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Federalism the Cure to US Transportation Ills

By: Contributor - Sep 10, 2014, 12:11 pm

EspañolThe US Congress may have passed a temporary revenue patch to the federal Highway Trust Fund this summer, but the debate over transportation revenues and spending is far from over. Short-term fixes do nothing to solve the long-term, structural problems facing the nation’s transportation infrastructure.

The core problem is that much of the transportation-policy debate is taking place in Washington, DC, and not statehouses nationwide. As Transportation Secretary Anthony Foxx has explained, transportation “is an area where the States have to make their own decisions.”

Decentralizing the federal government’s convoluted and centralized transportation funding system would result in improved management, local tailoring, and reduced waste.

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Los Angeles demonstrates the failure of transportation infrastructure in the United States, and it won’t be fixed from the federal level. (GSTC)

The US transportation system needs a great deal of investment in the coming decades. In fact, the majority of roads and bridges are over 50 years old. Robert Poole of the Reason Foundation has found that modernizing just the Interstate Highway System will cost around US$1 trillion — with current funding mechanisms and political infighting unable to cope with such a burden.

In addition to modernizing, the Congressional Budget Office has reported that vehicle-miles traveled have doubled since the 1980s, but highway lane-miles have remained essentially unchanged. Likewise, the advent of autonomous vehicles will result in increased travel demand.

It is unavoidable: the transportation system needs more sustainable and innovative funding options to deal with these coming challenges. With a stalled Congress kicking the transportation-funding can down the road, decentralization provides an exciting alternative.

James Buchanan, a Nobel Laureate in Economics, wrote extensively on the importance of federalism, a system where political power is divided among different levels of government. By allowing state governments to take control over funding, and by utilizing alternatives such as all-electronic tolling and public-private partnerships, the United States could finally experience better policy than the status quo of top-down federal planning.

The problems with centralization are manifold. In particular, federal policies stifle creativity and innovation.

There is a fundamental difference between a national problem that requires federal government intervention, like a foreign entanglement, and a problem that many states face across the nation. In the latter case, true federalism allows each state to try new funding experiments and other states to learn from their successes and failures. This discovery process leads to the most efficient funding mechanisms possible.

Earlier this year, President Barack Obama sent Congress a highway bill proposal that would remove the federal prohibition on states tolling their own interstate segments for reconstruction purposes. Lifting the ban on interstate tolling would be a much-needed first step to return highway funding back to state governments and local municipalities. Doing so would give states a much larger say in how they raise revenues, fund transportation projects, and manage congestion, while also helping road users to see the relationship between what they pay and the projects those revenues support.

Aside from this small measure, many other reforms can be made to transportation programs.

Slashing federal aid would encourage states to find the best possible production and revenue alternatives. For example, states could embark on ambitious new public-private partnerships, sell off infrastructure to innovative private companies, and add tolls to their interstates, among other ideas.

As the Congressional Research Service notes “it is widely believed that there are hundreds of billions of dollars of private monies available globally for infrastructure investment, such as surface transportation.” Devolving transportation decisions to state governments could attract billions of dollars in private financing. Likewise, decentralized funding allows for greater flexibility and responsiveness with projects, because there are less bureaucratic hoops to jump through.

More decentralized control over transportation funding and production will result in an increase of public-private partnerships, where public and private sector entities join in agreement for the financing, construction, and management of infrastructure projects. This generally means risks associated with mega projects are transferred to the private sector, meaning taxpayers are on the hook for very little of the total costs, while still enjoying the large benefits associated with access to the completed projects.