February 15, 2004
Congress reauthorizes federal transportation taxes and spending every six years. This year, it is debating two choices: A bill based on the current 18.4-cent-per-gallon gas tax, which would raise $234 billion but spend $256 billion over the next six years; and a second bill that would raise gas taxes by 43 percent and spend $318 billion over six years.
President Bush has threatened to veto any bill that increases gas taxes or uses accounting tricks to spend more than is collected -- which means both of these bills. While Bush may be motivated by a "no new taxes" pledge, the fact is that U.S. transportation doesn't need more federal spending. Ron Utt describes the problems in detail in a paper published by the Heritage Foundation titled, "Yes, Mr. President, Veto the Highway Bill" (even though it's not just a highway bill).
Both the powerful transit lobby and the allegedly powerful but actually weaker highway lobby support as much federal spending on transportation as possible. The transit lobby wants to build rail boondoggles in cities ranging from Madison, Wisconsin (which wants to spend $181 million on a rail line that, planners promise, will attract just 1,150 new riders a day) to New York (which wants to spend $2.1 billion a mile on a subway extension). As bad as these projects are, at least the transit lobby understands what is going on.
Not so the highway lobby. In 1998, when Congress last reauthorized the transportation bill, the highway builders were elated that Congress increased transportation funding by more than 20 percent. This was done by taking 4 cents of the federal gas tax that had been dedicated to "deficit reduction" (i.e., general spending) and rededicating it to transportation.
But a few years later, highway builders looked around and said, "Where's the money?" Despite the huge increase in spending, we weren't seeing many new highways built. This is because the transit lobby got most of it. Although only about 20 percent of federal transportation money (all of which comes from taxes paid by auto users) is dedicated to transit, a much larger share is "flexible": states and regions can use it on either transit or highways. Too many regions frittered away their share of the money on rail transit or various studies of rail transit.
The 1998 highway bill even created a new fund, with the impenetrable name of "Transportation, Community, and System Preservation" (TCSP), which was dedicated to helping regions plan for more transit and less driving. Congress actually specified that a portion of most TSCP grants should go to "non-traditional partners," meaning non-profit advocacy groups, to spend on propaganda. Of course, as described in update #23, most of this money went to anti-auto groups.
So raising gas taxes today doesn't guarantee any congestion relief for tomorrow. It just makes it more likely that more cities will waste money on ridiculous rail transit projects and other non-solutions.
When the federal government started funding roads, the money was initially dedicated to interstate roads in rural areas. Urban roads, Congress believed, should be paid for by local taxpayers. The big increase in federal funding came in 1956, when Congress authorized the Interstate Highway System. Note that these were supposed to be interstate highways, not local roads. The original interstate highway bill called for the highways to go around, not through, urban areas. But urban mayors, seeking their share of pork, convinced Congress to allow interstate highways in urban areas. Today, federal transportation funding is advertised as the solution to urban congestion, when in fact it is often more of an obstacle.
Part of the problem is that the federal bureaucracy requires so much red tape that any federally funded projects cost far more than projects that are funded only by state or local governments. The few rail lines in the country built at anything approaching a reasonable cost, such as San Diego's first light-rail line, were built solely with state and local funds. When the federal government gets involved, costs rise significantly.
But the real problem is that the planning process first imposed by Congress in 1991 biases the results away from congestion relief. Urban areas that have air pollution problems, for example, are discouraged from building more roads even though the evidence indicates that people will drive more even without new roads. The result will just be more congestion -- and since cars pollute more in congested traffic, there will be more pollution.
The planning rules also require regional planners to involve transit users, pedestrians, and cyclists in the planning process. But they are not required to involve auto users, even though 80 to 98 percent of travel in U.S. urban areas is by auto.
Beyond this, gas taxes are simply an inefficient way to fund transportation. They made sense when all roads were uncongested and cost about the same to build. Solving congestion with gas taxes means building a huge network to meet peak-period demand. Congestion tolls can mitigate that demand by shifting some travel to other times of the day when roads are less congested. Thus, tolling would allow more effective use of the transportation network and we could relieve congestion without building so many new roads.
Few people in Congress are particularly aware of these problems. Instead, they simply view transportation as pork -- and with the decline in defense spending since the end of the cold war, transportation is their biggest source of pork. The biggest question on their minds is "How much money will my state or district get?" The biggest issue of debate is that some states pay more than they get back while others get back more than they pay. Instead of endlessly fiddling with formulas to require some sort of parity, maybe the federal government should get out of the transportation business altogether.
Representative Jeff Flake (R-AZ) wants to reduce federal gas taxes to the amount required to maintain existing federal highways, leaving the funding of new roads to state and local governments. As long as federal planning requirements remain biased towards creating rather than solving congestion, that is probably the best way to go.
Realistically, that is not going to happen, at least not this year. Representatives Mark Kennedy (R-MN) and the appropriately named Adam Smith (D-WA) want to encourage more tolling and congestion tolls. These ideas, rather than more federal spending, should be at the heart of the new transportation legislation.
February 2005 update: A year after the above article was written, Congress still had not passed a transportation bill. The threat of a presidential veto prevented passage of the bloated bill most members of Congress wanted, and they could not agree on what to cut.