Brookings: Topics - Transportation

Strengthening the Federal/State Partnership on Passenger Rail

Robert Puentes — Tue, 21 May 2013 00:00:00 -0400

Robert Puentes presented this testimony before the House of Representatives Subcommittee on Railroads, Pipelines, and Hazardous Materials and the Committee on Transportation and Infrastructure in advance of the expiration of the Passenger Rail Investment and Improvement Act, which emphasized better rail performance and demanded a commitment from Amtrak's state partners. He discussed Amtrak's performance and the partnerships between the federal government, Amtrak, and the states, highlighting the ways in which states have provided lessons the nation should build on going forward. Read the full testimony here (PDF).

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Read the Testimony

Authors

Robert Puentes

How to Avoid Another FAA Fiasco

Clifford Winston — Wed, 08 May 2013 00:00:00 -0400

In the aftermath of last month’s air traffic control fiasco, many people are probably wondering how there could be a budget pinch since travelers pay for air traffic control every time they buy an airline ticket. Current fees amount to a 7.5% ticket tax per flight and $3.90 per flight segment, which generates some $10 billion in annual revenues. Assuming that user fees fund the service, it made no sense that the sequester would affect air traffic control. But that assumption is wrong.

What Americans experienced in April was a classic example of how federal transportation deficits can reduce the nation’s productivity. Millions of man-hours were wasted on planes that were delayed, and hundreds of thousands of travelers postponed or canceled trips that generate work for people at their destinations. Unfortunately, the United States will experience more costly disruptions to its transportation system unless its deficits are curbed by efficient policy reforms or by privatization.

Travelers’ user fees do not bear a close relationship to an aircraft’s contribution to the cost of air traffic control. Why? Because there is no variation in price for airspace congestion that increases traffic control’s workload. The gap between passengers’ user fees and the cost of air traffic control is even greater for unscheduled general aviation (corporate jets and other private flights). General aviation causes unpredictable peaks in demand for airspace, and their preferred altitude approaches create additional complexity and cost for controllers. Overall, revenues from user fees do not cover costs, and the difference is covered by a subsidy from the general federal fund.

The Federal Aviation Administration has been unable to figure out the real costs of air traffic control services and thus has underpriced it since its founding in 1958 as the Federal Aviation Agency. The inadequacy of the ticket tax to cover costs over time has been compounded by the intensity of airline competition that has driven down real airline fares. The costs of air traffic control also have undoubtedly been inflated by the delays and cost overruns attributable to the FAA’s inability to adopt new technology to upgrade and modernize the system. The long-anticipated next generation satellite-based air traffic control system, known as NextGen, is billions over budget and years behind schedule. It may need to be renamed PastGen at the rate of its deployment.

FAA’s involvement with public airports is also characterized by pricing and cost inefficiencies. The charge that an aircraft pays public airports to land—they are not charged to take off—is based on weight and generally does not vary by time of day. But the time at which an airplane lands clearly affects airport congestion and an airport’s capacity to reduce delays. Building new runways has turned into multiyear projects with a price tag in the billions of dollars due to various regulations that can take decades to meet, especially Environmental Protection Agency environmental impact standards.

As part of a federal agency that depends on taxpayer funds to cover a deficit caused by its inefficiencies, air traffic control is at the mercy of Congress. So when the sequester hit, the FAA’s already troubled budget was cut—including funding for air traffic control.

To be sure, the 10% cut in air traffic control was politically efficient from the White House’s perspective, because it delayed more than one-third of all flights and drew the immediate attention of the public and Congress. But FAA’s pricing and operating inefficiencies led to the deficits that rendered air traffic control operations subject to manipulation.

Air traffic control is not an isolated case. Evidence in my forthcoming Journal of Economic Literature paper indicates that the nation’s highways, ports, urban bus and rail transit systems are also characterized by prices that are below costs and by inefficiencies that inflate operating costs, which have resulted in large and growing budget deficits that make those services vulnerable to politics. Cuts in their funding could adversely affect the nation’s productivity by, among other things, increasing commuting and shipping delays.

One way to insulate the nation’s transportation system from the threat of costly political shocks is to efficiently reform its pricing policies so services are financially supported by real, cost-based user charges. Alternatively, the U.S. could follow the lead of countries such as Canada, England, Australia and New Zealand and explore privatizing its transportation services.

All of America’s transportation modes and infrastructure services were initially developed and operated by the private sector. Over the past centuries, they were brought into the public sector by financial crises—some that the government arguably helped create by interfering in the market. Now that the government’s political crises are becoming ever more disruptive, it may be time to return the transportation system back to where it started.

Authors

Clifford Winston

Image Source: © Larry Downing / Reuters

GCI Atlanta Rountable: Atlanta from the Air

Adie Tomer — Wed, 20 Mar 2013 00:00:00 -0400

Editor's Note: On March 20, 2013, as part of the Metro Atlanta convening of the Global Cities Initiative, Brookings helped lead a roundtable to focus on the role of Hartsfield-Jackson International Airport in generating economic activity, both local and global. The conversation, which included a presentation by Brookings’s Adie Tomer, senior research associate, associate fellow. and co-author of Global Gateways: International Aviation in Metropolitan America, built on efforts underway by Mayor Kasim Reed, Invest Atlanta, the Metro Atlanta Chamber, and the Atlanta Regional Commission to fully tap the economic potential of the airport.

Adie Tomer - Global Cities Initiative Forum

View the roundtable agenda »

Authors

Adie Tomer

Flow Oil and Gas Revenues to Cleantech R&D: Common Ground on Energy?

Mark Muro — Mon, 18 Mar 2013 00:00:00 -0400

Can Congress pass any sort of energy legislation? I’m not holding my breath. For too long now meaningful action through compromise has been a chimera. Even the most plausible deals have been dissipated by ideological tribalism.

Still, there remain potential convergence points.

Last month the Bipartisan Policy Center advanced more than 50 middle-of-the-road energy policy recommendations developed by its Strategic Energy Policy Initiative, co-chaired by former Sen. Byron L. Dorgan (D-ND) and former Senate Majority Leader Trent Lott (R-MS). And for that matter, interesting discussions surround energy efficiency issues, thoughtful subsidy reform, and steps like opening master limited partnership status to renewable energy projects.

Now comes President Obama’s modest proposal to capitalize an Energy Security Trust fund to support research into de-carbonizing the vehicle sector.

To be funded with $2 billion over 10 years drawn from royalties the government receives from offshore drilling on the Outer Shelf, the new proposal—first aired in Obama’s State of the Union address last month—represents an important check point on the potential for constructive action through compromise in Congress.

To be sure, the proposed research fund is tiny, given the scale of the nation’s cleantech research needs. And yes, it’s focused only on the transportation sector. And yes, the proposal is quite vague and so hard to gauge.

But even so, the energy trust concept represents a significant bid to test the potential for advancing energy policy.

Research on clean energy technologies remains a critical priority. Locating funding for it remains a critical challenge. And the president’s proposal probes an area of genuine potential for convergence.

For one thing a modest bargain on energy research and oil and gas royalties has always had a sound intellectual grounding. Through such an architecture the costs of investment would be internalized across the energy sector, and the revenues of “dirty” exploitation would be used to fund clean innovation. That just makes sense.

Beyond that there is the fact that the concept has some authentic bipartisan lineage and maybe traction. Some of that comes from the support for the idea by a group of retired military and business leaders, including some Republicans, called Securing America’s Future Energy. More importantly, Sen. Lisa Murkowski (R-Alaska), the top Republican on the Senate Energy Committee, has proposed a similar idea (albeit one focused on drilling on lands now off-limits, such as the Arctic National Wildlife Refuge in Alaska). This convergence might well mean there is room to negotiate a deal that pleases both sides, especially with royalty growth likely in the coming years.

Or, maybe not. Perhaps the Energy Security Trust is just another illusion of plausible potential compromise, soon to evaporate.

Yet, there is encouragement in something called the American Energy Act, the 2009 energy plan introduced by House Republicans under the leadership of Rep. John Boehner, now speaker of the House. At the center of that plan was a proposed bargain that would have paired expanded oil and gas drilling and nuclear development with new investments in renewable and alternative energy. To fund the latter the bill proposed putting hundreds of billions of anticipated new oil and gas royalties into a trust fund to accelerate clean energy innovation. Sound familiar?

That proposal may have been mostly a rhetorical counter to the big Democratic push on cap-and-trade legislation, but it was discussed widely by GOP leadership and represents a useful precedent for a new deal now.

So, we’ll have to see. Whether it’s called an Advanced Energy Trust Fund a la Sen. Murkowski or an Energy Security Trust as per the White House, a clean energy R&D fund for the transportation sector remains a meaningful test of whether there is any room at all for significant energy legislation in Congress.

Again, I’m not holding my breath. But I’m happy to be proven wrong.

Authors

Mark Muro

Expand State Partnerships for Passenger Rail

Robert Puentes and Joseph Kane — Wed, 13 Mar 2013 18:39:00 -0400

As passenger rail ridership grows nationwide, Amtrak and some states are engaging in innovative new partnerships to foster this demand. To comply with the Passenger Rail Investment and Improvement Act (PRIIA) that passed in 2008, federal and state policymakers will not only need to focus on the financial and operational performance of short-distance routes, where over 80 percent of the system’s ridership occurs, but also on the future of long-distance routes.

Of course, more federal support would help. But with additional federal funding unlikely and state budgets significantly pared, policymakers will need to consider more sustainable ways to finance the nation’s increasingly intermodal transportation network. Passenger rail, in particular, has shown the importance of states stepping up and taking action.

And several states have already seized the opportunity. Before PRIIA passed, 15 states paid at least a portion of the operating expenses for 21 different routes, affirming their commitment to passenger rail and placing them in a better position to target future spending. Oklahoma and Texas, for example, have jointly financed the Heartland Flyer and contributed more than $17 million combined from 2007 to 2011. Collectively, the 15 states have allocated almost $850 million during the same span.

Some states have also invested in rolling stock and other capital improvements that have furthered economic development along different corridors. North Carolina, for instance, has actively supported the Carolinian and Piedmont by rehabilitating stations and upgrading state-owned tracks. California has continued to invest in the Pacific Surfliner, the Capitol Corridor, and the San Joaquin, all of which rank among the 10 busiest routes nationally.

By prioritizing passenger rail, states are investing in a mode that has appealed to more travelers and strengthened the economic linkages between metro areas. But as states assume greater responsibility for passenger rail, they should be given greater flexibility in how they manage routes. While a dedicated source of funding, such as a ticket tax, would certainly help, states and metropolitan planning organizations (MPOs) could also benefit from having the ability to transfer federal funds to support intercity passenger rail, as they currently can between highway and transit programs.

Still, even with this flexibility, Amtrak and the states will need to address both short-distance and long-distance routes. Although PRIIA requires states to operationally support short-distance routes only, long-distance routes should not be exempt from this requirement. Amtrak and the states need to carefully weigh the benefits—geographically and otherwise—that these routes provide relative to their high operating costs.

The goal here is not to eliminate these routes but to strengthen the federal-state partnership. Expanding PRIIA in this way should be seen as an opportunity to innovate and collaborate, allowing Amtrak and the states to shape the future of passenger rail in response to local demands and a clear national plan. If states feel that certain long-distance routes are not worth supporting, then they should be scaled back, as has already been debated for routes such as the Pennsylvanian. If anything, though, states should feel confident and emboldened in this task based on their ability to coordinate other cross-border infrastructure investments. States should lead with greater decisiveness and action.

Indeed, supporting passenger rail comes down to a simple choice for federal and state policymakers: In the long run, is it wiser to invest $6 million to construct one mile of a new 4-lane highway, or to spend that same $6 million to cover the operating expenses for a passenger rail route spanning 300 miles?

Authors

Robert Puentes
Joseph Kane

A New Alignment: Strengthening America's Commitment to Passenger Rail

Robert Puentes, Adie Tomer and Joseph Kane — Fri, 01 Mar 2013 00:00:00 -0500

American passenger rail is in the midst of a renaissance. Ridership on Amtrak—the primary U.S. carrier—is now at record levels and growing fast. This research shows that the country’s 100 largest metropolitan areas are primarily behind this trend, especially ten major metros responsible for nearly two-thirds of total ridership.

Driving the connection between these metropolitan areas are short-distance corridors, or routes traveling less than 400 miles, that carry 83 percent of all Amtrak passengers. States now have formalized relationships with Amtrak to upgrade tracks, operate routes, and redevelop stations. The result is a new federalist partnership where Amtrak, the federal government, and states share responsibility for the network’s successes and failures.

This report is the first analysis to focus on metropolitan area statistics for passenger rail rather than individual stations or cities. Its findings will help policymakers and state leaders better understand the location dynamics of Amtrak: where it works well, and the areas poised to benefit from new and expanded services.

Findings:

Amtrak ridership grew by 55 percent since 1997, faster than other major travel modes, and now carries over 31 million riders annually, an all-time high.
The 100 largest metropolitan areas generate nearly 90 percent of Amtrak's ridership, especially those in the Northeast and West.
Only ten metropolitan areas are responsible for almost two-thirds of Amtrak ridership.
The short distance routes consistently dominate Amtrak ridership share and captured nearly all of Amtrak's recent growth.
Combined, Amtrak's short-distance corridors generated a positive operating balance in 2011—while corridors over 400 miles returned a negative operating balance.

Read the report » (PDF)
Follow the passenger rail conversation on Twitter using the hashtag #NextRail »
View our interactive application to see Amtrak route data for the largest 100 metro areas »

Downloads

Full report

Authors

Robert Puentes
Adie Tomer
Joseph Kane

Image Source: Jonathan Rissmeyer

New Partnerships for American Rail

Robert Puentes — Fri, 01 Mar 2013 11:00:00 -0500

American passenger rail is in the midst of a renaissance. Ridership grew by 55 percent since 1997 and is now at record levels, with over 31 million travelers annually. That's faster than other travel modes like aviation and far outpaces the growth in population and economic output during that time. Travel corridors like New York to Washington, Seattle to Portland, and Chicago to Milwaukee all boast higher shares of riders on rails than in the air.

Painting such a rosy picture of American rail may seem incongruous to those that like to chastise its beleaguered carrier, Amtrak, for transgressions related to food service, timeliness, and subsistence on federal subsidies. But in a new report, my colleagues Adie Tomer, Joseph Kane, and I find that Amtrak is actually finding itself well-positioned for the future. Part of this was initiated by federal lawmakers who, in 2008, gave Amtrak the kick-in-the-pants it needed by ordering the establishment of metrics and benchmarking for performance.

Smartly, federal lawmakers realized that achieving better performance—both financially and operationally—could not come without a new kind of commitment from Amtrak's partners. States now share the operating costs for short-distance rail corridors that stretch 750 miles or less from end to end. Today, these routes are Amtrak's high-performers, carrying around 85 percent of travelers.

Importantly, once they have "skin in the game," states are motivated to target investments more precisely and develop plans more comprehensively, better tailoring maintenance needs and capital improvements to local demands. Some states have already adopted such strategies and offer innovative and replicable models. North Carolina owns part of the tracks and encourages economic development along two different corridors. Virginia recently expanded service to metros lacking connections in the southwest and southeast portions of the state. Maine's Northern New England Passenger Rail Authority presents a new governance model for forging partnerships and coordinating action.

Building on this new federal-state alignment will require additional action. As the federal sequestration battle clearly illustrates, Washington isn’t putting any new money into Amtrak anytime soon. But partly because of the existing partnerships with 15 states, Amtrak has said it can weather the cuts easily enough.

So let's extend that requirement for state support to routes longer than 750 miles. After all, our research shows that the long-distance routes carried only 15 percent of the travelers in 2012 but, combined, constitute 43 percent of Amtrak's route-associated operating costs. This is not just a matter of offloading responsibility from the federal government to states. As seen in the short-distance routes that already enjoy state support, such a partnership results in a better sharing of risks and rewards.

Then, in exchange for greater responsibility from Washington, states should have added flexibility in how they allocate existing funds. For example, current federal law allows states and metro areas to transfer funds between highway and transit programs. Among other benefits, this freedom of financing greatly assists in bottom-up problem solving and gives additional consideration to alternative solutions that achieve a more balanced transportation network. States and metro areas should have the same flexibility when they support operating or capital investments for intermetropolitan passenger rail.

The goal here is to strengthen passenger rail in the United States by strengthening the federal-state partnership. While Amtrak has done a lot to remake itself in recent years, states need to reaffirm their commitment for the model to be sustainable.

Authors

Robert Puentes

Have Americans Hit Peak Travel? A Discussion of the Changes in US Driving Habits

Robert Puentes — Thu, 28 Feb 2013 00:00:00 -0500

American driving habits are changing. After decades of steady increases the growth in driving is clearly leveling off, and dropping on a per capita basis, even at a time when a vast array of public policies continue to support and encourage driving. Perhaps even more amazing are total aggregate declines in some recent years coupled with drops in licensing, trips, and vehicle purchases. These shifts have enormous implications for public policy in the US. Ample evidence shows that this phenomenon is not limited to the US, but is generally reflected in other developed countries around the world with mature transportation systems.

However, this phenomenon is still not well known. When they are recognized, these individual trends are either largely dismissed as economic factors caused by the global recession and stubbornly high unemployment rate. While there is little doubt that the sputtering US economy has major impact, emerging research suggests the changes in US driving habits are also the result of a long-term structural change reflective of a host of shifts in demographics, culture, technology, as well as settlement patterns in US metropolitan areas. A set of public policies also plays a key role.

This paper explores those macro forces through an analysis driving trends, a review of existing literature, and discussion what is likely behind these trends as well as implications for public policy.

Editor's Note: This discussion paper is part of an International Transport Forum series. Download the paper here.

Authors

Robert Puentes

Funding Transportation Infrastructure with User Fees

Jack Basso and Tyler Duvall — Tue, 26 Feb 2013 08:00:00 -0500

In this policy proposal — part of The Hamilton Project's 15 Ways to Rethink the Federal Budget — Tyler Duvall and Jack Basso suggest looking to user fees as a way to raise revenues, reduce congestion on major roadways, reduce pollution, and promote wiser infrastructure investments.

IMPACT

Deficit Reduction (10-year): $312 billion

Broader Benefits: Raises revenues, reduces congestion on major roadways, reduces pollution; promotes wiser infrastructure investments.

INTRODUCTION

Federal surface transportation programs are intended to improve the quality, utility, and productivity of the surface transportation system by enhancing the system's safety (e.g., achieving reduced vehicle crashes, including fatalities) and operating performance (e.g., reducing congestion, increasing freight throughput etc.); and by reducing the environmental impact of surface transportation. Although federal transportation spending is less than 2 percent of the overall federal budget, that spending—like spending in the rest of the budget—is currently on a collision course with reality. Unlike most federal programs, the federal surface transportation program has historically been funded by dedicated taxes on gasoline, diesel, and other transportation-related taxes. These taxes are deposited into the Federal Highway Trust Fund and then invested in roads, bridges, transit systems, and a variety of other surface transportation projects through state and local governments.

After being replenished by the general fund multiple times in recent years (adding billions to the federal deficit in the process), however, the Highway Trust Fund (the Fund) is currently projected to go negative again in 2015, with the negative balance growing rapidly each year after that (figure 9-1).

The 2012 federal surface transportation legislation Moving Ahead for Progress in the 21st Century Act (MAP-21) bought several years of solvency in the Fund, but did not address the long-term trajectory of the program. Going forward, it is undisputed in transportation policy circles that a new approach will be needed to sustainably fund surface transportation in the United States. The key questions that remain unanswered are these: How do we balance a looming near-term funding cliff with the long lead times associated with funding reforms that are more fundamental? And what role does the revenue policy choice play in improving transportation performance outcomes, particularly as it relates to congestion levels? If one accepts the premise that continued deficit spending to fund surface transportation projects is undesirable (some would argue this point), there are two distinct near-term options: (1) reduce federal spending to match revenues, or (2) adjust certain federal taxes in the near term. Given the growing costs to rehabilitate, maintain, and operate existing surface transportation, some experts express concern that state and local governments would not increase their own investments to fill the gap left by a shrinking federal program. Today, forty states rely on the federal government for more than 25 percent of their transportation funding.

Revenue options begin to expand when we look beyond the next two years, however. One approach that has been implemented relatively narrowly in the United States but that has achieved success in other countries is a direct road- pricing system where motorists pay fees directly to drive on certain roads (as opposed to paying taxes indirectly as they do today), potentially combined with some form of dedicated local taxes tied to specific transit projects. Economists from all backgrounds have strongly supported some form of direct pricing for roads, similar to the way other utilities are priced. In fact, Nobel Prize–winning economist William Vickrey proposed a specific road-pricing system to reduce congestion in Washington, DC, as far back as 1959 and in the New York City subway system in 1952. Vickrey said, “You’re not reducing traffic flow, you’re increasing it, because traffic is spread more evenly over time. . . . People see it as a tax increase, which I think is a gut reaction. When motorists’ time is considered, it’s really a savings” (quoted in Trimel 1996).

According to the U.S. Department of Transportation, an effective road-pricing system—once fully implemented— could generate between $38 billion and $55 billion annually in revenue while simultaneously reducing road congestion and reducing environmental impacts (U.S. Department of Transportation 2008a). Singapore’s broad use of fully electronic road pricing is one of the key reasons the World Bank perennially ranks it number one in the world in terms of logistics performance. With a population of more than 5 million and only 250 square miles of land, Singapore’s transportation system achieves free flow speeds on its expressways and arterials every day. Indeed, the key strength of such a solution is not only that it raises revenue to support surface transportation investments and operations, but also that it does so in a way that confers additional benefits including reduced congestion and pollution.

Downloads

Download the policy proposal

Authors

Jack Basso
Tyler Duvall

Publication: The Hamilton Project

Image Source: Ron Chapple Stock

15 Ideas for Smart Deficit Reduction

Michael Greenstone and Adam Looney, The Hamilton Project — Wed, 20 Feb 2013 14:36:00 -0500

Few policy debates have been as contentious as the current tug-of-war over the federal budget deficit. Despite widespread agreement that the budget is on an unsustainable path, there is also widespread disagreement about what should be done, and, to complicate matters, this budgetary uncertainty comes at a time when policymakers are still trying to get Americans back to work in the wake of the Great Recession.

In the coming months, policymakers will make important decisions on how to reduce the budget deficit. These decisions pose significant political and economic challenges, but also create a rare window of opportunity for policymakers to decide what kinds of programs and investments our country values, and what sort of society we will create for future generations. Once consensus has been reached about the broad focus of future investments, the devil will be in the details of implementation. And without a doubt, a sound budget strategy will require ideas rooted in evidence, not ideology, if we are to achieve these long-term goals.

To this end, The Hamilton Project asked leading experts from a variety of backgrounds—the policy world, academia, and the private sector, and from both sides of the political aisle—to develop policy proposals that could form a partial menu of options to achieve responsible deficit reduction. These experts include Jonathan Gruber, an MIT professor who was instrumental in shaping health-care reform bills in Massachusetts and nationally; Jeff Liebman, a Harvard professor who previously served as acting Deputy Director at the Office of Management and Budget; Gary Roughead, a retired four-star admiral and former Chief of Naval Operations; Tyler Duvall, former Assistant Secretary of Transportation Policy at the Department of Transportation; Adele Morris of Brookings, who leads the institution’s climate and energy economics initiative; and many others.

The mandate given to the authors was to describe pragmatic, evidenced-based proposals that would both reduce the deficit and also bring broader economic benefits. The resulting fifteen proposals take on a wide-ranging set of topics, including immigration, transportation, health care, defense spending, and tax expenditures, and include options to reduce mandatory and discretionary expenditures, raise revenues, and improve government efficiency.

The opening table of The Hamilton Project’s forthcoming budget book presents the fifteen proposals and their potential impacts on the economy and the deficit over a ten-year period. Viewed individually, the proposals offer specific reforms and evidence-based policy ideas to achieve budgetary savings and broader economic benefits. Taken together, they offer a menu of policies—a mix of tax reforms, changes to major spending programs, and new revenue raisers—that could contribute meaningful deficit reduction and help the country confront its most pressing economic challenges. To preview the budget table, click here.

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Michael Greenstone and Adam Looney: These Authors Have Drafted Policies That Help the Budget and Provide Economic Benefits

The Hamilton Project budget report will be released on February 26th as part of a two-part forum:

Part I: Budgeting for a Modern Military — February 22nd
The first event will feature two proposals for reducing defense spending while preserving national security. The authors of the papers—Retired Admiral and former Chief of Naval Operations Gary Roughead, and former CBO Assistant Director Cindy Williams—will be joined to discuss their ideas by high-level experts including former Deputy Secretary of Defense and former CIA Director John Deutch, former Undersecretary for Defense Michele Flournoy, and former Senate Armed Services Chairman Sam Nunn.

Part II: Addressing Entitlements, Taxation, and Revenues — February 26th
The second event in our series will shift the focus to entitlements, tax reform, and new sources of revenue. Three former CBO directors—Alice Rivlin, Senior Fellow at Brookings, Robert B. Reischauer of The Urban Institute, and Donald Marron of the Tax Policy Center—will set the stage for the day’s discussions around 13 new proposals for reducing the deficit. A diverse group of authors will join the forum for roundtables focusing on an enduring social safety net, innovative approaches to tax reform, and new sources of revenue and efficiency.

For updates on the event, follow us @hamiltonproj and join the conversation using #RethinktheBudget.

Michael Greenstone is the director of The Hamilton Project and Adam Looney is its policy director. For more about the Project, visit www.hamiltonproject.org.

Video

Michael Greenstone and Adam Looney: These Authors Have Drafted Policies That Help the Budget and Provide Economic Benefits

Authors

Michael Greenstone and Adam Looney, The Hamilton Project

Crumbling Infrastructure Has Real and Enduring Costs

William A. Galston — Wed, 23 Jan 2013 12:00:00 -0500

Anyone who travels abroad can see that the United States no longer has a world-class infrastructure. And there’s hard evidence to back up that impression. The World Economic Forum compiles a massive annual “Global Competitiveness Report.” The 2012-2013 edition finds that the United States has fallen well behind many members of the European Union, Canada, and Asian countries such as Singapore, Japan, and South Korea in the overall quality of its infrastructure. We rank 18th in railroads, 19th in ports, 20th in roads, 30th in airports, and 33rd in the quality of our electrical system.

An outstanding new report from the Building America’s Future Educational Fund explains why this has happened. Relative to our economic competitors, we have no national infrastructure planning, we systematically underfund infrastructure investments, and we fail to use rigorous measures of evaluation and accountability for the projects we do manage to fund. This makes for a drag on our economy. One example: in 2010, Americans spent a total of 4.8 billion hours stuck in traffic, wasting 1.9 billion gallons of fuel, at a total cost of $101 billion.

And it will only get worse. According to the Building America’s Future report, by 2020, every American port will be struggling to cope with at least twice the tonnage it was designed to handle. While a projected 94 percent of the nation’s economic growth will occur in metropolitan areas, these jurisdictions are already home to “the most congested highways, the oldest roads and bridges, and the most overburdened transit systems,” with no relief in sight. The report warns that “if we don’t create a transportation system that functions reliably and cost-effectively in the 21st century, companies operating in this globalized world can simply choose to do their business elsewhere.”

But before it comes to that, the American economy will pay a steep price. Another report, from the American Society of Civil Engineers, lays out the projected costs, sector by sector. Here’s the bottom line: by 2020, if the mounting investment gap in infrastructure is not addressed, “the economy is expected to lose almost $1 trillion in business sales, resulting in a loss of 3.5 million jobs . . . the cumulative cost to the U.S. economy will be more than $3.1 trillion in GDP and $1.1 trillion in total trade.”

These numbers would appear large enough to arrest the attention of even the most jaded policy makers. This has not happened. Instead, current fiscal trends and policies portend a long-term squeeze on domestic discretionary spending—the pool of funds from which federal infrastructure investment is drawn. Innovative plans for federal government partnerships with the private sector to leverage scarce public resources have not gone forward in some instances and have fallen well short of adequate scope in others. While things have gone better at the state and metropolitan levels, aggregate investment continues to fall far short of needs—by an estimated $1.1 trillion between now and 2020, according to ASCE projections.

As the Building America’s Future report observes, most of our global competitors have access to infrastructure banks that attract private capital to fund major projects. A recent Brookings report has proposed one model for such a bank in the United States. (There are several others.) Sound proposals to break through the current impasse in infrastructure funding are not hard to find. It has proved much more difficult to mobilize elected officials and average citizens around plans that will require higher taxes and fees upfront in return for a stronger economy and better quality of life down the road.

One of the key tests of democratic self-government is each generation’s ability to overcome chronological myopia and provide for the future that its children and grandchildren will enjoy. Throughout history, Americans have found a way to do that—from the canals and roadways of the early 19th century to the Civil War-era Transcontinental Railroad to Theodore Roosevelt’s Inland Waterways Commission to FDR’s bridges, tunnels, and airports that put millions back to work during the Great Depression, to Dwight Eisenhower’s visionary Interstate Highway System, begun in the 1950s and still benefitting the nation two generations later. It remains to be seen whether today’s Americans will muster the will and resources to do as well for their posterity.

Authors

William A. Galston