President-elect Barack Obama's transition team is days away from releasing the details of an economic stimulus plan. If, as expected, more than $200 billion is directed toward transportation infrastructure, federal funding for roads, bridges, and transit will exceed spending in more typical years by more than a third. In 2008, for example, the federal government spent $70 billion. This raises the question: where will all this money go? Under the current system, pork. And more pork.
States receive most transportation funding from the federal government based on a complex formula. The money isn't given to projects based on their potential economic impact, efficiency or effectiveness. Congress allocates a large chunk through a process driven by special interests and earmarks. The number of "earmarks"-specific projects inserted into transportation legislation by individual members of Congress-increased from just 10 in 1982, to 1,850 in 1998, to 6,371 in the 2005 federal highway bill. Throwing a couple hundred billion dollars into this system with a mandate to "spend it fast" is a recipe for waste that won't meet the stimulus goals of the incoming Obama administration.
Mr. Obama, seems to recognized this danger. On Jan. 6, the Associated Press reported, "President-elect Barack Obama says he will bar pork-barrel projects from the massive economic stimulus bill he wants Congress to pass." Mr. Obama said, "We are going to ban all earmarks, the process by which individual members insert projects without review." So we'll see how that plays out in the real world with Congress.
More than a little irony characterizes this policy conundrum. Transportation was one of the most strategic, focused, and economically effective functions of the federal government for decades after President Eisenhower signed the Federal Aid Highway Act in 1956, creating the modern-day Interstate Highway System.
The federal government, in fact, was likely the only institution capable of embarking on such an ambitious program at the time. Private roads and bridges were too small in scale and scope to be able to undertake such a mega-project. Private financial markets didn't have the capacity to coordinate the capital necessary to make it work. The technology simply didn't exist to make road pricing and national toll roads cost-effective. Moreover, crossing state borders created political hurdles significant enough that a pre-emptive role of the federal government made sense.
Those times are gone. The private sector is now far more strategic and effective in delivering infrastructure projects that count than the federal government. A report by Infrastructure Partnerships Australia found in a survey of 54 major infrastructure projects the private sector delivered the facility a head of schedule and on budget while public projects were delayed 15 percent on average and over budget by 23 percent. The Dulles Greenway and Pocahontas Freeway in Virginia are domestic examples of public-private partnership projects. Europe and Austrialia have frequently used private capital to bring projects on-line ahead of schedule and under budget.
The federal government had clear goals in building the Interstate system. Today, it does not have a clear vision of its role in transportation funding and construction. Without an updated vision for the federal government's role, transportation (and other government spending) is likely to fall flat or, worse, undermine our nation's economic viability by allowing the gridlock and traffic jams that plague our urban areas to worsen as the economy recovers from the recession.
Federal transportation dollars need to be narrowly focused on transportation projects that are clearly national in scope or have demonstrably significant economic impact. Specifically, federal policy should focus on four key areas of national interest:
- Interstate highway upgrades that link state highways in fast growing corridors, tapping into private companies to finance, build and operate these roads through user fees and the most up-to-date technology to ensure free-flow speeds at the maximum speed limit allowed. Places like Phoenix, Las Vegas and Austin, Texas, have grown immensely since Interstate system was first developed.
- Leading multi-state coordination in expanding urban areas, resolving disputes such as the current spat between Missouri and Illinois over how to pay for a bridge over the Mississippi River in St. Louis, or facilitating an agreement between Kentucky and Ohio to build bridges spanning the Ohio River.
- Protecting and supporting key freight corridors to ensure our manufacturers and producers have networks they need to get materials in and products out, whether it's the ports of Los Angeles and Long Beach, upgrading rail connections through Chicago, or ensuring goods move north from Houston of New Orleans to the interior of the US. Over 80 percent of all goods (by value) in America are now shipped by truck.
- Investing in transportation research, safety and related issues, with special focus on new technologies and methods of managing transportation systems (such as stop light synchronization, electronic tolling, new road design, and toll roads) coordinating common standards for things such transmission frequencies for new technologies, and incentivizing experimentation and innovation, particularly with private sector participation.
Paradoxically, elevating these areas to national priorities would mean the federal government would largely back out of the regular project grant making process. Instead, specific funding priorities would be set by those closest to the problem, empowering states and regional authorities that already generate more than half of funds spent on transportation. Thus, federal funds for purely local projects would go away over a transition period, refocused on projects with clear national impacts. State and local governments will have strong incentives to adopt direct user fees to establish willingness to pay criteria for deciding what projects should be funded and when.
Travelers, drivers, taxpayers and businesses will benefit from this transition because funding levels will be set and projects selected by those closest to the problem, not formulas or legislative gamesmanship.
Rahm Emanuel, President-elect Obama's chief of staff, told The New York Times last fall that, "You don't ever want a good crisis to go to waste; it's an opportunity to do important things you would otherwise avoid."
This is clearly true for U.S. transportation policy. This recession and the ongoing transportation funding crisis should prompt Mr. Obama and Congress to reinvent the U.S. Department of Transportation in ways that allow it to become a player in laying a foundation for the long-term growth of the national economy. Not only is the federal government working on stimulus packages, it is poised to commit $500 billion in transportation spending as part of the six-year reauthorization bill of the Transportation Equity Act for the 21st Century. The nation can continue to waste precious resources on bridges to nowhere or we can finally reform the transportation funding system to reflect the needs of our modern, global economy.