A week before Christmas, John Massoud wrote about a Virginia Transportation Construction Alliance (VTCA) poll at The Bull Elephant. The poll shows strong public support for levying tolls on freight trucks or spending taxpayer funds to improve Interstate 81 in the western part of Virginia. Massoud rightly points out that the VTCA is a lobbying group with an interest in highway construction funding and we should take the poll with a grain of salt (I have not looked into the methodology). Still, he offers no solution to the mess I-81 has become and instead rejects the idea that government can be trusted with “my money.” We need infrastructure that helps Virginians efficiently move themselves and the products we make and sell, so I thought this would be a good hook to share some thoughts on transportation issues in the Commonwealth.
Unfortunately, the firms that make money moving raw materials to factories or goods to markets using this infrastructure can’t build it themselves. No individual corporation or business will realize the required return on investment, so no free market will organically allocate resources to the construction or maintenance of miles of highway that anyone can use any time. Our aggregated economic choices simply don’t create the necessary incentives.
Since our commerce depends on this infrastructure, we more or less have to find a way to get this done. No single agent can or will take on this cost alone, so we have to distribute the cost among stakeholders – those who use the highway – commercial and private users alike. Since everyone may use the infrastructure and we all benefit whether or not we also drive on it, we should also ask everyone to help pay for it. We can accomplish this through government, and if we don’t it won’t be there. This of course means permitting government to levy taxes and watching them to ensure they effectively use the funds.
For the immediate future the existing intermodal system will include interstate highways full of tractor trailer rig fleets and large private vehicles moving one passenger. Many of us would like to see more freight rail and passenger mass transit, but we still need to address critical needs as we move in this direction. This means investment in Virginia’s highway network, including construction and repair of pavement, bridges, and interchanges even as we shift to other modes.
This does not mean we should favor highway construction over mass transit by requiring long-distance passenger and commuter rail to pay for itself while we subsidize freight trucks and passenger cars. This amounts to subsidizing the least efficient transportation mode. Every commuter who shifts to an energy efficient VRE or Metro train or bus – and every rail freight shipment – reduces vehicle traffic on congested roadways, and thereby construction and maintenance requirements. Virginia must begin to construct a 21stCentury transportation grid based on rail and other mass transit modes and reduces congestion by giving people better options that gets cars and trucks off the highways.
These factors have implications for how we pay for transportation infrastructure. Firms and people will of course work to keep down costs in both fiscal and convenience terms. At some price and convenience point firms and drivers will shift from highway use to rail or other modes. So it makes sense to finance infrastructure in a way that increases the price of less efficient modes so people pay the true cost.
Fuel taxes look like a good way to do this, but increasing base fuel prices actually reduce tax collections available for infrastructure because people drive less or purchase more efficient vehicles. This means we cannot count on these taxes for a consistent revenue stream. Taxes on mileage driven work a bit better, but like fuel taxes generate funds without a way to force users to pay for what they actually use or target spending on problem routes.
Tolls do a better job of capturing actual use, and collection methods can allow application of revenue to the specific stretches of highway where the toll is paid. They’re less effective however at capturing the true cost unless the system accounts for vehicle weight and energy efficiency – heavy and/or less efficient vehicles do more damage more quickly to both the highway and the environment. They also tend to shift the congestion problem to other roads – tolling I-95 will shift traffic to US 1, at least at the margins.
We can adjust tolls and fuel taxes in ways that address these issues. We could greatly expand tolling, for example, which would let us reduce the amount tolled at each station and dedicate some portion collected to the stretch of highway where drivers actually pay it. Allocating some percentage of fuel taxes collected in specific places (e.g., city, county, or zip code) to maintenance of local infrastructure would also help. A dedicated tax on wholesale or retail sales is another way to ensure that those who benefit from good infrastructure pay its cost. Even better if we can tie this tax to the logistics chain supplying the store.
Massoud agrees that I-81 needs work. Congestion slows down progress and makes travel less safe, and this is true along other transportation corridors in Virginia. But it’s wrong to complain that government unwisely spends transportation funds solely because he hasn’t yet seen the improvements he wants to see. In fact, constructing and maintaining the infrastructure our economy needs requires government action – no private firm will invest in highways alone, and no consortium of private businesses appears ready to get together and take this on – even though the private sector has the money to do so.
We should direct this government action toward construction of green infrastructure that moves freight and people out of trucks and cars and uses renewable energy for fuel. Simply moving freight to rail cars would help, and we certainly need more mass public passenger transit. But creating communities where people can live, work, and play without getting into a vehicle except for long-distance travel also makes sense.
And we should pay for transportation infrastructure with revenue streams that perform three functions. First, it should force users to pay the true cost of transporting themselves and the goods they consume. It should also ensure that those who benefit from transportation infrastructure pay a fair share to construct and maintain it. Finally, it should target spending of collected revenue on construction and maintenance of the most heavily used infrastructure.
One more thing:
Like many conservatives, Massoud complains about government efficiency:
“The fact is that giving more money to government never solves problems, it just gives the bureaucrats more money to spend – often times on things we do not need. Quite frankly, I wish that I could trust my government enough to give them money and know that they would do the right thing. But history shows that we cannot trust our government with more and more of our taxpayer dollars.”
Refusal by conservatives to “trust” government has always baffled me. To be sure, each of us can think of some government program we think is wasteful or ineffective, whether or not someone else benefits from the spending. But it’s not clear that private firms respond better than public agencies, as anyone who has spent the afternoon on the phone with the cable company or waiting all day for delivery of a microwave can see. And average citizens have a direct influence on government they lack with private businesses and more control over government behavior than corporate behavior. I get to help choose the Governor, but not a corporate CEO. But I have to engage, and pay attention, and vote so unwise and inefficient officials pay the price at the ballot box. Simply complaining about government and trying to kill it doesn’t help.