Late last month, the Federal Highway Administration reported that Americans drove a record number of miles in 2018: 3.225 trillion miles in all. While the Department of Transportation heralded this as a sign of a “robust economy,” detailed data show that driving grew by only 0.38 percent over 2017. This is slower than the previous year’s growth of 1.21 percent, and slower than the nation’s population growth of 0.62 percent, which means per capita driving declined by 0.24 percent.
While any growth at all is better than the transit industry is doing, this slow growth may be more of a sign of an on-coming recession than a robust economy. According to the Bureau of Economic Analysis, personal incomes declined by 0.1 percent in January, 2019, though they grew by 0.2 percent in February. Bloomberg says that some indicators suggest that we are facing the highest chance of a recession since 2008.
Of course, some people are using the growth in driving as one more argument for a big infrastructure spending bill. In fact, the need for a new federal spending program is becoming more questionable every day.
Both the Minnesota and Illinois state legislatures are considering hikes in state gas taxes to pay for infrastructure. On one hand, this suggests states can handle infrastructure needs without more federal spending. On the other hand, Minnesota and Illinois roads don’t really need a lot more spending.
Spending advocates are running an advertising campaign in Illinois implying that structurally deficient bridges are killing people. In fact, the number of structurally deficient bridges in Illinois has declined by more than 50 percent since 1992. Moreover, in the past 30 years, not a single bridge has collapsed in Illinois, or anywhere else, because it was structurally deficient.
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The number of structurally deficient bridges in Minnesota has declined by 75 percent in the same time period. In both states, records indicate that the average roughness index of all types of roads has significantly declined — meaning the roads are getting smoother. So there seems to be no pressing need for gas tax increases to pay for roads.
What is collapsing is transit ridership and transit infrastructure. According to the Illinois Economic Policy Institute (which supports a gas tax increase), more than 80 percent of Illinois’ transportation infrastructure needs are transit, while less than 20 percent are roads ($41 billion vs. $10 billion). In advocating for a gas tax increase, the group is supporting wealth transfers from downstate Illinois to Chicago (which has most of the state’s transit infrastructure) and from low-income people (who are more likely to drive than take transit) to high-income people (who now make up the bulk of Chicago transit riders).
Of course, advocates of the tax increases don’t admit this in public, instead playing on public fears of bridge collapses and similar problems. Yet to the extent that any funding for roads is really need, it can be achieved by ending diversions of gas taxes to transit. According the Federal Highway Administration, in 2016 more than half of Minnesota gas taxes and a third of Illinois gas taxes were diverted to transit (and diversions of vehicle registration fees were similar). Ending such diversions would double Minnesota road funds and increase Illinois funds by 50 percent.
Such diversions should not be necessary. In the long run, spending on transit infrastructure is a waste because ridership is declining. In the short run, instead of repairing worn-out transit infrastructure, both Chicago and the Twin Cities should replace the trains that use such infrastructure with buses. That would eliminate the need for huge infrastructure spending on transit and could actually lead to improved transit service because buses are so much more flexible than trains.
Growing at a slow rate is still growth. Using that same analogy for transit or not. Take it with a grain of salt.
Illinois in general is collapsing. It serves as a inevitable test case for what lies ahead for states who don’t get their financial affairs in order. Illinois is chasing a moving target as it tries to dig out of one of the nation’s worst budget crisis. Illinois now has the worst credit rating in the municipal bond market. Anticipating bailouts, municipal governments have fewer incentives to impose effective fiscal rules or to pursue prudent fiscal policies. Banks and financial institutions continue to extend loans to failed states, anticipating that they will be bailed out by the federal government; Effectively waiting for the sugar daddy to rescue you.
I think we need to take state economic numbers with a huge cup of salt. What I most recently discovered is state’s like Oregon and California are said to have relatively high real GDP growth rates in the last few years. But in checking with the Bureau of Economic Analysis these so-called state real GDP numbers are derived by taking state level nominal business revenues and other nominal income streams; and discounting them by the U.S average rate of inflation.
The problem with this is California and Oregon have substantially higher rates of inflation than the U.S average implies. Portland’s Consumer Price Index is discontinued after December 2017; but for the year 2017, Portland’s CPI inflation indicator is 4.2%; whereas the U.S average CPI inflation is only 2.2% for the year 2017. San Francisco, Seattle, Los Angeles, San Diego all sport CPI inflation numbers perhaps 1 to 2 percentage points higher than the U.S average.
Another thing is Oregon and California have golden export oriented gooses. As long as they leave these golden gooses alone to thrive and generate revenues to government directly and indirectly, the governments there (Oregon and California) can go on all kinds of “save the world by making government class richer schemes.” Mean time, the ramping up of government regulation and taxation, price out the existing middle class residents; and in some instances, cause folks at the edge of middle class to fall into the lower classes requiring government assistance.
It would be amazing what kind of economic prosperity Oregon might have if it weren’t for the costly social justice Gorilla Government crusades it is carrying increasingly.