Getting Infrastructure Bang for the Buck

November 13, 2008

The list of infrastructure crises over the last three years reads like an almost biblical catalog of calamity: The I-35W bridge falling into the Mississippi River during rush-hour traffic in Minneapolis; a steam pipe explosion in mid-town Manhattan; and, of course, the drowning of New Orleans. These disasters have inspired a national what I call “infrastructure epiphany” about the need to reinvest. The economic stimulus package being cobbled together on Capitol Hill, which includes a whopping $19 billion for highways and transit, provides the perfect opportunity to do so.

But the stimulus package lacks a vision for how to use the money, bereft of any strategy for dealing with gas price volatility, transportation’s impact on energy security and climate change, persistent metropolitan bottlenecks and congestion, or the explosion in freight and truck traffic. Nor does it provide for a reliable source of funds to make these transportation projects sustainable: Undoing the effects of decades of physical neglect and congestion in the system will cost, by conservative estimates, hundreds of billions of dollars–but federal transportation trust fund will run out of money by the end of 2009. President Obama must put forth an entirely new concept for how and where infrastructure dollars are spent, and install institutions that will implement that concept.

The first way to reform infrastructure spending is by changing the way money is distributed. Right now, one of the primary methods is through the thousands and thousands of earmarks, which became a ubiquitous target in this campaign season. In 2008, about 10 percent of the earmarks in the appropriations bills for fiscal year 2008 went to the Department of Transportation, with 8 percent of the federal highway funds disbursed through earmarks. The 1981 transportation bill contained only 10 earmarks; the current law has over 6,300. This politicized method of distribution makes it difficult to streamline projects on the national level.

Though earmarks are a fat political target, wiping them out is only part of the solution. To replace the current haphazard system, Obama needs to invest in coordination and information. Right now, federal policies are highly compartmentalized, often work at cross-purposes, and even the modes within the transportation program are hampered by lack of connections and cohesiveness. The U.S is the only industrialized country that fails to link aviation, rail, transit, and passenger rail networks. This is a recipe for duplication and waste. His first step should be naming an infrastructure czar to coordinate the projects of the myriad federal agencies that construct, operate, maintain, and use infrastructure.

In order to make funding decisions based on fact rather than political horse-trading, the government also needs a major overhaul in how it collects, assembles, and provides data and information on transportation. Currently, our infrastructure programs are largely funded by the federal gas tax, with each state receiving an amount of funding roughly equaling the amount of money it collects from the gas tax. Other data that might help decide how to spend the money, such as economic benefits, environmental impacts, or social inclusion, is ignored or not even collected. This system of disbursement turns the program into one of revenue distribution instead of one designed to meet national needs–an inefficient approach that is also remarkably inconsistent when compared to other recently federal reforms in welfare and education. To give just one example of how we might use information to drive spending differently, the government should analyze the potential costs savings associated with linking transportation and housing programs in ways that promote more environmentally sensitive, energy-efficient, and health-enhancing growth patterns.

Obama then has to be strategic regarding where exactly the money is being spent. Right now, because political considerations dictate the disbursement process, transportation funding is spread like peanut butter on a piece of bread: We treat every part of the country as if it is exactly the same. Obama must make sure that infrastructure investment is targeted at the largest 100 metropolitan areas. These places house 65 percent of our population, and produce 75 percent of our nation’s GDP. They are also where 75 percent of the seaport tonnage arrives and departs; where 78 percent of our interstate miles are traveled; where 92 percent of air passengers and transit miles are ridden; and where 93 percent of rail passengers board. Metropolitan areas are the engines of our economy, and the places where the need, and the potential return on investment, is greatest.

However, the current stimulus plan makes no attempt to target funds based on the need for investments. Instead, the billions in stimulus funds for highways and transit are slated to be distributed to states based on existing federal formulas that are tied to consumption: The more you drive and the more you pave, the more money you get. Funds are not allocated according to other measures of need, such as number of deficient bridges, roadway fatalities, or population in bad air-quality areas.

Before he starts building anything, Obama also needs to implement a tangible set of performance measures for federal programs before the first check is cut. Once funds are appropriated, states distribute them among projects as they see fit–with the current statute mandating that the federal government “shall in no way infringe on the sovereign rights of the states to determine which projects shall be federally financed.” States rarely use formal benefit/cost analysis in deciding among alternative projects, and regular evaluations of outcomes are typically not conducted. The federal information system only tracks costs–not performance. In other words, the federal government requires states to build and maintain the nation’s roadway network, but it does not require them to provide the public with accessible, detailed information about state investment decisions using those funds. It is far easier for citizens to discern where private banks and thrifts lend (thanks to the federal Home Mortgage Disclosure Act) than to determine where public transportation agencies spend.

When new money starts to flow, President Obama should concentrate on three critical areas: preserving and maintaining the interstate system; developing a plan to move freight across the nation using rails, roads, and ports; and developing a comprehensive plan for getting people between our major metropolitan areas. These are areas that require national engagement because they are just too big for states and metros to handle on their own. Our competitor nations get this–see, for example, Australia’s National Transportation Council, the UK’s Eddington Transportation Study, and Canada’s Straight Ahead transportation plan. So far, the U.S. doesn’t.

Transportation is the nation’s largest discretionary domestic spending program. The existing approach to infrastructure reform is essentially revenue distribution and superficial state aid, rather than a serious and purposeful approach designed to meet national economic needs. If done properly, the federal stimulus dollars can accelerate the right kind of projects in the right places, creating jobs and waking up related areas of the economy. In an era of environmental anxiety, declining revenues, continued transportation problems, and a fiercely competitive global economic environment, Obama has to make American transportation policy about more than just dividing the spoils.

This publication appeared in the November 13, 2008 issue of The New Republic with the title “Road Blocked.”