. With a lack of public funds due to the Great Recession, projects are being taken on and valued by a companies concerned more with making profits than with promoting the general welfare. The problem with having a private sector driven infrastructure redevelopment program, however, is that the companies involved have no incentive to improve areas that will not bring back major returns. Rightfully so, I might add: Econ 101 will tell you that not getting returns on your investments is bad business. But the US government is not a business—it’s (ideally) a conglomerate interested in providing for people who aren’t just in the top tax bracket. Although not explicitly relevant to the issue at hand, Director of US Department of Housing and Urban Development (HUD) Shaun Donovan’s quote about having a strong central government for housing issues speaks to the importance of getting our government back on track when it comes to infrastructure:
“I would never believe that the private sector, left to its own devices, is the best possible solution. I’m in government because of the role of government in setting rules and working in partnership with the private sector. On the other hand, there’s no way you could ever get to a scale that can really affect the housing problems in this country without working with the market.”
If you are coming up with ways for user-pay models (gas-taxes, EZ-pass) on roads and infrastructure largely built by private companies contracted out by the government, you are effectively just inserting a government middle-man between the constructor of something and the people who pay for it. This perhaps masks costs in certain instances – maybe giving an upfront fee of 75 cents instead of the new, private-sector-decided $2 toll in the example you linked to about that bridge. But the money will have to come from somewhere, and it usually comes from either racking up debt (which will have to be paid back at some point), or just taking money out of other pots – sales taxes, etc. The amount of money itself will be higher because you have to pad the pockets of the huge bureaucracy of DOT employees – along with the workers and entrepreneurs who actually build the road – so it seems like a raw deal for the citizen.
Of course you’re going to have government middle-men talking about how important government middle-men are (just as you are going to have societies of civil engineers advocating for more civil-engineering jobs), but when push comes to shove, not every govt subsidized road needs to be built, and the cost-efficiency and price-consideration inherent in the private sector could lead to less waste, less land blighted by under-used and unnecessary roads and a cheaper travelling experience for the citizen as a ‘consumer’ than they can get as a ‘taxpayer’.
Hi Ben,
Thanks for your comment. Yes, US citizens are taxpayers as well as consumers. When our government contracts companies to build bridges or develop roads, however, it – ideally – uses the market to provide for citizens regardless of tax bracket or consumer status. The government “middle men” are there to ensure that natural market processes are not deciding who gets better bridges or roads. If the exchange between communities and companies lost the “middle men,” what incentive would companies have to develop in areas that would not provide them with high returns?
As for the bureaucracy of the DOT, I’d assert that underpaid government workers are less of a problem than the unregulated companies that abandoned many of the communities where the DOT’s work is needed most. The issue here, as I see it, is not that infrastructure is being unnecessarily constructed but rather that there is a need for infrastructure that is not being addressed. If there were excess projects that the federal government was supporting without cause, I’d agree. But since that is not the case, states are experimenting with the gas tax–citizens are hurting, and its because the federal government is not doing its job.
Hey Daniel,
Well I’ve often heard that the gap between private and public sector workers’ salaries should give a push to mandate higher wages in the private sector. But I haven’t heard that public sector union employees are woefully exploited. 1/5 have a 6 figure salary, and the gap has risen to an over $30,000 difference in the median wages in the two sectors. (http://usatoday30.usatoday.com/news/washington/2009-12-10-federal-pay-salaries_N.htm) I know you support huge rises in minimum wages, price controls, etc., but for the job that DOT workers do, it seems like mandating fairness is a very well-compensated profession. And that compensation comes directly out of taxpayers’ wallets.
In terms of the fairness that they’re mandating, realize that mandating a highway to every locale in America results in chronic underuse. And this underuse isn’t some benign happenstance, only of interest to academics and economists. These highways need to be maintained. Costing thousands of dollars for cash-strapped local governments and states. They impede on real estate that could be used for much better, more profitable purposes – housing, new businesses, parks, forests, etc. Roads are great, no one’s denying that. But there’s a point where building a new road is not worth its costs, and the government has no way of knowing where that point is, unlike entrepreneurs who are not deaf to the signals of prices and profits. This deafness costs citizens more productive employment, new businesses, more open land and more housing. Cities and states are beginning to realize the same thing (http://www.smartgrowthamerica.org/2011/03/24/five-cities-argue-the-economic-case-to-tear-down-a-highway/
http://dc.streetsblog.org/2013/01/28/wisconsin-over-invests-in-new-roads-destined-for-underuse/)
Perhaps we should listen to the market more, and realize that there’s a cost to pursuing ‘equality and fairness’ through OVER-paid government bureaucracies.
-Ben