Friday, April 01, 2005

Paying too much for roads

Just a few years ago, Dan Klein wrote about "Planning and the Two Coordinations," a timely piece because we hear again and again about the virtues of top-down coordination. Top-down planners may cede the point that North Koreans do not live nearly as well as South Koreans -- even that central planning is the problem -- but will usually suggest that some systems just cannot function without coordination from the top.

The regular Congressional spending orgies over fuel tax moneys, highway trust funds and many thousands of resulting pork projects are usually justified by the logic that widespread networks must spring from centralized authority.

The latest to examine (explode) this idea is Gabriel Roth who authored Cato's Policy Analysis No. 538, "Liberating the Roads: Reforming U.S. Highway Policy."

Roth reminds readers that decentralization, federalism and choice worked well before the trust fund and can do the job again, and much better than the existing system.

Here is the executive summary:

Deliberations on reauthorizing the federal fuel tax dragged on through the summer of 2004 and were not completed in the 108th Congress. Whether the fuel tax and the transportation programs it funds should be renewed is the central question of this paper.

A federal role may have been necessary to finance the Interstate Highway System in 1956—the year the federal fuel tax was enacted—but the system is now complete. The Federal Highway Trust Fund was established specifically as a means to finance highway construction. It is now a slush fund for Congress to fund programs aimed at appeasing special interests and financing non highway projects. The power of Congress to finance road projects was supposed to sunset in 1972 but instead continues to this day. In addition, federal regulations increase construction costs and stifle innovative policy experiments in the states.

Before the federal government took on the role of financing highways in 20th century, that role was assumed entirely by state governments and, before that, the private sector. This study makes the case that there is no longer any role for the federal government in the construction and financing of roads. Significant reform must include phasing down the federal fuel tax and giving back to the states full responsibility for highway programs.