Fixing America’s ‘crumbling infrastructure’

The 405 freeway is viewed from above in Carson, California August 5, 2015. REUTERS/Mike Blake.

In a new AEI Economic Perspectives paper, Richard Geddes presents a set of principles to guide policy making intended to facilitate the operation, maintenance and expansion of what politicians and civil engineers alike often to refer to as “our nation’s crumbling infrastructure.” His focus is in particular on the highways, roads, streets, bridges and tunnels that cars and trucks use.

The principles Professor Geddes believes policymakers should adhere to are the following three:

• Infrastructure should be paid for by those who use it, ideally through user fees;

• Public-private partnerships should be used to streamline financing, operations, and maintenance;

• Public policy should complement emerging transportation technologies, especially those related to vehicle autonomy.

Each of these has direct policy implications, and the paper discusses a variety of concrete steps toward implementation.

But let us elaborate a little on the first principle. Taxes on motor vehicles and the fuels they use have historically paid for much of US infrastructure spending, sometimes complemented by general tax revenue (especially at the local level). For example, taxes on gasoline and diesel account for more than 90% of the revenue going into the federal Highway Trust Fund.

For a variety of reasons — such as political opposition to raising these taxes merely to keep up with inflation, increased fuel efficiency, and the rise of electric cars —  revenue from these taxes has declined significantly in recent years. Fortunately, technological progress has made it much more straightforward to charge drivers for actual use without costly tollbooth systems.

In a sense, the surface transportation system has become more “excludable,” as economists say: it is easier to keep track of who uses it, to keep users, and to make them pay, without excessive transaction and monitoring costs. Infrastructure can thus be financed more easily in ways typically associated with private, not public goods, making a shift to a system with more user cost financing a sensible step.

And that’s just the beginning! For much more, read the entire paper here.

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