Summary: Billions of dollars are added to America’s national debt every year to pay for the transportation system, eighty percent of federal highway funding is allocated without oversight, and the United States ranks 23rd worldwide for quality of overall infrastructure.
Billions of dollars are added to America’s national debt every year to pay for the transportation system. Eighty percent of federal highway funding is allocated without oversight. And the United States ranks 23rd worldwide for quality of overall infrastructure. What is the solution?
In a video Q&A, David Burwell and Shin-pei Tsay discuss what’s wrong with the transportation system in the United States and the steps that should be taken to ensure America’s economic competitiveness.
Burwell and Tsay directed a project led by Bill Bradley, Tom Ridge, and David Walker to identify a non-partisan strategy for fixing America’s transportation system. The landmark new report, Road to Recovery: Transforming America’s Transportation, details a solution that will decrease the deficit, stabilize gas prices, and finance America’s transportation infrastructure.
What is the history of the U.S. transportation system?
Burwell: The modern history of the transportation system is the creation of the Interstate Highway System in 1956. The idea was that every major capital in the United States should be connected with at least a four-lane interstate highway. It was a twelve-year project costing $27 billion. This was in 1956, and in fact it was only declared complete in 1991. The total cost was $425 billion, in 1991 dollars. So it took longer, but it’s a major infrastructure improvement and it has been the foundation of America’s economic development over the last fifty years.
When the Interstate Highway System was finally declared complete in 1991, the program was made more flexible to fund not only highways but a wide variety of transportation projects from transit to buses to bus rapid transit to street cars to bikes. There was no directive, however, for a specific additional system. The result was that many states continued to just build highways or felt they could build projects rather than a system. It became highly earmarked, highly project-focused, and therefore unfocused.
What are the problems in America’s transportation system?
Burwell: There are three main problems with the transportation system in the United States. One is this problem of earmarks and funding projects and not a system. The result is that we have built too many capital projects that have cost us money we don’t have. The Highway Trust Fund, which funds the system, is highly in debt. We have not maintained the system we have built. So, altogether, that adds over $100 billion a year to our debt, including deficit spending and deferred maintenance. That’s one big problem.
The second big problem is that the system is not supporting economic development anymore. The return on investment in transportation is now about one, which means that we are digging a hole and filling it up again. If we want to have transportation actually grow our economy, we have to be much more strategic in our investments.
And the third is that we are highly dependent on oil. 50 percent of our oil is imported and transportation uses 75 percent of the oil consumed in the United States. That amounts to about $300 billion that we send to foreign countries to fund this particular type of highway-oriented transportation system.
What is the Highway Trust Fund?
Tsay: The Highway Trust Fund is set up to fund the federal transportation bill. It is funded through various fees. There are two accounts in it: the highway account and the transit account. It is primarily set aside for new capital projects, and the localities, municipalities, and the state pick up the maintenance of those projects.
The Highway Trust Fund is beneficial because it dedicates funding for the transportation program. The reason that this is necessary is because transportation projects take place over the course of several years. It’s not like a public service where you allocate funding for a social service and it takes place over the course of the year and then you reassess and you can reallocate funding. Capital projects take planning, scoping, getting the contractors in place, sourcing the materials—all of this takes time.
Why is America’s transportation system insolvent?
Burwell: The transportation system is insolvent because it depends almost entirely on the gas tax for its funding. The gas tax has not been raised in eighteen years. Its purchasing power has gone down almost 40 percent. But as a user fee, the general public is very resistant to higher gas taxes. We are an energy-dependent economy and gas taxes tend to meet tremendous resistance because people use so much energy.
Why is investment in transportation important?
Tsay: Investment in transportation is important because it is the backbone of our society: it is the way we get together with our families, it is the way we move around, it is the way businesses are able to move their goods and services around, and it is a significant piece of infrastructure for the United States. People often underestimate how much they rely on the transportation system and they’re so dependent on it in so many different ways.
At the same time, investments are crucial now because we are in a paradigm shift with transportation. We have overly focused on roads and we really need to be more holistic in our thinking about what a transportation system is. The United States is the only country in the world that doesn’t fully pay for its system and it is underinvesting in transportation; most of the other countries in the world are investing in transportation—they see that it is a backbone of economic development for their country.
How does transportation relate to America’s global economic competitiveness?
Burwell: The level of investment in transportation in the United States is falling far behind other countries. We dedicate about 2 percent of our gross domestic product to transportation improvements: Europe, the European Union, dedicates about 5 percent and China, 9 percent. The quality of our infrastructure is deteriorating compared to other countries. Just ten years ago, the United States had the third most efficient and well-maintained infrastructure in the world. We are now number 23, just below Spain and just ahead of Namibia. So when global firms are looking for places to invest and to locate their plants, they tend to go to the countries that have the high-quality infrastructure that can support their goods and services. It’s not the United States anymore.
How should the U.S. transportation system be reformed?
Burwell: There are three reforms to the transportation system in the United States that should take priority. The first is to get rid of the underbrush, the programs that have built up that we don’t need anymore. We now have 108 surface transportation programs. We should have just a few; just urban, rural, and intermodal systems. So we need to get rid of the programs that are no longer needed.
Number two, we really have to invest for performance. We need to focus on return on investment, not just mobility, which means cars. Economic analysis now shows that if you are just focusing on speed, on moving vehicles faster, you can never get back the return on the capital investment. However, if you are investing to grow a community and its economy, you do get that back. As a leader in the Department of Transportation said, “We used to be involved in building, we used to be in the facilities development business; we are now in the community development business.” And that’s where we have to go with transportation. It’s about community development, not about facilities development.
And the third thing is that we have to get off our dependence on oil as a transportation fuel. We have to move to different technologies, different fuel systems, and a system that is less dependent on travel as opposed to access. The cities are the economies of the future and moving around cities at maybe slower speeds and walking, biking, transit provides more access than being able to drive 80 miles per hour to get from one suburb to another suburb. So we need to have a much more focused function for transportation on job access, community access, and not mobility.
Is this politically feasible?
Tsay: Transportation is one of those things where you can find a lot of common ground and incredible disagreement. There is a lot of common ground over the fact that we need to invest in transportation and it needs to happen now. There should be greater emphasis on maintenance and there should be greater inclusion of other modes of transportation. It is fundamental to business and economic development for the country. There is significant disagreement over how it should be funded. Given the rhetoric that’s out there over revenue, even though the gas tax is an existing revenue source, we think that there has to be really strong leadership in order to push the necessary changes through.
How urgently is reform needed?
Burwell: It’s important to do this now for several reasons. Number one, the way we do transportation now is digging our debt hole deeper. We are transferring $12-14 billion a year from general revenues to the Highway Trust Fund to keep it solvent. So we have to address the debt problem, the fact that it is not paying its own way.
Second, we have to grow our economy and transportation is fundamental to growth, as it brings goods to markets and markets to buyers. And it’s not doing that anymore. So we have to focus on the ability of transportation to grow the economy.
The third thing is that it’s a major consumer of oil and a major emitter of carbon. We have to control our transportation investments to reduce that and to reduce our carbon footprint.
What are the benefits of transforming transportation?
Tsay: There are so many benefits from redesigning our transportation system. One is that we wouldn’t be throwing away money on bad projects. Right now we don’t even know how well projects are doing or whether or not we need them, we just know that there is fairly equal distribution between all the states for the gas revenue that they contribute to the Highway Trust Fund. That is not a good way of allocating scarce resources at this moment.
The second thing is that focusing on stabilizing oil prices and gas prices will allow people to plan for the future and allow some of these businesses to think about providing alternatives and bringing alternatives to the market. There is significant demand for electric vehicles, hybrid vehicles, and alternative fuel development. But, given the level of uncertainty around oil and where the government is going with these policies, businesses are reluctant to invest in these things.
Improving the system will also bring about the social benefits that people want to see in addition to the economic benefits. For example, for public health benefits, there is a prevention aspect. We have high levels of obesity and diabetes in states where there is more sprawl. Sprawl is enabled by bad transportation planning. And so, if we can think about the system differently, we can work on these issues.
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