Right way to pay
Interstate-quality highways were a major boon to the productivity of American commerce and the quality of American life. But now, more than half a century after construction began on the network, its age is showing. The original interstates were designed to last 50 years. Some have reached that point already. Most other interstates will do so over the next two decades.
Even discounting for probably inflated estimates from firms that stand to gain from such projects, the cost of updating our interstate system to the demands of the 21st century is likely to approach $1 trillion over the next 35 years. That’s about $600 billion to rebuild the existing roadways plus another $400 billion to add sufficient lanes, shoulders and other infrastructure to accommodate the mobility and safety needs of the motorists who will use them. Here are the relevant estimates for our state, according to a 2013 report from the Los Angeles-based Reason Foundation: Over the next 35 years, we’ll need to spend $11.3 billion reconstructing North Carolina’s interstates and an additional $9.4 billion widening them.
The expected stream of revenue from current state and federal taxes won’t even come close to financing the job. Yes, you can quote this fiscal conservative on that. I know very well that transportation departments waste money, as do most government agencies (and large bureaucracies of any kind, as it happens). Here in North Carolina, my John Locke Foundation colleagues and I have identified many millions of dollars in annual savings from eliminating low-priority road projects, contracting out services, and ending diversions of gas and car taxes to non-highway programs. Recent reforms enacted by state legislators and the McCrory administration will produce some of these savings in the coming years. Our leaders should go further in advancing such reforms. But that still won’t be enough, not if we want to get our interstates and other critical roads into shape over the coming decades.
Admittedly, there are North Carolinians who don’t think we’ll need to spend heavily on our roads. Some believe that alternatives to automobility such as urban transit and intercity passenger rail will become so commonplace in the future that we won’t need a robust, expanded network to accommodate all those privately owned and operated cars and trucks. Others believe that if North Carolina skimps on highways, that will crimp North Carolina’s future population growth — an outcome they would welcome for social or environmental reasons.
These are fantasies, not practical realities. Policymakers should not be tempted to indulge them. The vast majority of North Carolinians will continue to use their own cars to travel to work, school, shopping and other destinations — or will aspire to do so when they can afford it. The vast majority of businesses will rely on vehicular transportation to move their products or serve their customers. And because of our state’s other natural and economic assets, people will keep coming here in search of new opportunities. We will either provide adequate highway capacity to meet these needs or endure worsening congestion and unsafe travel conditions.
So how should the necessary work be financed? Policy scolds say that raising taxes on vehicles and motor fuels is the obvious answer but that politicians are too gutless to say so. The politicians would rather increase the sales tax, which is the least-unpopular alternative. I disagree with both groups. Public infrastructure such as highways and water systems should operate on the user-pays rule as much as possible. Sales taxes don’t fit the bill at all. And even gas taxes are at best an imperfect proxy for user fees. Because of rising fuel efficiency, taxes levied per gallon end up producing less revenue per mile traveled. Moreover, there’s no relationship between where cars travel and where the resulting highway revenue is spent.
Bob Poole, the Reason Foundation’s transportation expert, offers a better alternative: value-added tolling to rebuild the nation’s interstate system. Using automated billing and variable pricing, this system would toll cars and trucks according to how much they use specific interstates — and then dedicate the revenue to paying off the construction debts and meeting the maintenance needs of those roadways. Poole even proposes that motorists receive gas-tax rebates in some proportion to the tolls they pay as a means of addressing the widespread impression that tolls make people “pay twice” for the same project.
This impression is mistaken, by the way. No road is permanent. No matter how well it is constructed, it will have to be repaved and repaired. Paying taxes for its initial construction in 1970 does not mean you shouldn’t pay to use its resurfaced, expanded version in 2020. North Carolina ought to join other states in demanding that the federal government change its policies so that future costs are borne by those who benefit the most from the interstate system, rather than socializing the costs or trying to pretend they don’t exist.