Infrastructure Follies


When Howard Baker and Tip O'Neill agree that something is in the national interest, hang onto your wallet. With the endorsement of the Senate majority leader and the Speaker of the House, the campaign for a $5.5-billion program to rebuild the nation's transportation "infrastructure" has reached the boiling point.

The move to rush such a measure through the lame-duck session of Congress is the culmination of a year-long crusade by advocates of big government. The opening shot was the publication of Pat Choate's book, America in Ruins. Drawing on studies from reputable research institutes, the book documented the growing deterioration of many of our roads, bridges, water systems, and other public works—and raised a call for spending hundreds of billions of dollars on repairs.

The depth of 1982's recession gave political currency to the idea of killing two birds with one stone: relieving unemployment and repairing infrastructure by creating a modern version of FDR's Works Projects Administration. With almost embarrassing orchestration, New Republic staff writer Timothy Noah advanced the WPA idea in the September Washington Monthly, while that magazine's contributing editor Robert Kaus made the same proposal in the October Harper's.

The politicians scrambled to get on board. "America is in ruins," intoned Rep. Henry Reuss (D–Wis.) somewhat unoriginally. Chief tax-writer Dan Rostenkowski (D–Ill.) jumped aboard with a call for a gasoline tax to repair roads and bridges. The "Atari Democrats" belatedly signed on. Soon the GOP was out-promising the Democrats, with Sen. Pete Domenici (R–N.M.) upping the ante to $6 billion for public works. That brought Transportation Secretary Drew Lewis back to center stage with his long-cherished five-cent-a-gallon gasoline tax increase, quickly dubbed a "user fee" by the president and endorsed by Baker and O'Neill just before Thanksgiving.

What's wrong with such a plan? At least two things. It won't even make a dent in today's unemployment. And it won't solve the infrastructure problem.

It won't reduce today's unemployment for three reasons. First, emergency public works programs always take a couple of years to get up to speed—and by then, the recession is over. Economist Donald Ratajczak of Georgia State points out that spending on Jimmy Carter's 1977 public works program peaked in 1979, two years late. "Carter didn't mishandle the program," Ratajczak notes. "That's just the nature of public works."

Second, public works programs are inherently capital-intensive—most of the money goes for materials, not wages. Economist John Albertine of the American Business Conference points out that the cost per job of the Carter public works program was $87,000. And only two percent of those employed by it had been out of work for 13 weeks or more.

Third, a federal jobs program cannot create new economic activity. The money, after all, does not materialize out of thin air. All such a program can do is to shift resources out of private-sector activities and into the government sector. FDR's massive public works programs did build lots of new post offices. But they had no real effect on unemployment, which was higher in 1939, after six years of the New Deal, then when Roosevelt took office.

Far more serious is the fact that a new public works program would ignore the cause of our decaying infrastructure. Simply put, that cause is the political management of our roads, bridges, sewers, and transit systems. Mismanagement has two aspects: bloated costs and deferred maintenance. We get bloated costs because interest groups use their political clout to extract monopoly gains. Thus, Conrail's commuter-service workers average $40,300 a year. And the federal sewer grants program has poured $50 billion down the drain building largely unnecessary secondary treatment plants.

Even more serious is deferred maintenance. While vocal special interests carve up the spending pie, the long-term interest of infrastructure users is ignored. Nobody with any clout lobbies for adequate preventive maintenance of politically run facilities. That's why New York's city-owned bridges, water, and subway systems are literally falling apart while public-employee wages reach new highs.

Yet New York and Detroit can point the way to a real solution. Detroit's investor-owned Ambassador Bridge and New York's authority-owned George Washington and Triborough bridges are in excellent repair. Why? Because they are outside the political process, run by corporate entities and financed by tolls. Similarly, the nation's turnpikes and tollways are in good repair, in marked contrast to the often-decrepit interstate highways. Turnpike operators charge tolls that make heavy trucks actually pay their way, based on weight and distance, rather than the so-called user taxes (gasoline taxes) by which heavy trucks cover less than 50 percent of their costs.

The solution, in short, is privatization of infrastructure. For highways, simply repeal the current federal ban on charging tolls on interstates and allow their transfer to independent authorities—or, better yet, to private investors. The same can be done with major bridges.

In congested urban areas, adding toll booths to bridges and expressways would increase congestion. So the solution here is electronic metering, discussed in this issue (p. 18) and in last January's cover story. This would permit tolls to be raised to high levels during rush hours, providing strong economic incentives for car and van pooling.

For transit itself, the answer is not to dump more billions into subway boondoggles for Houston and Los Angeles. The solution is to deregulate urban transit, allowing mini-bus, van, jitney, and cab service to meet the need for flexible, decentralized service at marketplace rates (and wage levels). And then to privatize existing transit systems, selling off their assets to private operators. Even New York's subways could be viable under private ownership, as we showed in last May's cover story.

We do have an infrastructure problem. But the way to solve it is not to throw money at it. A new WPA would simply perpetuate the political causes of the problem. And it wouldn't even provide the jobs its advocates promise.