Future of National Freight Policy

Another question being debated at National Journal’s Transportation Experts blog is about national freight policy. Lisa Caruso asks:

“Many organizations have called for the next surface transportation bill to create a national freight program with a dedicated source of funding (among them are the Freight Stakeholders Coalition, the American Road and Transportation Builders Association and the American Association of State Highway and Transportation Officials). What should that policy look like and what should its revenue source be? What role can the private sector and other levels of government play in improving the movement of goods across the country and across all modes of transportation? Where do air cargo and freight rail fit into the equation?”

Goods-movement infrastructure has not gotten enough attention in recent decades, either at the federal level or in the transportation plans of urban areas. So it would be useful for the forthcoming federal reauthorization to require metropolitan planning organizations (MPOs) to put more serious emphasis on goods movement as they revise their long-range transportation plans.

The larger question before us is what the federal government’s direct role should be. Despite my general decentralist leanings, I agree that facilitating the free flow of commerce—with the world and among the states—is one of the tasks the Constitution gives to the federal government. So I’m favorable to the idea of the federal government making strategic investments in critical corridors and key nodes in the goods-movement system. And obviously, this needs to involve all the modes that make economic sense for shippers to use in moving cargo.

But the difficult part is figuring out a mechanism that will actually do this. Our general experience with federal user taxes, centralized trust funds, and politically-driven allocation of the monies is that this model creates all kinds of incentives to spend Party A’s money on something that benefits Party B, and to substitute political criteria for economic/investment criteria in determining what is “strategic.” Just within the Highway Trust Fund, we have not only out-of-control earmarking but a plethora of specialized programs that are anything but strategic (“Recreational Trails”? “Scenic Byways”?) as national priorities. Similar problems exist within the Airport Improvement Program and the harbor dredging program.

Some are now calling for a new federal multimodal freight program, funded by some combination of new user taxes and fees—but with the funds still sent to Washington, deposited in the Treasury, and then authorized and appropriated by Congress. Even though it would be separate from the Highway Trust Fund, and begun with the best of intentions, I fear it would fairly rapidly come to resemble the existing centralized approaches, taxing high-volume, high-growth sectors of goods-movement to fund projects serving a large variety of politically blessed ends.

So what kinds of safeguards could we impose, to resist those tendencies?

The first is to avoid creating a single multimodal fund, where the tendency to cross-subsidize one mode with funds derived from another mode will be too great to resist. That’s not to deny that multimodal projects are sometimes appropriate. But if there is a strategic freight highway fund and a strategic freight railway fund—each paid for by user fees on its mode—then funding for specific multimodal projects that meet the needs of both modes can be made available, with the consent of both.

That model also suggests two other safeguards. First, the revenue source for each fund be some form of user fee, paid by the users of that mode. Second, those users should have a significant say in which projects get selected—”user pay means user say.” Thus, even if the user fee is legally a federal user tax that gets deposited in the Treasury and must be authorized and appropriated by Congress, each modal fund would have a user board to determine both the general principles for selecting strategic projects and the allocation to specific projects (whether single-mode or multi-mode) of the funds made available by Congress each year.

To be sure, that would be a dramatic change from the way we’ve operated federal infrastructure funds historically. It would mean Congress delegating the details to the goods-movement community, rather than micro-managing them itself. I realize that’s a tall order. But if we simply replicate, for goods-movement investment, a model that we know from experience is seriously flawed, we shouldn’t be surprised when the results turn out to be far less beneficial than hoped for.