Improving Funding and Management of Surface Transportation Infrastructure

A Mercatus Policy Primer

President Trump and others have argued that the United States faces a crisis in infrastructure, including transportation infrastructure, that needs to be addressed. Although the crisis rhetoric exaggerates the seriousness of the problem, in some parts of the United States, roads, highways, bridges, airports, and water and sewer systems do need upgrades or better maintenance. US transportation infrastructure, in particular, falls short in a number of ways, including inadequate maintenance of highways, bridges, and public transportation. 

Although spending on infrastructure does not, in itself, stimulate the economy, infrastructure investments can contribute to economic growth, since infrastructure is part of the economy’s capital stock. Investments in infrastructure can also benefit the economy by alleviating the problems that poor infrastructure causes. For example, inadequate transportation infrastructure leads to traffic congestion, which causes commuters to waste millions of hours stuck in traffic. Reducing traffic congestion would enable people to commute farther in a given amount of time, increasing employment opportunities for some workers and leisure time for others. Decreased congestion would also reduce the time vehicles spend idling or traveling slowly, decreasing fuel consumption and air pollution from auto emissions. The extent to which infrastructure investment contributes to growth, however, depends on the net benefits of the projects chosen. 

This paper focuses on how to manage and pay for investment in, and maintenance of, transportation infrastructure in a way that maximizes the net benefits from its use and contributes to economic growth. In this regard, we conclude that federal spending is not the best approach. Instead, a better path to making needed infrastructure improvements is to reduce the role of the federal government (including the funding and management of projects) and to increase reliance on state and local governments, user fees, and private firms.

We begin our assessment with a discussion of the role played by the federal government and how it contributes to problems with transportation infrastructure. The first section discusses how politics has driven priorities so that the projects with the highest net benefits do not necessarily get funding. It also discusses growing problems with congestion, as well as the unequal and inefficient geographic distribution of highway and transit funding. The next section discusses strategies for improving the funding and management of transportation infrastructure, including greater use of tolls and mileage-based user fees (MBUF), privatization, and expanded roles for state and local governments. It also discusses the likely effect of autonomous vehicles on congestion and the demand for mass transit. The final section summarizes recommended changes in federal policy and institutions. 

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