Congress is currently debating reauthorization of the federal surface transportation program, something it does every six years or so. In response to concerns that the federal government is too large and intrusive, many fiscal conservatives, led by Senator Jim DeMint and Representative Jeff Flake, support devolving both the program and the federal fuel taxes that support it to the states. After all, the states own and operate the vast majority of all highways, but accepting federal funds for them has entangled the states in numerous costly federal requirements.
Two reauthorizations ago, devolution enjoyed a surge of popularity, in 1997 and 1998. Half a dozen governors and their transportation departments supported a measure proposed by Senator Connie Mack and Representative John Kasich to devolve nearly the entire highway and transit program, including most of the federal gas tax, to the states. Mack and Kasich argued persuasively that, as Mack put it, “states now have the technical capability to build their own roads, and, frankly, they know better than Washington what their transportation needs are.” Mack and Kasich proposed only a skeleton federal program to maintain the existing Interstate system and roadways on federally owned lands, supported by a federal gas tax of only a few cents per gallon (far below the current 18.4 cents a gallon).
I was an enthusiastic supporter of Mack-Kasich then, both as a member of California’s Commission on Transportation Investment (which endorsed it) and as a transportation policy researcher. In a 1996 Reason Foundation policy paper, I laid out a case for devolution, arguing that federal mandates (Davis-Bacon, Buy America, etc.) meant that federal highway dollars were worth only 73 percent of what unencumbered state dollars could buy, that the feds were diverting an ever-increasing share of highway user tax money to non-highway programs (such as mass transit and bike paths), and that Congress mandated that a lot of the money be wasted on pork-barrel projects.
Those points are even more valid today. Earmarks soared to unprecedented levels in the 2005 reauthorization, and nearly a quarter of all federal highway user-tax revenue is now spent on non-highway purposes. The Obama administration’s proposed reauthorization measure would double the size of the federal program and fund high-speed rail and an “infrastructure bank” out of the Highway Trust Fund, which it would rename the Transportation Trust Fund. Even within the highway portion of this trust fund, $27.5 billion would be diverted to a new “Livable Communities” program.
While I am strongly opposed to the administration’s proposal, I no longer support the drastic form of devolution represented by Mack-Kasich and still embraced by DeMint and Flake. The main reason for my change of mind concerns the Interstate highway system. In a one-on-one meeting with a pro-devolution member of Congress last year, I made the case that the Interstate highway system is inherently federal and should remain funded at the federal level of government, while agreeing with him that all the rest should be devolved. “How much federal tax would it take to support that?” he asked, adding that he guessed 2 or 3 cents a gallon. He was shocked when I replied that to rebuild and modernize the Interstate system would likely take the entire 18.4 cents a gallon gas tax and possibly more.
What Fiscal Conservatives Miss about Major Highways
There are three principal reasons for the disconnect between reality and much conservative thinking about Interstate highways. First, highways wear out. Major highways, such as urban freeways and our long-distance Interstates, are designed for a useful life of about 50 years, even with reasonably good maintenance. After that, they need to be rebuilt, from the sub-pavement base on up. And when such a road is reconstructed, it makes sense to upgrade its design to current standards, instead of the accepted practices of 50 years before. For example, many of the early freeways were designed with left-side exits at major interchanges, a practice now seen as creating safety hazards. The Interstate highway program began in 1956, with the initial segments opening in the late ’50s and early ’60s. That means large portions of the system will reach their 50th anniversary this decade and next. And that will mean major reconstruction projects, carried out at today’s high construction costs.
Second, the map of what became the Interstate system was drawn up in the 1940s, for a country whose economy was predominantly industrial rather than services-based, and whose population was far more concentrated in the Northeast and Midwest than today’s. There is no Interstate route, for instance, between Las Vegas and Phoenix, two major and (for the past 40 years) rapidly growing metro areas. Patterns of shipping and travel have changed enormously over the decades, and accordingly there are many missing links in the Interstate system. Many of those links could be created by upgrading existing highways to Interstate standards. But the idea that “the Interstate system” is complete is fallacious.
Third, many of our Interstates – both urban and rural – are seriously congested and need more capacity. In some cases, this means widening them in the near term, well before age requires complete reconstruction. In other cases, adding lanes is appropriate when the facility is rebuilt, as when the old Woodrow Wilson Bridge was replaced several years ago on the Capital Beltway between Maryland and Virginia and when the obsolete Marquette Interchange was rebuilt in Milwaukee.
What would it cost to reconstruct, expand, and modernize the Interstate system? One estimate comes from the Federal Highway Administration. Every two years FHWA is required to report to Congress on the condition and performance of the U.S. highway system. It estimates the amount of annual capital spending (major maintenance, reconstruction, and new capacity) required (1) to maintain current conditions (e.g., pavement quality) and performance (e.g., congestion) and (2) to improve conditions and performance (e.g., replace deficient bridges, significantly reduce congestion). Based on a requirement that such projects have a ratio of benefits to costs of at least 1.5, the average annual investment in the Interstate system to improve conditions was between $24 billion and $39 billion. Current annual capital investment in the Interstates (federal plus state) averages $16.5 billion. Thus, the annual shortfall is between $7.5 billion and $22.5 billion. To invest less than that means, at best, to preserve today’s conditions, including today’s level of congestion.
The FHWA numbers emerge from a macro model of the entire U.S. highway system. Other studies take a bottom-up approach. A 2005 study for the Institute for Defense Analysis estimated the capital cost of adding a network of express toll lanes to the freeway systems of the 19 most congested metro areas. That estimated cost was $98 billion, in 2002 dollars (more like $139 billion in today’s dollars). A 2004 study of the 233 most congested interchanges in the country (nearly all of them involving Interstates) identified huge benefits (time savings and improved safety) from rebuilding them. At an estimated cost of $128 billion, the 20-year benefits would be about $1.4 trillion, for a benefit/cost ratio of 10.9.
No generally accepted estimate of the cost of reconstructing, expanding, and modernizing America’s Interstates exists, but it’s pretty clear that the cost would be in the hundreds of billions of dollars over several decades. If, somehow, all the current federal surface transportation money could be devoted to this single endeavor – which I have called Interstate 2.0 – it’s not clear whether the current gas tax, which yields an annual revenue of $33.9 billion, would be sufficient.
Why (Only) the Interstates Should Remain Federal
What role (if any) the federal government should play in highways has been an issue ever since the Constitution was ratified. The initial justification, in the 19th century, was that Article 1, Section 8 gives Congress authority to “establish Post Offices and Post Roads.” For a long time, the prevailing view was that since no other types of infrastructure (canals, other highways, railroads) were mentioned in the Constitution, the power to establish or assist them was reserved to the states via the 10th Amendment. Most of what we think of as highways in the 19th century were privately financed turnpikes – toll roads.
Once the automobile came into existence, the “Good Roads” movement lobbied both state and federal governments to pave the highways. That led to the widespread enactment of state motor fuel taxes, with the proceeds dedicated to highways. It also led to the Federal-Aid Road Act of 1916 to assist states in building paved post roads. Subsequent lobbying led to the Federal Highway Act of 1921, with the justification for federal involvement expanded to encompass the Constitution’s interstate commerce clause. A one cent per gallon federal motor fuel tax was enacted in 1932, but there was no direct connection between the revenue raised and the amount spent, since the revenues went into the federal government’s general fund.
Congress expanded the federal program in 1944, by that point not bothering to cite a constitutional justification. But after the war, when debate turned to creating the Interstate highway system, constitutional concerns were sufficiently strong that national defense was invoked as part of the rationale (the program’s official name was the National System of Interstate and Defense Highways). The 1956 legislation also increased the federal fuel tax rate and created the Highway Trust Fund, to which all federal fuel tax receipts were credited. At that point, all the revenue from the trust fund was to be spent on highways, primarily the Interstates but also the other highways that had become part of the federal-aid system of highways. Thus, for the first time, the federal fuel tax became a users-pay/users-benefit tax, much like the original state gas taxes.
Despite Congress’s subsequent departure from the users-pay/users-benefit principle, there is a strong case for the Interstate system to remain a federal program, for three reasons. First of all, ensuring the free flow of commerce among the states and across our national borders is in the DNA of the Constitution. One of the reasons the Founders replaced the Articles of Confederation was that states were charging tariffs at their borders and impeding the flow of commerce. Between the interstate commerce clause and the post-roads provision, ample justification exists for a federal system of superhighways with common technical standards.
Second, the benefits of such a system extend beyond the borders of any state. Some portions of the Interstate system, such as the freeways serving the ports of Los Angeles and Long Beach, facilitate the flow of a large fraction of all oceangoing cargo between the United States and Asia, benefiting all Americans. But the burdens of this nationally beneficial infrastructure – in terms of traffic congestion, noise, and air pollution – are borne primarily by residents of Southern California, who reap only a fraction of the benefits. Likewise, residents of the Seattle area benefit from commerce that moves through their ports and onto Interstates that traverse the mountain West. National benefits of this kind do not arise from the numerous other programs Congress now pays for with federal highway user tax revenue: state highways, urban transit, bike paths, recreational trails, sidewalks. Those programs’ benefits are purely local, and they should be supported locally.
Third, in terms of practical politics, any move to “defederalize” the Interstates would be fiercely opposed by highway user groups, such as trucking and automobile associations. While this “highway lobby” does not have the clout it had during the original Interstate and freeway era, its influence is still a significant factor in debates on federal transportation policy.
What Fiscal Conservatives Should Support, and Why
The defining issue of our time is figuring out how to reduce the scope and cost of the federal government. In surface transportation, the federal role has grown far beyond the highly focused program to develop a national superhighway network, paid for by and benefiting its users. Every time Congress has reauthorized the program, it has expanded its scope, to the point where one-quarter of the funds are now spent on non-highway programs. And if the Obama administration has its way, the program will double in size, spending highway users’ money on endless high-speed rail boondoggles and even more transit and other non-highway purposes.
Advocates of devolution are on the right track, in that most highways, all urban transit, and certainly things like sidewalks, bikeways, and recreational trails are the province of state and local government, not Washington. Without the lure of “free federal money,” states and cities will have much greater incentive to make cost-effective choices (flexible bus rapid transit rather than costly and inflexible light rail systems, for instance). In addition, their own dollars, unencumbered by costly federal mandates, will go 20 to 30 percent further than federal dollars.
The Interstate system is different, in that its benefits are truly national in scope. It can and should be paid for solely by its users, thereby having no net effect on the federal budget deficit. But devolving the rest of the current federal surface transportation program to the states would have a modestly positive impact on the deficit, especially to the extent that in the last three years almost $35 billion in federal general-fund money has been added to what the federal user taxes bring in, to support the bloated scope of the current program.
But the Interstate system is wearing out, much of its design is obsolete, and it is woefully short of the capacity needed to support projected population and economic growth in coming decades. Hence, it makes sense to re-focus the federal program on a second-generation Interstate system for the 21st century: Interstate 2.0. Much of the cost of this program will go for reconstruction and widening, as well as replacing obsolete interchanges conducive to bottlenecks. But the map also needs to be redrawn, reflecting where economic activity takes place today and tomorrow, not where it was in the 1940s. That will involve upgrading a number of highways in what is now called the National Highway System to full Interstate standards.
There’s an old adage in politics that “you can’t fight something with nothing.” Fiscal conservatives rightly oppose the administration’s high-speed rail and “livability” programs as boondoggles. But instead of just being the party of “no,” fiscal conservatives need something bold and meaningful to be for. Interstate 2.0 should be that alternative. And by restoring the Highway Trust Fund to the original concept, conservatives can also rebuild the trust of the voting public.
Robert W. Poole Jr. is director of transportation policy at the Reason Foundation.