For at least the past decade, it has become increasingly clear that there
is no national purpose driving federal highway and transit funding programs.
Instead, a variety of special interests -- from contractors and unions
to environmentalists and urbanists -- have come to view the national highway
and transit program as an opportunity waiting to be tapped. As Democrats
begin to think about the reauthorization of federal highway and transit
programs in 2003, it may, therefore, be time to take a page out of our
history and give states and localities primary responsibility for both
funding and building highways and transit systems.
For most of our history, in fact, highways and public transportation
were a state and local matter. While the notion of a nationally planned
and funded transportation system was first proposed by President Thomas
Jefferson's Treasury secretary, Albert Gallatin, it was not until the
Eisenhower years, when federal funding spurred the construction of the
long-planned national interstate highway system, that the national government
made transportation a top domestic priority.
By the late 1960s, however, it was clear that the interstate highway
program was skewing investment decisions in urban areas because the federal
government paid 90 percent of the cost of planned interstate highways.
In accordance with the wishes expressed by big-city mayors and business
leaders in the 1940s and 1950s, these roads were to extend into the heart
of virtually every major city in the country.
In contrast, there was little federal aid for other highways and no aid
for transit, which had been losing riders at a rapid rate since the end
of World War II. Contending that the combination of generous federal aid
for highways and no aid for transit distorted local spending decisions
in favor of unacceptably disruptive roads, a coalition of big-city mayors,
transit advocates, environmentalists, and anti-highway activists sought
to increase funding for transit and give states and localities more flexibility
in how to spend money allocated for interstate highways. Pro-highway forces
initially resisted these efforts, but by the mid-1970s key highway advocates
came to believe that unless they made peace with transit advocates, the
entire highway program might collapse. Consequently, in the early 1970s
highway advocates not only backed significant increases in federal funding
for transit but also agreed to provisions allowing states to trade in
money earmarked for highways to build rail transit instead. (This latter
provision helped fund major transit expansion projects in dozens of localities
including Boston, Washington, D.C., Chicago, and Portland, Oregon.)
This uneasy alliance has endured for over three decades, and it has proved
to be extraordinarily powerful. Indeed, it is so powerful that federal
funding for highways and transit generally has risen steadily even though
the interstate highway system, which spurred the vastly increased federal
role in highways (and indirectly led to the federal transit programs as
well), has been virtually complete since the early 1980s.
Post-interstate policies. As the interstate highway program has
wound down, federal highway and transit programs have slowly become trans-formed
into a hodgepodge marked by three sometimes conflicting phenomena.
First, funding formulas have been slowly converging on a point where
each state's share of available highway aid is about equal to the share
of federal gas taxes raised in those states. This is an important shift
from the initial interstate legislation, which (in contrast to most federal
programs) generally subsidized the construction of interstate highways
in Northeastern and Great Plains states while generally shortchanging
Mid-western and Southern ones. To date, however, transit legislation has
yet to follow similar patterns, largely because most transit riders are
concentrated in a handful of cities. Representatives of many Sunbelt states,
however, have been pressing for greater "equity" in the distribution
of transit funds -- a fight likely to intensify during the drafting of
a new highway and transit act. The measure is generally known as TEA-3,
in keeping with the names of its two predecessors, TEA-21 (the Transpor-tation
Equity Act for the 21st Century, which passed in 1998) and ISTEA (the
Intermodal Surface Transportation and Efficiency Act, which passed in
1991).
Historically, Congress has met the demands for funding equity by increasing
total spending -- a phenomenon strongly supported by those who build highways
and transit systems as well as by state and local officials who prefer
federal to local funding for projects because it allows them to claim
credit for projects without having to justify their costs. TEA-21, for
example, authorized spending far in excess of the amounts implied in the
landmark balanced budget agreement signed by the Clinton administration
and leaders of the Republican Congress in 1997. The law then directed
most of the new money to the Sunbelt and Midwestern states that historically
had sent more to Washington in gas taxes than they received in federal
highway aid. (Not coincidentally, many of those states were represented
by Republicans, including several in key leadership posts.)
Second, Congress generally has given states increased flexibility in
deciding how to spend available funds. This trend was particularly noteworthy
in ISTEA, which eliminated many categorical grant programs in favor of
a program structure that now gives states great discretion in choosing
how to divide funds between highways and transit and in deciding exactly
which projects they will fund. (TEA-21 basically retained this structure.)
The flexibility, however, still comes with extensive strings -- most notably
complex and often confusing rules governing the transportation planning
process as well as numerous restrictions on exactly how federal aid can
be spent.
Third, the general push toward greater flexibility has been tempered
by the fact that members of Congress also like to claim credit for specific
projects and programs popular among key local constituencies. Consequently,
since the late 1980s, members also have used authorizing and appropriations
measures to earmark funding for an increasing number of projects. There
were only a handful of such earmarks in the 1982 act reauthorizing highway
and transit laws, but the 1987 measure contained funding for about 150
specific projects -one of the rationales President Reagan cited in his
unsuccessful veto of that law. In contrast, no one blinked an eye when
ISTEA earmarked money for more than 500 highway and transit projects or
when TEA-21 included more than 1,800 earmarks.
In addition to earmarking for specific projects, ISTEA and TEA-21 also
included a raft of new spending programs aimed to please a variety of
constituencies. Most notably, both laws included a "transportation
enhancements" program requiring states to spend a portion of their
federal aid on cultural, aesthetic, and environmental projects such as
the restoration of historic transportation facilities, bike and pedestrian
facilities, landscaping and scenic beautification, and the mitigation
of water pollution from highway runoff. While the question of whether
such projects ought to be a national responsibility is debatable, politically
such provisions expanded the traditional coalition in support of highway
and transit laws to include a host of new constituencies, such as environmentalists,
preservationists, and new urbanists.
Congressional earmarking and the creation of small, targeted programs,
of course, are both longstanding traditions and ones that can serve a
good purpose if they are used in the service of larger policy goals. Daniel
Patrick Moynihan, for example, reportedly secured support for ISTEA's
important programmatic changes by agreeing to back the law's many earmarked
projects. (Moynihan was no fool, of course. He also made sure many of
those projects -- most notably money to convert the Farley Post Office
building into a replacement for Pennsylvania Station -- were in New York
state.)
But every careful student of legislatures also knows that money for earmarked
projects and special programs is not distributed by need or merit but
in accordance with seniority and power. And from Tip O'Neill's efforts
to make Massachusetts' Central Artery/Tunnel (CA/T) project eligible for
interstate funding to Bud Shuster's securing of funding for dozens of
projects in Pennsylvania in TEA-21 (and the many measures that preceded
TEA-21), highway and transit legislation has never been an exception to
this rule.
More important, the prospect of significant federal funding drives states
and localities to build projects that they never would undertake if they
had to fund even a significant portion of the costs themselves. For example,
the funding strategy for virtually every major rail transit project built
in the last three decades -- from Los Angeles' Red Line to Seattle's current
troubled project -- has been predicated on securing significant federal
funding for those projects because local officials knew that local voters
would never have approved local taxes needed to fully fund those projects.
Similarly, the CA/T project's advocates candidly admit that they never
would have started the project if they thought that Massachusetts would
have to pay a large share of its total cost, which has risen from $3 billion
in the 1980s to more than $14 billion today. (Indeed, the state now has
to pay about 40 percent of the project's costs, largely because Massachusetts,
which under ISTEA had been receiving almost $3 in highway aid for every
dollar it sent to Washington in gas taxes, was the only state to receive
less federal highway aid in TEA-21 than it got in ISTEA.)
Taken together, the press for special projects and programs creates a
process that is politically compelling but one that also is far from economically
efficient. And that means we either are spending too much on highways
and transit or, more likely, that we're not spending the money we have
in ways likely to produce significant positive payoffs by either making
the economy more efficient or improving the quality of many people's lives.
Returning to first principles. One way to fix the current system
would be to seek a national vision akin to the interstate highway program.
Some Amtrak advocates have been trying to make the case for high-speed
rail lines, but most careful analyses strongly suggest that such lines
would attract relatively few riders at extremely high costs. The history
of the interstate program suggests, moreover, that over time infrastructure
programs marked by a strong national vision will have two important unintended
consequences. First, national programs generally aren't flexible enough
to respond to local circumstances -- as evidenced by the fact that urban
interstate highways generally were much larger and more disruptive than
highways local officials sought to build in the 1930s and 1940s, before
such roads became part of the proposed national interstate highway system.
Second, over time national programs are likely to fall victim to creative
lobbying by states and localities for projects that primarily serve local,
not national needs.
Use the old road. It may, therefore, be time to take a page out
of our history and give responsibility for both funding and building highways
and transit systems back to the states and localities. This is not a new
idea. Rather, in various forms, it's one that has been embraced in the
last two decades by a variety of thoughtful scholars. Most notably, in
the early 1990s both Alice Rivlin and Paul Peterson wrote well-received
books arguing that we should devolve responsibility for transportation
and education (and cut the gas taxes that fund the former program) to
the states and localities while giving the federal government primary
responsibility for providing an adequate, well-funded social safety net.
The key to this approach is recognizing that states and localities are
engaged in fierce competition for economic activity. Consequently, they
have tremendous incentives to make investments in areas that will help
them compete -- such as education and infrastructure. In contrast, it is
much harder for states and particularly localities to fund generous social
welfare programs. Why? Because they are likely to attract those who need
such programs and because the taxes needed to fund them could drive away
more affluent residents.
Even an ambitious devolution plan should retain a modest federal role,
funded by a substantially reduced (but not entirely eliminated) federal
gas tax. The primary federal role would be to provide some money so that
states maintain those roads needed for a nationally connected highway
system. To ensure that the smaller federal program isn't abused, however,
states and localities should be required to fund the bulk of the work
on those roads. Indeed, even if Congress does not pass a full-scale devolution
proposal, it should seriously consider requiring states and localities
to pay at least half the cost of all federally aided highway and transit
projects to ensure that federal funds are being spent as wisely as possible.
There is also a role for continued federal safety, data collection, and
research programs, though the latter, like construction programs, should
include requirements for substantial matching funds to ensure that only
compelling projects are funded. Again there is historic precedent for
such an approach. Before the interstate highway program took shape, the
federal Bureau of Public Roads, working with state highway officials,
used the modest federal-aid highway program to create a rudimentary national
highway system, to set minimal national standards for both new roads,
and to both collect important data and conduct a modest national research
program on future highway needs.
Though economically compelling, proposals to give states and localities
more responsibility for funding highways and transit systems generally
have run into three major obstacles. First, many governors and mayors
have opposed such plans on the grounds that the federal government is
likely to return responsibilities without funding. Such objections, however,
can be overcome via program design that carefully links responsibility
and funding sources.
Second, some advocates for major projects contend that the approach would
lead to lower spending on transportation (which they view as a bad outcome)
because states would not raise local gas taxes to replace lost federal
revenues. The fact that over the past two decades states have regularly
increased their gas taxes to fund highway and transit programs -- and that
many of those increases were approved by voters in state and local referenda
- suggest, however, that this argument is spurious. Moreover, if the federal
government reduced its share of gas tax, states probably would simply
keep the tax at its current level and retain the extra revenues.
Third, some environmentalists believe that since federal transportation
funds often come with federal environmental regulations, the loss of the
latter would lead states to build projects that should not get built.
This too is a spurious argument. Many federal environmental laws that
limit construction (such as the Clean Water Act's limits on filling or
on air pollution) are not directly linked to federal funding, and many
states have strong environmental laws of their own. Moreover, if states
have to fund roads themselves, they may be less likely to engage in grandiose
schemes that require significant displacement or environmental harm. Finally,
politicians who advocate such projects run the risk of voter backlash
if the voters decide that such projects' social and environmental costs
are too high.
In short, TEA-3 offers a fork in the road similar to the mid-1990s "mend
it or end it" debates over welfare. On the one hand, Democratic members
of Congress can push for a variety of policies and programs that might
improve the current programs. To a large extent, doing so would give them
the opportunity to curry favor with some key core constituencies such
as enviromentalists, unions, and big-city mayors. Winning such changes,
however, also would require a variety of tradeoffs, such as allowing even
more earmarking than the pork-laden TEA-21 legislation.
Such prospects should convince Democrats that it is time to fundamentally
change the federal government's role in surface transportation. We should
return decisions about investments in physical capital to states and localities
and let the national government take on those issues that it can best
address. On first blush, the politics of such a bargain are far from appealing.
Yet the issue gives Democrats the opportunity to clearly state that while
they believe there are many things that only the federal government can
do, there also are many things that it should no longer do. More important,
the policy is one that will make life better for the Americans who travel
on our roads and take our buses and trains.
