As Congress honed its recently announced deal on a long-term transportation bill, the debate centered on funding sources beyond the fuel tax. But going forward, Congress should be worried about how the funds are spent, because the current process rewards efforts to exaggerate the benefits and understate the costs of transportation projects. California's high-speed-rail project is a prime example: The cost estimate has more than doubled, to $68 billion, since voters approved funding for a share of the project. These biased estimates result in the building of projects with questionable economic merit. Reform is needed.
A well-functioning transportation system is an integral part of a healthy economy. Politicians in Washington have focused mostly on ways to raise more revenues, paying less attention on how to make our highway system work better. We cannot build our way out of congestion. Only a variable toll can solve this problem.
There are economically worthwhile transportation infrastructure projects that need funding, but given the limited tax funds available, it makes sense to target the funds to get the biggest bang for the buck. Since the completion of the Interstate Highway System in the 1980s, politicians in Washington have failed to do this. It's time to shift responsibility for the provision of transportation infrastructure back to cities and states.
Given that most highways in the United States are toll free, overuse is to be expected. The only way we can determine whether or not we need to build more highways is to charge drivers who travel during peak hours. These charges or prices reflect the value drivers place on using the highway. These pricing signals can then be used to determine whether it makes economic sense to build more highway capacity. When the value drivers place on using a highway exceeds the cost of additional lanes, more lanes should be built.
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