Surface Transportation Innovations # 94

In this issue:

• I-70’s dedicated truck lanes
• Inspector General on PPP toll roads
• Rail job fantasies
• Inter-city buses vs. Amtrak
• High cost of new CAFÉ standards
• Upcoming Conferences
• News Notes
• Quotable Quotes

Dedicated Truck Lanes for I-70 Moving Forward

Last summer, in Issue No. 81, I reported on the results of Phase 1 of a major feasibility study on rebuilding and modernizing I-70 from Kansas City on the west to the Ohio/West Virginia border on the east. This project, involving the state DOTs of Ohio, Indiana, Illinois, and Missouri, received federal funding under the Corridors of the Future program. It’s a major truck corridor, and the preferred alternative resulting from Phase 1 was to rebuild I-70 with the addition of four dedicated truck lanes (DTLs), two each way, over the entire 800-mile length of the corridor. Phase 1 concluded that there is a realistic business case for the DTLs approach-i.e., that the benefits would exceed the costs. The purpose of Phase 2 was to produce more specific estimates of costs, revenues, and benefits of the preferred alternative.

A 105-page Powerpoint is now available online (www.i70dtl.org), summarizing the information soon to be released in the Phase 2 Final Report. As with Phase 1, the Phase 2 research and analysis was carried out by a team led by Wilbur Smith Associates and HNTB, working closely with the four state DOTs and ATRI, the research affiliate of the American Trucking Associations. It analyzed four scenarios: no-build, adding general-purpose lanes in urban areas, and three variants that would add DTLs (two featuring four lanes and another with four lanes in the rural segments but only two in the urban portions).

One of the key findings was that even if the project is not constructed, the four states would still have to spend $32.2 billion over the next 75 years to maintain and reconstruct I-70-and even that is not affordable out of current highway revenues. Existing fuel tax revenues would have to be 42% greater to do even that “no-build” case. Over a 30-year period, that no-build cost is nearly $16 billion, and the non-DTL urban-area widening is $18.5 billion. By comparison, the three DTL scenarios are each in the $27-28 billion range, including construction, reconstruction, and operating and maintenance costs.

Phase 2 also did more work on what it calls high productivity vehicles (HPVs)-doubles, triples, and gross weights higher than the standard 80,000 lbs. The HPV scenario showed significant reductions in fuel consumption and emissions, with 13% less CO2, NOx, and PM emissions. The DTL scenarios (which would permit HPV use) produced large reductions in congestion by 2045, compared with no-build. They also yielded large safety benefits, with one-third fewer crashes by 2045 and two-thirds fewer fatalities.

Because of the large costs involved, Phase 2 looked more closely at tolling and a long-term public-private partnership. Assuming a 75-year toll concession, with construction done in five consecutive phases over 25 years, starting in 2020, and with all lanes on the rebuilt I-70 tolled, the toll revenues would support 86% of total project costs ($48 billion out of $55.6 billion). The public sector would therefore have to come up with $7.5 billion–$2 billion to maintain existing segments after 2020 until each rebuilt segment is completed and $5.5 billion for the public-sector portion of the PPP construction budget. All four states would need legislative approval for tolling, but (not noted in the study) all except Missouri already have some form of transportation PPP legislation.

Needless to say, tolling is probably the most sensitive issue for this project. ATRI did focus groups and interviews with motor carriers. They found strong interest in using HPVs in the corridor and support for the safety benefits of DTLs. If tolling is to be used, the trucking community favored an approach in which all vehicles pay, that tolls be all-electronic, and that trucks be allowed in all lanes, with DTL use being voluntary. They also want tolls to end “when the facility is paid off.” I disagree with the latter two propositions. A shipper/receiver focus group was supportive of HPVs, and this research assessed which shippers and receivers would be most likely to take advantage of HPVs if they were available in the corridor.

The study’s conclusions were that the I-70 corridor states have a unique opportunity, acting together, to “create a highly efficient and effective ‘logistical artery’ for current and prospective business” and to “achieve higher levels of safety and efficiency for everyone.”

I see this corridor study as a prototype for what is needed on many truck-intensive Interstate corridors in coming decades, as the original Interstates wear out and need to be reconstructed to meet 21st century needs. One clear implication is that current thinking about Interstate tolling in Washington, DC-including both DOT Secretary LaHood and House T&I Committee Chairman John Mica-is an obstacle to implementing projects like this. Both support tolling to fund “new capacity” but oppose tolling “existing” Interstate capacity. But what about reconstructed capacity? We can be sure that if only the “new” DTLs were tolled, the tolls would be so high that most trucks would not use them. Only by tolling all lanes of the reconstructed corridor can projects like this be funded.

Inspector General Report Damns PPPs with Faint Praise

For some reason the U.S. DOT Office of Inspector General decided to do a “Financial Analysis of Transportation-Related Public-Private Partnerships.” The rather bizarre report was released July 18th as CR-2011-147 and is available at: www.oig.dot.gov/library-item/5599. Right off the bat, the report tips its hand by stating that its objective was to “identify financial disadvantages to the public sector of PPP transactions compared to more traditional public financing methods; to identify factors that allow the public sector to derive financial value from PPP transactions; and to assess the extent to which PPPs can close the funding gap.” So the study begins with a bias against PPPs. And it’s practically all downhill from there.

OIG’s financial analysis is based on a model it created to compare the cost of doing large infrastructure projects via either traditional procurement or via a long-term PPP. From the outset, that is a flawed approach, because long-term PPPs are not selected primarily because of lower cost. Rather, they are selected because of greater value. For certain types of (especially) large, complex projects, a long-term PPP can (a) raise a larger sum of money up-front so that a needed project can be built in the near term, rather than decades later when it must be built in stages out of annual state highway cash flow, and (b) shift major risks from the public sector to the private sector, including construction cost risk, on-time completion risk, and traffic and revenue risk.

The OIG analysts admit, in passing, that their assessment “did not consider the impacts of factors such as risk sharing arrangements or the ability of the private sector to deliver a project more expeditiously.” That reminds me of the old joke, “Other than that, Mrs. Lincoln, how did you like the play?”

Instead, the analysts repeat the tired old proposition, dressed up with their modeling results, that the PPP cost of capital is higher because the private sector seeks to make a profit (though they subsequently concede that thanks to tax-exempt private activity bonds and low-cost TIFIA loans, the cost of PPP debt capital is nearly equal to that of a public-sector toll agency). They also portray it as negative that a PPP company has the added cost of paying taxes-as if that tax revenue were not also a benefit to the public-sector entities whose interest OIG purports to be championing.

And in their modeling, they repeat a mistake made by other PPP critics: using as a discount rate for assessing the value of the PPP approach to the public sector a typical private-sector cost of capital. Now it is true that an investor-owned toll road company will analyze the viability of its own investment in such a project using its own cost of capital as a discount rate. But in an analysis of the public-sector value in getting, say, a billion-dollar highway project via a PPP, the correct discount rate to use is the same public-sector discount rate that would be applied to the project if carried out by a public-sector entity. OIG has here made a fundamental mistake in financial analysis.

What I find especially egregious is the OIG analysts’ conclusion that “PPPs are not likely to significantly decrease the infrastructure funding gap, because private sector investment in transportation through PPPs generally does not entail new or incremental funds.” What they mean by this is that any large bridge, tunnel, or highway project would likely have been funded by tolls in any case, so adding a PPP procurement method doesn’t really change the funding. That might be true in some mythical land where tolling is widely accepted and is the default method of funding new projects. But America in 2011 is not that country. When Caltrans requested proposals for its first PPP projects in 1990, no new project in any part of the state was planned for toll funding. All four of the winning projects (only two of which ended up being built) were to be toll-funded. All of that would have been net new investment into California’s transportation system. Likewise for the Beltway HOT lanes now under construction on I-495 in northern Virginia. The only approach VDOT had come up with was an unfundable $3 billion plan to add HOV lanes to the Beltway. What made the actual project possible was the willingness of the private sector to use tolls to fund the project. The same goes for comparable PPP megaprojects now under construction in Dallas, Fort Worth, and Fort Lauderdale-and many others that are in the procurement or feasibility study stage.

To his credit, FHWA Administrator Victor Mendez provided a fairly strong counter to this flawed and misleading report. His July 21 memo (included as an Appendix to the OIG report) stresses the importance not only of risk transfer, but of valuing risk transfer. He points to what is now global best practice for PPP decision-making: value for money analysis (VfM). This is a point that GAO reports on the role of PPPs have also made, in particular recommending use of a Public Sector Comparator methodology, which values the risks transferred and risks retained, as well as tax payments made by the PPP company to the government.

This is a very disappointing piece of work, far below the DOT Inspector General Office’s usual high caliber. It’s already being used by PPP opponents to buttress their case. The sooner it is given a decent burial, the better.

Rail Jobs Derailed

During the debate over the now-cancelled 84-mile Florida high speed rail project, a frequent claim was made that the project “would create 60,000-plus jobs for Floridians.” The most prominent voice for this claim was that of Rep. Corrine Brown (D, FL), who made that claim repeatedly. Back in March, Politifact.com did some research into the validity of that number.

It began with information from the Florida DOT application for federal money. FDOT did a year-by-year analysis of both direct (construction) jobs and indirect jobs (due to purchases made by presumably otherwise unemployed construction workers). On that basis, Year 1 would require 2,800 engineers and construction works, plus 3,400 indirect jobs. Year 2, the total of both types would jump to 21,600, decreasing to 18,900 in Year 3 and 2,100 in Year 4. Once the rail system was completed and in operation, it would require 600 permanent jobs and generate 500 spinoff jobs.

FDOT produced a total number of “job-years,” i.e., the number of people employed for one year, during the four-year period (including indirect jobs). If you simply add them together, that’s 48,800 job-years over the four-year period, but most of those would last for only two of the four years. And the permanent jobs would total only 1,100.

When most people hear “60,000 plus jobs created,” they assume this means that 60,000 new, permanent jobs will result from the project in question. That’s a far cry from what that project would have created, even including the indirect jobs. Rep. Brown was either deliberately exaggerating the jobs impact or else woefully uninformed about the reality of the situation. Neither speaks well of an elected public servant.

Inter-City Buses Challenge Amtrak

The new-generation inter-city bus revolution keeps rolling. Since I last reported on this phenomenon, Megabus has added Akron to its existing Ohio services at Cleveland, Columbus, and Cincinnati. RedCoach has recently added Ft. Lauderdale International Airport to its service roster (which already includes the major airports in Miami and Tampa); Red Coach now serves most large Florida cities and links them to Atlanta. And although many of these services operate from curbsides, in Washington, DC the various operators-including Bolt Bus, Megabus, and Washington Deluxe–have recently agreed to shift to Union Station. With airports and train stations being added to their route networks, the new inter-city buses are becoming an important part of an intermodal system.

Three new reports help to document this trend. The newest was released August 1st by the Chaddick Institute at DePaul University, which has become the go-to place for keeping tabs on this emerging industry. “Who Rides Curbside Buses” reports the results of a survey of passengers waiting to board such buses in Chicago, St. Louis, Indianapolis, Philadelphia, New York, and Washington, DC in the first half of 2011. Among the interesting findings are that the availability of this low-priced but high-amenities mode is stimulating new inter-city travel (induced demand!). About 22% of all passengers surveyed said they were making the trip only because the new service was available. And, as many would expect, this lower-priced service is starting to take market share from Amtrak: 34% of those in the East formerly rode Amtrak, while that was true of 22% in the Midwest. Only about one-third of passengers are former Greyhound riders; this really is a next-generation bus service. But thus far it is serving primarily personal and leisure travel. The researchers found that only about one in six passengers are traveling for business. (http://las.depaul.edu/chaddick/ResearchandPublications/index.asp)

We all know that Amtrak is pretty heavily subsidized; what about inter-city buses? That question is addressed in a study commissioned by the American Bus Association from Nathan Associates: “Federal Subsidies for Passenger Transportation, 1960-2009.” (www.buses.org/files/Modal%20Subsidy%20Full%20Report.pdf) This study uses the same basic methodology as the DOT’s Bureau of Transportation Statistics, defining a federal subsidy as the difference between the federal user taxes paid by a mode and the amount of federal spending on that mode. For inter-city trips, the best measure is subsidy per passenger mile. According to the study, during the period 2002-2009, Amtrak received a federal subsidy of $0.254 per passenger mile, while private sector commercial buses received less than $0.001 per passenger mile. That subsidy results from two factors. First, for some obscure reason, private commercial bus operators pay a diesel tax of only 7.4 cents/gallon, compared with the regular 24.4 cents/gal. paid by everyone else. If they paid the same rate as other diesel users, the study estimates the bus industry’s already miniscule subsidy would be cut by two-thirds. The rest comes from a small Federal Transit Administration subsidy program for non-urban inter-city buses.

The third study is “Intercity Buses: The Forgotten Mode,” by Randal O’Toole (www.cato.org/pubs/pas/PA680.pdf). In his usual thorough and well-documented manner, O’Toole documents the rise of this fast-growing mode, and compares it directly with current and planned inter-city passenger rail services. For example, as of May 2011, he identifies 16 different carriers offering 4 billion seat-miles of service per year in the Boston to Washington corridor, which is somewhat more than Amtrak’s 3.4 billion seat miles there. Using data on all travel in the Northeast Corridor, including load factors, he estimates that Amtrak has about a 6% market share, inter-city buses 8-9%, airlines 5%, and automobiles 80%. (So yes, in that corridor Amtrak does better than airlines, but both are now exceeded by inter-city bus, and all are dwarfed by car travel.)

O’Toole also makes pointed comparisons with proposed higher-speed rail services that are currently receiving federal start-up funds, finding that “all of the funded rail corridors have intercity bus service and most have new-model bus service featuring low fares and onboard amenities such as wireless Internet.” None of these services will provide trips significantly faster than bus-yet each requires hundreds of millions of dollars in capital subsidies and will almost certainly require operating subsidies, as well. By contrast, the inter-city bus subsidy is so small as to be negligible.

Reading these three reports makes you wonder why politicians are so intent on funneling billions of federal tax dollars into creating competition for essentially self-supporting, taxpaying inter-city bus companies.

The High Cost of the New CAFÉ Standards

Last month I noted Transportation Weekly‘s alert on the likely negative impact of the Administration’s new 2025 Corporate Average Fuel Economy (CAFÉ) standards on gasoline tax revenue, the primary source of federal and state highway funding. Editor Jeff Davis translated these new miles-per-gallon requirements (at the then-expected 2025 level of 56 mpg) into cents per mile, showing that the amount paid per mile driven would decrease from today’s .561 cents/mi. to only 0.276 cents/mi.

Since then, the chief economist at the American Road & Transportation Builders Association, Bill Buechner, has run the numbers from 2010 through 2025, to calculate the annual Highway Trust Fund revenue loss each year, on a fleet-wide basis (as older cars are scrapped and replaced by new, higher mpg cars). By 2015, there will be $2.2 billion less in HTF revenues than without the CAFÉ increases, a decrease of 5.2%. But by 2025, the decrease in revenue grows to $12.4 billion or 26.4%. The cumulative total from 2010 through 2025 is $75.6 billion. Of that total, if the allocation between highway and transit remains the same as today, that would mean $64.3 billion less for highways and $11.35 billion less for transit. And these are just the impacts at the federal level. State gas tax revenues will suffer comparable percentage decreases.

After all the years I’ve spent in transportation policy, I’m not surprised that the auto companies caved in, rather than fighting the new CAFÉ standards. To be sure, they balked at the Administration’s starting figure of 56 mpg by 2025-but settled for 54.5 mpg, hardly much of a change. But what startled me was the response of the American Trucking Associations several weeks later, praising the first-ever federal mpg standards for heavy trucks. ATA represents those who use trucks, and they will pay significantly more to buy and operate new tractors due to these regulations. I would expect ATA to have more concern for their members-and for the viability of state and federal highway funds, especially since they are still generally opposed to greater use of toll finance.

The auto companies, however, know they will be able to raise their prices to cover the cost of developing workable high-mpg cars and light trucks. A new Center for Automotive Research study estimates the average price increase for 2025 cars compliant with the new CAFÉ standards will be $6,714. That figure is based on a model that assumes 36% of new cars have heavily modified gasoline engines, 36% are hybrid electrics with significant weight reduction, 19% are plug-in hybrid electrics, 8% are diesels with significant weight reduction, and 1% are battery electric vehicles. The Administration says the 2025 54.5 mpg cars will save their owners $8,000 over the vehicle’s life. But of course the $6,715 price occurs in year one, while those savings would occur at, say, $800 per year over 10 years. At any interest rate greater than 4%, there would be no net saving to the vehicle owner.

I’m pretty sure automakers will be able to produce a fleet that can meet the new standards. The Wall Street Journal reported on May 18 that European luxury car makers already produce some significantly higher-mpg vehicles than they sell here-notably a BMW 320d that reportedly gets up to 57 mpg. But they will come at a hefty increase in price.

Far more serious will be the impact on highway funding. All the more reason to get serious about figuring out what kind(s) of mileage-based user fees will be the most feasible replacement for fuel taxes.

Upcoming Conferences

Note: I don’t have space to list all the transportation conferences going on; below are those that I or a Reason colleague am participating in.

What’s the Best Way to Get to Work? A South Florida Transportation Forum, August 24, 2011, Boca Raton, FL, Lynn University. Details at www.lynn.edu/tickets (Robert Poole speaking)

Funding Transportation Projects for Arizona, August 25, 2011, Phoenix, AZ, Arizona Biltmore. Details at: http://ncppp.org/calendars/AZ_1108/AZ_SaveTheDate_LINK.pdf. (Shirley Ybarra speaking)

Implementing Partnerships in California, Sept. 9, 2011, Redondo Beach, CA, Portofino Hotel. Details at: http://ncppp.org/calendars/CA_1109/CA_1109.shtml. (Adrian Moore speaking)

IBTTA 79th Annual Meeting, Sept. 10-14, 2011, Berlin, Germany, Intercontinental Hotel Berlin. Details at: www.ibtta.org/Events/EventDetailwithVideo.cfm?ItemNumber=4734 (Robert Poole speaking)

ARTBA 2011 National Convention, Oct. 2-5, 2011, Monterey, CA, Monterey Plaza Hotel. Details at www.artbanationalconvention.org (Robert Poole speaking)

News Notes

Fedex and HOV Lanes

An article by consultant Charles Banks in the July issue of the Eno Transportation Foundation’s EnoBrief mentioned in passing the following: “Fedex already staffs its delivery trucks in the East San Francisco Bay Area with an extra worker solely to meet HOV requirements,” in an effort to meet delivery schedules by avoiding some freeway congestion. I don’t know how much that extra employee per truck costs, but it’s likely far more than the cost of paying HOT lanes tolls, were the planned Bay Area HOT lanes network in place. What a sad commentary on the dysfunctional nature of our urban expressways!

Highway PPPs Leverage State Funds

The July-August issue of Public Works Financing includes a useful table with data on how 10 recent toll concession projects were financed. Overall, state and federal highway grant funds accounted for just 13.5% of the total of the $11.7 billion investment in these projects; all the rest was financed based on toll revenues. Federal TIFIA loans averaged 30.8% of project capital, senior bank debt 22.3%, private equity 19.8%, and tax-exempt private activity bonds 13.6%. That’s the kind of leverage an expanded TIFIA program can bring about.

Eight Projects Invited to Submit TIFIA Proposals

Out of 34 agencies that had submitted letters of interest, reports Citibank, the FHWA has invited eight to submit formal applications. Four of these are highway projects: Georgia DOT’s Northwest Corridor, Virginia DOT’s Midtown Tunnel, North Carolina DOT’s I-77 HOT Lanes, and Washington State DOT’s 520 Bridge Replacement. Others include LA Metro’s Westside Subway, a project from Boston Massport, the Dulles Metrorail, and a Monterey, CA bus maintenance facility.

Union Lawsuit over Presidio Parkway Rejected

The First Appellate Court of the California Court of Appeals on August 8th dismissed a petition by Professional Engineers in California Government (PECG) to stop the 30-year PPP project to rebuild the Presidio Parkway in San Francisco. Under the deal, the Meridiam/Hochtief consortium will design, finance, build, operate, and maintain the 1.6 mile roadway, one of a number of Urban Partnership Agreement demonstration projects and California’s first highway PPP project under its new PPP enabling legislation.

TRB Issues Guide to Pavement Warranties

One of the latest reports from the National Cooperative Highway Research Program is “Guidelines for the Use of Pavement Warranties on Highway Construction Projects.” It’s NCHRP Report 699 and is available on the Transportation Research Board website, www.trb.org.

Florida Transportation Plan Stresses Tolling and PPPs

FDOT Secretary Ananth Prasad on August 5th unveiled the Florida Transportation Vision for the 21st Century. Because it correctly views fuel taxes as a non-sustainable funding source, the policy states that “all new capacity on Interstates and expressways, and widening and replacement of all major river crossings” will be tolled, unless that is found to be infeasible. The plan commits Florida to developing a system of managed lanes in Florida’s major urban areas, as well as doing advance planning for a number of future highway corridors-an effort began under former Gov. Jeb Bush but abandoned by successor Charlie Crist.

Increased Ethanol Mandate at Odds with Reality

At a time when even former Vice President Al Gore has admitted that his earlier enthusiasm for ethanol in gasoline was misplaced, and widespread understanding that the federal ethanol program is a costly boondoggle, the EPA is persisting with its plans to mandate an increase in ethanol content in gasoline from the current maximum of 10% to a new maximum of 15%. Nearly every U.S. and foreign automaker in the U.S. market has protested these plans to members of Congress, arguing that higher ethanol content risks damage to cars’ fuel systems. The EPA proposal would require so-called E15 fuel to be sold for use in cars and light trucks from model year 2001 onward, most of which were not designed to handle higher levels of corrosive ethanol. Rep. James Sensenbrenner (R, WI) has drafted legislation to block the EPA’s plan.

Quotable Quotes

“The Highway Trust Fund was at one time intended to be a true ‘user fee’ system designed to benefit those it taxed; yet it has evolved over the years into a slush fund with less than 65% of its receipts dedicated to those who pay into the fund at the pump, and much of that remaining money funneled into federally-mandated programs that states and localities would not otherwise prioritize. . . . Last Congress, Chairman Jim Oberstar proposed a surface reauthorization bill that proposed a large gas tax increase despite the fact that his legislation restricted the construction of any new highway capacity, purposefully stymied private investment in transportation infrastructure [and] expanded mandates on transportation enhancements such as graffiti removal, transportation museums, roadside landscaping, and programs such as ‘walking school buses.’ It would have funneled valuable resources into a proposed ‘Livability Initiative’ and held state and local eligibility for funding hostage based on achievement of greenhouse gas emission targets. . . . Those policy proposals reflected a warped mentality that limited Highway Trust Fund dollars could be stretched to cover countless new non-infrastructure purposes and further divert from the direct infrastructure benefit to those paying the gas tax. . . . The limited resources of the Trust Fund should return investment value to users. Another high priority must be to protect the structure and existence of our Highway Trust Fund and maintain its unique and justified budgetary treatment. A continuation of deficit spending and General Fund transfers will destroy our dedicated, user-fee-based Trust Fund. As stewards of that Fund, it is our responsibility to stabilize the fund to protect its budgetary treatment and existence.”

–Rep. John Mica, letter to U.S. Chamber of Commerce, July 13, 2011

“Every single independent review of its project . . . has concluded that it’s not working. No exceptions. Not even one. The only ones saying the bullet train will work as promised are the [California High-Speed] Rail Authority itself, its highly paid consultants and media cheerleaders, and those on the political left who hate cars and love trains. A University of California review of the authority’s ridership estimates found them to be highly suspect. The Legislature’s budget analyst has been highly critical of the project’s management. Meanwhile, a ‘peer review’ panel has been equally skeptical of the authority’s ability to deliver the project-three times. . . . The peer review panel of transportation experts was appointed at the behest of increasingly skeptical legislators. . . . The authority is supposed to be producing a ‘business plan’ to answer all these questions, but its first draft was laughably skimpy and contained pie-in-the-sky projections of federal and private construction funds, ridership, and operational revenues. . . . We’ve spent millions, but we’re on the verge of committing billions without a realistic plan. This is a disaster in the making, and it’s time to step back.”

—Dan Walters, “High-Speed Rail on Track for Debacle,” Sacramento Bee, July 16, 2011

“Although worthy of consideration, the availability payment model does not solve the fundamental problem of marshaling budgetary funds for projects. Even the United Kingdom, which has led the way in the use of government payment mechanisms, has started to consider limited tolling of its motorways as governmental budgetary pressures mount. In addition, the availability approach introduces an auditing burden that likely exceeds that of a real toll project, because the amount of each payment hinges on the performance parameters.”

–Michael J. Garvin, “International Practices in Public-Private Partnerships,” TR News 274, May-June 2011.

“Transportation dollars should be spent on programs that most enhance long-term economic productivity. . . . For example, building an ill-advised rail line might give the local economy a short-term boost in employment, only to saddle taxpayers with large operating deficits in the future. Building the Interstate Highway System created many construction jobs, but it would be a huge mistake to interpret that employment as the system’s contribution to the economy. Workers who drew salaries from the construction program benefitted, but far less than the travelers and shippers of goods who have used those facilities every day for six decades. By building an effective transportation network, government transportation spending draws jobs to those industries that benefit from the investment. At the same time, this moves jobs away from activities that would have been financed in the absence of the transportation investment. So while transportation investment can ‘create jobs,’ it can also destroy them.”

–Martin Wachs, “Transportation, Jobs, and Economic Growth,” Access, Number 38, Spring 2011. (www.uctc.net/access/38/access38_transportation_growth/shtml)

“I think people deeply underestimate what a huge problem this day-night issue is if you’re trying to design an energy system involving solar technology that’s more than just a hobby. . . . It’s cute, you know, it’s nice. But the economics are so, so far from making sense. And yet that’s where subsidies are going now. We’re putting 90 percent of the subsidies in deployment-this is true in Europe and the United States-not in R&D. And so unfortunately, you get technologies that, no matter how much of them you buy, there’s no path to being economical. You need fundamental breakthroughs, which come more out of basic research.”

–Bill Gates, interview by Chris Anderson, Wired, July 2011.