A Better New New Deal

On December 6, 2008, President-elect Barack Obama announced to a nation battered by job losses and worsening economic conditions that his administration would make “the single largest new investment in our national infrastructure since the creation of the federal highway system in the 1950s.” The massive public works stimulus package, estimated at $850 billion as of press time, prompted further comparisons to Franklin Delano Roosevelt and his Works Progress Administration. Time magazine had already put Obama on the cover, superimposed over a classic image of FDR, under the headline “The New New Deal?”; now liberal writers and activists were rubbing their hands together at the prospect of attacking the recession through federal make-work. Obama did nothing to discourage such hopes. By repairing bridges, expanding transit, and paving roads, he claimed, “we will create millions of jobs.”

There is an important grain of truth in the new president’s rhetoric. American transportation systems are antiquated, better suited to the low-mobility days of the 19th century than the wealth-driven, movement-driven economy of today. Inadequate infrastructure contributes significantly to the burden that traffic congestion imposes on America’s urban economies—about $168 billion each year, according to Jack Wells, chief economist for the U.S. Department of Transportation. Just maintaining our roads, highways, and transit systems in “good repair” would mean increasing current spending by about $36 billion a year, according to reports by the Department of Transportation and the Transportation Research Board of the National Academy of Sciences.

So Obama and his policy team will have to do more than think of transportation as a 1930s-style pump-priming program. Sending armies of workers out onto the highways and byways to fill potholes won’t come close to meeting the country’s urgent transport needs, nor would it be a cost-effective use of tax dollars. Rates of return on highway investments have been falling steadily since the 1970s. Seventy-three million Americans know this firsthand because they drive on severely congested roads almost every day. Congestion is growing so fast that 58 cities will face chronic stop-and-go congestion during longer peak hours by 2030, according to a 2006 study by the Reason Foundation, the organization that publishes this magazine.

Instead of the old transportation hub-and-spoke system, in which towns and suburbs are tethered to big cities through straight lines made of concrete or steel, 21st-century systems should operate much more like the Internet, connecting individual nodes in a complex and dynamic web of origins and destinations, customized to the travel needs of individual residents and businesses. Just as the Internet benefits from the networked actions of millions of self-interested parties operating from the ground up, an agile, Web-like transportation network can be created only by unleashing the ideas and money of the private sector and rejecting the Rooseveltian notion that money is spent most efficiently by central planners on job-stuffing projects.

New technologies have made it possible to put the users of roads, highways, and rails in charge of decisions about what facilities get built. That, in turn, can allow future investments to be tied to steady, dependable revenue streams. Such a shift requires the still-controversial step of charging people for the roads and trains they use. With advances in electronic ticketing and boothless toll collection points (which drivers roll past without slowing down) and commuters’ increasing willingness to pay their own way out of congestion, reconnecting transportation costs to use is the best method for ensuring that the government doesn’t slop money onto roads and tracks that don’t serve a meaningful purpose. It’s also the only practical way the U.S. can tap into the available private equity —estimated by the investment analysis firm Probitas Partners to total about $90 billion—that could leverage another $200 billion to $300 billion for private infrastructure projects in 2009 alone.

With Obama promising improved infrastructure even while states and municipalities beg Washington to fill rampant budget deficits, reforming the way transport dollars are spent is a necessity, not a luxury. Obama insists that he “won’t just throw money at the problem” and that he’ll “measure progress by the reforms we make and the results we achieve.” It’s doubtful that he’ll get very far with his current approach, which takes it for granted that it’s Washington’s responsibility to fund parking policies in Pasadena. But if we can’t avoid national meddling into local problems, the feds should at least consider ways to introduce choice, competition, and sound budgeting into our subsidized and centralized transportation system. As the new Congress takes up Obama’s stimulus package and weighs the six year, $500 billion-plus transportation bill reauthorization in 2009, the time has never been riper for reform.

If House Transportation and Infrastructure Committee Chairman James Oberstar (D-Minn.) has his way, we will spend about $85 billion for the infrastructure piece of the “stimulus” package. Most of that money will go to state and local governments to spend, and in theory it could do a lot to upgrade our transportation system. But Congress includes all manner of programs in its infrastructure funding, from a broadband Internet backbone to bicycle trails to bridges. Add in the amount needed just to maintain existing infrastructure, and only a fraction of that $85 billion will likely go to build new, useful projects.

A better way forward would be for Congress to a) focus the “stimulus” on crucial projects that provide measurable benefits at least commensurate with their costs, b) favor projects that draw on private investment to get more bang for the buck, and c) require that the funds be spent as advertised, with the benefits documented. Under those conditions, the spending could accomplish something useful. Of course, by the time the feds collect the money from taxpayers, pass it through the big sausage factory of Congress, then pass it again through the Vienna sausage factories of state and local governments, there won’t be much left for jobs and economic development. A one-time $85 billion tax relief package probably would stimulate a lot more job growth and consumption.

Wherever the money comes from, transportation planners should pay close attention to the innovations already taking place on the ground. As the stories below indicate, impressive projects are already coming online in places ranging from London to Anchorage to Beijing, providing lessons that the Obama administration would do well to heed.

THE NO-RUSH HOUR IN SOUTHERN CALIFORNIA

Afternoon rush hour finds thousands of cars and trucks plodding along at 15 miles per hour on the “free” lanes of Route 91 in Orange County, California. Just a few feet away, on a 10-mile stretch of median road called the 91 Express Lanes, toll-paying motorists fly by at 65 miles per hour. Pricing the roads on an hourly basis allows the 91 Express Lanes to maintain speedy traffic and carry 33 percent more cars per hour than regular lanes.

Twenty years ago, keeping rush-hour speeds at free-flow levels (i.e., 55 miles per hour or faster) in Southern California would have been unimaginable. Now advances in electronic tolling allow governments and private companies to change prices in real time based on traffic levels. Prices increase during congested times to encourage travelers to choose other routes and fall during uncongested times to encourage more use.

In 1989, after the state passed pioneering legislation crafted on ideas first proposed a year earlier by the Reason Foundation’s Robert Poole, the California Private Transportation Company built and began operating the 91 Express Lanes. Unfortunately, the company’s principal shareholder, Kiewit, decided to leave the toll road business, and the profitable roads were eventually sold in 2003 to the Orange County Transportation Authority. They still turn a profit for the county and even fund public transit along the corridor.

Every three months, the transportation authority sets new prices for each hour of the day, based on the average hourly traffic volume. The price swings can be dramatic. During rush hour, lanes can cost as much as $1 per mile. At off-peak times, the price per mile can be as low as 12 cents.

Toll rates also change depending on the day of the week. On weekends the lanes are lightly traveled, so the transportation authority sets rates lower during the same period when they might be high on another day. For eastbound traffic in April 2008, a toll at 4 p.m. varied from $2.30 on Sunday for the 10-mile stretch to $8.50 on Thursday or Friday. For westbound traffic, tolls varied from $1.85 to $2.75 for the same time period on different days.