Tag Archives: interstate highway system

We don’t need more federal infrastructure spending

Many of the presidential candidates on both sides of the aisle have expressed interest in fixing America’s infrastructure, including Donald Trump, Hilary Clinton, and Bernie Sanders. All of them claim that America’s roads and bridges are crumbling and that more money, often in the form of tax increases, is needed before they fall into further disrepair.

The provision of basic infrastructure is one of the most economically sound purposes of government. Good roads, bridges, and ports facilitate economic transactions and the exchange of ideas which helps foster innovation and economic growth. There is certainly room to debate which level of government – federal, state, or local – should provide which type of infrastructure, but I want to start by examining US infrastructure spending over time. To hear the candidates talk one would think that infrastructure spending has fallen of a cliff. What else could explain the current derelict state?

A quick look at the data shows that this simply isn’t true. A 2015 CBO report on public spending on transportation and water infrastructure provides the following figure.

CBO us infrastructure spending

In inflation adjusted dollars (the top panel) infrastructure spending has exhibited a positive trend and was higher on average post 1992 after the completion of the interstate highway system. (By the way, the original estimate for the interstate system was $25 billion over 12 years and it ended up costing $114 billion over 35 years.)

The bottom panel shows that spending as a % of GDP has declined since the early 80s, but it has never been very high, topping out at approximately 6% in 1965. Since the top panel shows an increase in the level of spending, the decline relative to GDP is due to the government increasing spending in other areas over this time period, not cutting spending on infrastructure.

The increase in the level of spending over time is further revealed when looking at per capita spending. Using the data from the CBO report and US population data I created the following figure (dollars are adjusted for inflation and are in 2014 dollars).

infrastructure spend per cap

The top green line is total spending per capita, the middle red line is state and local spending with federal grants and loan subsidies subtracted out, and the bottom blue line is federal spending. Federal spending per capita has remained relatively flat while state and local spending experienced a big jump in the late 80s, which increased the total as well. This graph shows that the amount of infrastructure spending has largely increased when adjusted for inflation and population. It’s true that spending is down since the early 2000s but it’s still higher than at any point prior to the early 90s and higher than it was during the 35-year-construction of the interstate highway system.

Another interesting thing that jumps out is that state and local governments provide the bulk of infrastructure spending. The graph below depicts the percentage of total infrastructure spending that is done by state and local governments.

infrastructure spend state, local as percent of total

As shown in the graph state and local spending on infrastructure has accounted for roughly 75% of total infrastructure spending since the late 80s. Prior to that it averaged about 70% except for a dip to around 65% in the late 70s.

All of this data shows that the federal government – at least in terms of spending – has not ignored the country’s infrastructure over the last 50 plus years, despite the rhetoric one hears from the campaign trail. In fact, on a per capita basis total infrastructure spending has increased since the early 1980s, driven primarily by state and local governments.

And this brings up a second important point: state and local governments are and have always been the primary source of infrastructure spending. The federal government has historically played a small role in building and maintaining roads, bridges, and water infrastructure. And for good reason. As my colleague Veronique de Rugy has pointed out :

“…infrastructure spending by the federal government tends to suffer from massive cost overruns, waste, fraud, and abuse. As a result, many projects that look good on paper turn out to have much lower return on investments than planned.”

As evidence she notes that:

“According to the Danish researchers, American cost overruns reached on average $55 billion per year. This figure includes famous disasters like the Central Artery/Tunnel Project (CA/T), better known as the Boston Big Dig.22 By the time the Beantown highway project—the most expensive in American history—was completed in 2008 its price tag was a staggering $22 billion. The estimated cost in 1985 was $2.8 billion. The Big Dig also wrapped up 7 years behind schedule.”

Since state and local governments are doing the bulk of the financing anyway and most infrastructure is local in nature it is best to keep the federal government out as much as possible. States are also more likely to experiment with private methods of infrastructure funding. As de Rugy points out:

“…a number of states have started to finance and operate highways privately. In 1995, Virginia opened the Dulles Greenway, a 14-mile highway, paid for by private bond and equity issues. Similar private highway projects have been completed, or are being pursued, in California, Maryland, Minnesota, North Carolina, South Carolina, and Texas. In Indiana, Governor Mitch Daniels leased the highways and made a $4 billion profit for the state’s taxpayers. Consumers in Indiana were better off: the deal not only saved money, but the quality of the roads improved as they were run more efficiently.”

It remains an open question as to exactly how much more money should be devoted to America’s infrastructure. But even if the amount is substantial it’s not clear that the federal government needs to get any more involved than they already are. Infrastructure is largely a state and local issue and that is where the taxing and spending should take place, not in Washington D.C.

 

 

Delaware’s Robber Barons

I recently drove across the Delaware Turnpike while traveling from Washington to New York.  It had been a while so I didn’t remember that the toll had risen to $4 in 2008 – this for a road 11 miles long. It amounts to 36 cents for eacdelaware-turnpikeh of those 11 miles.  This is ridiculous.

The other tolls I paid driving up Interstate 95 were $2.50 for the JFK Highway in Maryland and $9.05 for the full length of the New Jersey Turnpike. The Maryland highway is 50 miles, and I drove 122 miles in New Jersey, amounting to 5 cents and 7 cents per mile, respectively.

Other Northeast tolls are much like New Jersey and Maryland. Driving the full length of the Massachusetts turnpike covers 135 miles and costs $6.85, amounting to 5 cents per mile. The length of the New York Thruway is 376 miles, costing $17.50, also 5 cents per mile.  The $28.45 toll for driving the entire 358 miles of the Pennsylvania Turnpike comes to 8 cents per mile.

So how can Delaware get away with tolls 5 to 7 times higher than other nearby states in the Northeast?  It is said to be the highest toll per mile in the United States. It helps that the Delaware Turnpike feeds into the Delaware Memorial Bridge, one of the few ways of getting across the Delaware River. There are no good alternative routes if you are traveling up the east coast. Once on the New Jersey side of the river, by contrast, it is easy to take Interstate 295, a toll-free road which allows you to bypass at least half of the Turnpike.

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The Dwindling Highway Rest Stop

This July 4th weekend marks the end of operation for 19 of Virginia’s 42 public highway rest stops, a move that will save the state $9 million.

The Wall Street Journal reports this isn’t limited to the Old Dominion; Louisiana, Vermont, Maine, and Colorado have shut down some public rest areas in recent months not only to save money, but because they’ve become obsolete – replaced by clusters of privately operated gas stations, fast food restaurants and motels right off the interstate. RV users even have the option of overnighting at many of Wal-Mart’s 4000 parking lots nationwide.

Public rest stop advocates, such as the American’s Truckers Association and AAA, argue closures are a threat to safety.  Fatigued drivers have more accidents.

Other incentives are also at work. The Association of Blind Merchants opposes the move because federal law grants them priority – about 600 of their members stock rest-area vending machines.

Federal law is also in the way of a less draconian solution. Virginia tried to privatize the soon-to-be-shuttered rest areas, but federal law prevents franchising directly on the Interstate Highway System.

Read more about the history of the public rest stop here.