Make drivers pay for driving
I STRONGLY doubt that President Obama has a secret agenda to increase American oil consumption, but anyone who looks at his highway-heavy recovery spending plans might think he did. If the president wants to reduce American carbon emissions — and I believe he does — he should strip the proposed $50 billion on transportation from his latest stimulus plan, and embrace the principle that American infrastructure should be paid for by the travelers who use it.
Amid today’s economic woes, Obama understandably wants to be seen as a modern FDR, not as a 21st-century version of Grover Cleveland, who took a “hands off’’ approach to the Panic of 1893. Obama believes in the New Deal vision of using federal spending to directly “put people to work rebuilding America.’’ He believes that “to attract new businesses to our shores, we need the fastest, most reliable ways to move people, goods, and information.’’ He has suggested to Congress that America would be far weaker “if the people who sat here before us decided not to build our highways, not to build our bridges, our dams, our airports,’’ suggesting that America was built by congressional support for transportation.
Together, these ideas lead toward billions of federal spending on infrastructure, and in a country where 86 percent of adults commute by car, infrastructure means highways. The federal government has a long history of funding roads, and the Interstate Highway System is seen as a successful example of big government, despite the terrible toll it took on many urban centers. Low-density states are disproportionately endowed with both highways and senators, and that may further explain the political popularity of road building.
The first Recovery Act has spent almost $22 billion on highways, and a total of $27.5 billion has been authorized. Obama’s new jobs bill offers another extra $27 billion for highway infrastructure spending, as part of a $50 billion transportation package. Much of that money will be apportioned using the standard formula that rewards states with more highways and more highway miles driven.
Even when the goal is to create more jobs, injecting more federal money into highways - and particularly into this flawed formula - is shortsighted. I don’t like “badly decaying roads and bridges’’ any more than Obama does, but why should taxpayers have to pay for roads they don’t use? Why can’t companies pay the full social costs of moving their own trucks? Why should Connecticut have to pay for California’s highways? Can’t states be responsible for projects that overwhelmingly benefit their own citizens?
The number one rule of economic policy is that people make better choices when they have to pay for the costs their actions impose upon a society. By subsidizing driving, though, the president is only encouraging people to drive more.
The Recovery Act website proudly tells of funding an expansion of Interstate 94 now underway in Madison, Wis., and a “four-lane interstate bypass and access road on Highway 71.’’ The site claims that “40,000 miles of pavement’’ have “been improved since the Recovery Act became law.’’
Yet “the Fundamental Law of Road Congestion,’’ empirically established by economists Gilles Duranton and Matthew Turner is that vehicle miles traveled increase roughly one-for-one with highway miles built. If you build it, they will drive. Every new highway paid for with our tax dollars means more drivers on the road, more gasoline consumption, and more carbon emissions.
Some may hope that Recovery Act spending on public transportation will offset the energy increases associated with highway subsidies, but historically that hasn’t been the case. Nathaniel Baum-Snow and Matthew Kahn have found that new subway stops, generally funded by the federal government since about 1970, typically did little to reduce automobile commuting. Making drivers pay for the social costs of driving will always be more effective than subsidizing other forms of transportation, even though the latter course is more politically attractive.
If Obama wants to create jobs, there are more efficient ways to do so. For example, reducing the employer portion of the Social Security payroll tax will put more money in the economy and give employers more reason to hire. (We could pay for this by raising the retirement age.) Meanwhile, America should rebuild its infrastructure, but that rebuilding should be funded with user fees, not general tax revenues. If you want a more sensible energy policy, the best place to start - even now - is by stopping the subsidies for new highways.
Edward L. Glaeser, a professor of economics at Harvard University, is director of the Rappaport Institute for Greater Boston.