A recent report from the RAND Corporation looks at America’s infrastructure and concludes that “not everything is broken.” In face, what is broken, more than the infrastructure itself, is “our approach to funding and financing public works.” This is largely because governments by-pass market signals and rely on “often complicated and multilayered governance arrangements and competing public goals and preferences” to make decisions about where to spend money.
For example, the report shows that government spending on infrastructure as a percentage of gross domestic product declined from a peak of 3 percent of GDP in 1960 to about 2.5 percent in 1980, and has hovered between 2.5 and 2.7 percent since then. But governments also made a clear trade-off in infrastructure spending: spending on roads declined from 1.6 percent of GPD in 1960 to around 1 percent in and since 1980, while government spending on mass transit grew from 0.1 percent in 1970 to 0.4 percent in and since 1980.
This would be fine if spending on mass transit had been as productive as spending on highways had been. But it wasn’t. Until the 2008 financial crisis, per capita driving continued to grow despite the lack of much capital spending on new roads, while per capita transit ridership was stagnant or declining. The report doesn’t have data after 2014, when per capita driving began to increase again while transit ridership began to collapse. Continue reading
President Trump issued an executive order yesterday aimed at streamlining the federal approval process for infrastructure projects. Contrary to the impression given by press reports, the order doesn’t repeal any environmental laws or rules. All it really does, the White House explains, is require federal agencies to work together to speed existing approval processes with a target of issuing permits within two years–which is hardly very fast.
Since it isn’t clear to the Antiplanner that the lengthy process of writing and revising environmental impact statements has done much to protect the environment, streamlining would seem to be a good idea. The real problem is not that federal projects threaten the environment–some do, but most don’t–but instead that they threaten the economy by wasting a large share of nation’s resources on projects that produce little value.
For example, the Washington Post published an op-ed yesterday about Maryland’s Purple Line light-rail project. This project would spend more than $5 billion to build and operate a transit line that, the environmental impact statement admits, will actually increase congestion. Since this is conveniently ignored by project advocates, it reveals one of the weaknesses of the environmental process: the documents produced are so lengthy and complex that almost no one read them. Continue reading
A new report from professors at Cornell University’s Program on Infrastructure Policy argues that the path towards fixing infrastructure involves user fees, public-private partnerships, and streamlined approval processes–all part of Trump’s infrastructure agenda. The report argues that current priorities are often misplaced, noting that more than half of state highway spending goes for new projects when more should be spent maintaining the roads that already exist. In particular, the report endorses mileage-based user fees to pay for roads.
Click image to download a copy of the report.
The report was published by the Committee for Economic Development, a branch of the Conference Board. Originally founded in 1916 to provide a business response to the labor movement, the Conference Board is now seen (according to Wikipedia) as the “progressive wing of the business community.” Indeed, recent reports criticize crony capitalism, advocate for more women on corporate boards of directors, and urge the elimination of many corporate tax breaks. Continue reading
The Trump administration has declared this to be “infrastructure week,” with President Trump and Elaine Chao partaking in a traveling road show to sell the administration’s ideas. Some people say that this is just a way to take the nation’s eyes off of the Comey hearings, and if so, it’s working as a lot of electrons and not a little ink are being devoted to infrastructure.
Others are claiming that Trump doesn’t actually have an infrastructure plan, but that’s not true, as the Antiplanner revealed last week. The plan isn’t 1,000 pages long, but it contains seventeen distinct proposals that have all been fleshed out in other places, including a variety of studies from Heritage, Reason, the Competitive Enterprise Institute, and yes even Cato.
What really aggravates some people, especially Democrats, is that Trump isn’t proposing to spend a trillion federal dollars on hundreds of juicy pork barrel projects. Instead, he is proposing to leverage about $200 million in federal tax credits and other incentives to get the private sector to spend a trillion dollars on infrastructure. Continue reading
Greater reliance on user fees, federal loans rather than grants, and corporatization are three keys to the Trump administration’s infrastructure initiative released as a part of its 2018 budget. The plan will “seek long-term reforms on how infrastructure projects are regulated, funded, delivered, and maintained,” says the six-page document. More federal funding “is not the solution,” says the document; instead, it is to “fix underlying incentives, procedures, and policies.”
In building the Interstate Highway System, the fact sheet observes, “the Federal Government played a key role” in collecting and distributing monies to “fund a project with a Federal purpose.” Since then, however, those user fees, mainly gas tax receipts, have been “inefficiently invested” in “non-federal infrastructure.”
As a result, the federal government today “acts as a complicated, costly middleman between the collection of revenue and the expenditure of those funds by States and localities.” To fix this, the administration will “explore” whether transferring “responsibilities to the States is appropriate.” Continue reading
The American Society of Civil Engineers (ASCE) will surely benefit if the federal government were to spend a trillion or three dollarson infrastructure. So it is no surprise that its latest infrastructure report card says the nation needs to spend not one, not three, but four-and-a-half trillion dollars on infrastructure.
Yet there is no reason for the federal government to get involved in any of the infrastructure needs claimed by ASCE. In fact, the potential for federal spending on infrastructure is probably doing more harm than good since other people aren’t doing what they should be doing because they are counting on, or at least hoping for, the floodgates of federal funding to open.
Here are some of the most important infrastructure needs identified in the ASCE report:
- Transit gets the lowest grade of any of ASCE’s infrastructure categories. Not coincidentally, transit is the most tax-dependent and gets more federal subsidies of any of the other infrastructure categories.
- Railroads get ASCE’s highest grade. They also happen to be the least subsidized, being almost entirely private. Will anyone learn this lesson about private vs. public ownership of other infrastructure.
Everyone wants a piece of Trump’s trillion-dollar infrastructure plan, even though they don’t really know what that plan is. Perhaps most arrogant of all, the American Public Transportation Association thinks that transit industry should get $200 billion, or 20 percent of the total.
That’s the same transit industry that carries 1 percent of all passenger miles in the United States–and no freight. That’s the same transit industry into which taxpayers have pumped more than $500 billion in operating subsidies and $350 billion in capital improvements since 1990, only to see annual transit trips per urban resident fall from 47 in 1990 to 40 in 2016. That’s the same transit industry that’s likely to be mostly replaced by self-driving cars in a few years. So, sure, blow $200 billion on it.
APTA’s plan might sound reasonable to transit fanatics who think that transit is worth a lot more than roads. But this assumes that the entire trillion-dollar infrastructure plan is for transportation. In fact, infrastructure includes things like Flint, Michigan’s water supply, a smart electrical grid, and high-speed internet to rural and low-income areas. With all these potential projects, why should an obsolete transportation system that carries 1 percent of passenger travel and no freight get 20 percent of the funds?
The Christian Science Monitor thinks that the Democrats wrote their infrastructure plan as a “political bridge to President Trump.” Fox News thinks that Trump might “get on board” the Democrats’ plan. Statements like these show that many reporters–and by extension members of the public–haven’t yet figured out the real issues behind the infrastructure debate.
As Business Insider points out, there’s a bigger difference between the two sides over “how it’s paid for” than “what gets built.” The Democrats want the federal government to spend a trillion dollars, money it would have to borrow. Trump wants private investors to spend their own money. Never the twain shall meet.
But Business Insider doesn’t understand how Trump’s idea will work. If Trump is going to rely on the private sector, it says, then only projects that generate revenue will be built because “projects that don’t generate revenue for the private sector generally don’t get financed.” But there are two kinds of public-private partnerships. The kind that Business Insider is writing about is called demand risk because the private partner takes the risk that tolls, fares, or other user fees won’t repay the cost.
Senate Democrats have proposed an infrastructure plan that calls for $1 trillion in federal deficit spending. In detail, the plan calls for:
- $100 billion for reconstructing roads & bridges;
- $100 billion to “revitalize Main Street,” that is, subsidies to New Urbanism and affordable housing;
- $10 billion for TIGER stimulus projects;
- $110 for reconstructing water and sewer;
- $50 billion for modernizing rail (Amtrak and freight railroad) infrastructure;
- $130 billion to repair and expand transit;
- $75 billion for rebuilding public schools;
- $30 billion to improve airports;
- $10 billion for ports & waterways;
- $25 billion to improve communities’ resistance to natural disasters;
- $100 billion for a next-generation electrical grid;
- $20 billion for broadband;
- $20 billion for public lands and tribal infrastructure;
- $10 billion for VA hospitals;
- $10 billion for an infrastructure bank;
- $200 billion for “vital projects” that “think big” such as building “the world’s fastest trains.”
An op-ed in the New York Daily News argues that Trump’s infrastructure plan “will result in wasteful spending and do little to fix crumbling facilities or promote economic growth” unless it is properly targeted, and the best way to target is to spend only on infrastructure that can be built and maintained with user fees.
The country should also avoid building new infrastructure that will soon be obsolete. For example, Bay Area Rapid Transit (BART) spent nearly half a billion dollars building the Airport Connector, a 3.2-mile elevated cable-car line to the Oakland Airport. BART expected to cover operating costs by charging people $6 to travel between the airport and the nearest BART station. Instead, it is losing money, and they are blaming Uber and Lyft. It was a dumb idea even if they did recover operating costs, but new technologies have made it even dumber still.
The Trump Administration needs to learn the Antiplanner’s Law of Transportation Infrastructure: Any transportation technology that requires new infrastructure is doomed to failure because it will be unable to compete against technologies using existing infrastructure such as the nation’s hundreds of commercial airports and millions of miles of highways.