Transportation Secretary Anthony Foxx says the Highway Trust Fund is going to run out of money in August, and President Barack Obama is spending this week pushing his infrastructure plans. If Congress doesn't come up with the money to patch the shortfall, many states will likely start cutting back transportation projects, so the looming deadline is prompting an embarrassment of gimmicks and bad ideas.
House Democrats are dreaming of replacing the gas tax with a larger per-barrel tax on oil companies. House Republicans want to violate their own Budget Control Act rules to use 10 years of projected savings from a rag-bag of cuts in unrelated programs to pay for one year of highway funding. And Sens. Chris Murphy (D-Conn.) and Bob Corker (R-Tenn.) recently proposed raising the federal gas tax, which is a political non-starter in an election year.
Congress is likely to pass a short-term fix that addresses none of the structural issues. And while there are a lot of things to disagree with in the president's transportation plans, the most sensible long-term solution for the Interstate Highway System is actually coming from the Obama administration, which is calling for allowing states to use toll revenue to finance the reconstruction of aging Interstate highways.
Most conservatives claim to support principles like privatization, market pricing, and devolving functions from Washington, D.C. to the states, but apparently not in this case. Everyone from prominent law professor and Instapundit blogger Glenn Reynolds to Sen. Rand Paul (R-Ky.) to The Washington Times opposes giving states the freedom to toll Interstates, which is currently banned by federal law. They fear it will result in the federal government "tracking" drivers via "government-mandated GPS" and argue Interstate highways have "already been paid for" by gas taxes, so tolling is unnecessary. Neither of which is true.
In fact, only the initial costs of building the Interstates, plus some ongoing maintenance, have been paid for by fuel taxes. Like most major highways, the Interstates were designed for a 50-year pavement life, after which they must be reconstructed (i.e., replaced). Many Interstates are already more than 50-years-old, and nearly all will reach that age over the next two decades.
In a Reason Foundation study last year, I estimated the cost of Interstate reconstruction and selective widening in bottlenecked areas at just under $1 trillion. Some think that number is too low, and there is no identified funding source for a set of highway mega-projects with that price tag. Even if the per gallon fuel tax is raised, its revenues will keep shrinking over the next two decades thanks to federal fuel-economy standards and the growth of non-petroleum-fueled cars.
The toll-financing approach would be feasible for all but a handful of states, with toll revenues capable of exceeding construction and maintenance costs. Tolls should replace gas taxes on Interstates, be limited to what's needed for the capital and operating costs of the rebuilt Interstates, and be implemented only after an Interstate has been rebuilt and modernized. All tolling would be done via state-of-the-art all-electronic tolling, with no toll booths needed.
This kind of project is tailor-made for private capital investment under long-term public-private partnerships. States would have companies compete for long-term contracts to finance, build, operate, and maintain specific Interstates. America already has about a dozen major toll road and bridge-replacement projects under way using this method, and its success is well proven in Europe, Australia, and Canada.
By using today's transponder-based all-electronic tolling systems like EZPass, the cost of toll collection could be kept to about 5 percent of the revenue and there would be no need for GPS boxes in vehicles.
Many conservatives are leery of this concept, especially given President Obama's endorsement, but they should support it for several reasons. First, it would be a large (and do-able) first step toward devolving the overextended federal transportation program to the states. Second, it would begin replacing a wasteful gas tax system with a true user fee, under which you pay only for the highways you drive on. Third, it would mobilize private capital for major projects that would otherwise be put off for decades, while the Interstates further deteriorate and become more congested. And, finally, it would allow using congestion pricing on urban Interstates, which would bring relief to long-suffering commuters and express buses.
The Interstate highway system is one of our most important 20th century accomplishments. It handles 25 percent of all vehicle miles of travel despite making up just 2.5 percent of physical highway lane miles. But unless we figure out a way to rebuild and modernize it soon, travel, trade, and the economy will be seriously constrained in coming decades. The status quo will not get the job done. But a customer-friendly approach via 21st century toll financing will.