Transportation Infrastructure: What Do We Need? How Can We Pay for It?

By William A. Strauss
NABE Board Member
Senior Economist and Economic Advisor
Federal Reserve Bank of Chicago

Congested and crumbling infrastructure is a threat to growth. But the public has seemed unwilling to fund improvements. This session presented three views on what should be done to help solve this problem.

Diego Saltes, senior economist at the American Road and Transportation Builders Association, presented the justification for investing in our transportation infrastructure.  The net social returns from transportation infrastructure investments range from 20 percent to 30 percent around the world.  Trucking handles the vast majority of freight based on tonnage and is forecast to rise by 30 percent by 2017.  The underinvestment in infrastructure has led to increasing congestion on the nation’s highways.  For example, real congestion costs have increased from $14.9 billion in 1982 to $78.2 billion in 2005.  Since 1990 the U.S. population increased 21 percent and vehicle miles traveled rose 35 percent, yet roadway lane miles increased by less than five percent over this period.  Highway congestion that is currently restricted to urban areas is expected by 2020 to become an inter-urban issue.  The funding for highway investment has also been under pressure.  Gasoline taxes are used to help finance investment in highways, yet since 1993 the real value of the federal gas tax has fallen 30 percent, while the cost of highway and street construction has gone up by 71 percent, Saltes said. 

Robert Kanter, managing director of environmental affairs and planning for the Port of Long Beach, discussed how cargo movement in southern California is forecast to rise more than four-fold over the next 20 years and how to meet this significant rise in volume.  Challenges to achieving this growth include constraints that are internal to the ports, such as water depths and dock facilities for ever larger ships; constraints that are external to the ports, such as limited road and railway infrastructure; and environmental constraints, including air quality and congestion.  Kanter suggested several ways to handle this growth.  Port terminals need to be expanded, both in terms of the berths for vessels as well as backland improvements in order to handle the larger scale of operation.  The ports will need to build and to improve both road and rail to increase the efficiency of the goods movement.  Finally, environmental issues that growth will bring need to be addressed.  To pay for much of the improvement, Kanter suggested that an infrastructure and environmental cargo fee levied on the beneficiaries of the improvements would give ports funding to address their growth needs.

Robert W. Poole, Jr., director of transportation studies at the Reason Foundation, explained how toll roads offer the best prospects to deal with capacity constraints on the highways.  There is a substantial shortfall in funding for U.S. highways.  There is estimated to be a $9 billion annual shortfall in maintaining the current highway system, with another $53 billion per year needed to improve the performance.  This expenditure can be justified considering that congestion costs America $168 billion per year.  A study by the Reason Foundation concluded that we need 104,000 new lane-miles at a cost of $533 billion.  To pay for this, Poole, similar to Kanter, recommended toll financing.  Tolls already provide for the development of 13,800 new lane-miles, either planned or built since enactment of a federal law in 1991.  Poole recommended a nationwide system of special all-electronic tolling truckways (TTW) to deal with the increasing amount of goods needed to be shipped.  One key way to improve shipping productivity is to increase the use of long combination vehicles (LCVs), trucks that haul more than one trailer.  The TTW would be more ruggedly constructed to weather the strain that LCVs would put on the road.  A barrier would separate the TTW from regular lanes, adding a safety element for passenger vehicles.  The use of these lanes would be voluntary for trucks, but mandatory for LCVs in non-LCV states.