Other Unleashing America’s Resources Topics:

Transportation



The Issue


Transportation is vital to the nation’s economic health. Ease of movement in the air and on highways, roads, rails, bridges, and waterways contributes to the productivity of workers, manufacturers, and other businesses. Yet the current Washington-centric approach hampers transportation investment with bureaucracy, mismanagement, and resource misallocation. The inefficacy of federal management undermines the goal that should be the basis of federal transportation policy: maintaining nationally significant infrastructure in order to improve mobility and increase safety in a cost-effective manner. Instead, workers have received longer commutes, growing congestion, and lackluster benefits for the federal taxes they pay.

Politicians often justify increased transportation spending with hollow promises of job creation, economic growth, and idyllic dreams of achieving “livability.” The country’s “crumbling” infrastructure is invoked to justify stimulus and special-interest spending. As a result, spending out of the Highway Trust Fund is diverted to low-value programs unrelated to highways, diluting the fundamental “users pay, users benefit” concept by shortchanging the motorists and truckers who pay gas taxes.

The question is not whether the nation should be investing in infrastructure, but how to do so most effectively. In order to achieve maximum efficiency and accountability, vital infrastructure decisions should be made at the local and state level, as well as by the private sector, free from federal mandates. Local and state governments are more accountable to those who rely on their infrastructure and know their transportation needs better than Washington. Thus, they are in a better position to address these needs and, indeed, already independently enact policies to generate their own transportation funding. Congress and the Administration should seek to empower states by limiting the role of the federal government to concerns that are truly national in scope.


Recommendations


Refocus the Highway Trust Fund on Maintaining the Interstate Highway System. Federal involvement in highway spending since the completion of the Interstate Highway System in the early 1990s has been marked by irresponsible fiscal management, misallocation of resources, and continuous overreach into projects beyond the proper scope of government. Today, nearly 30 percent of Highway Trust Fund spending is allocated to causes that have nothing or little to do with the National Highway System. Many of the resulting projects are wasteful or strictly local in nature such as bicycle-sharing programs, sidewalks, landscaping, and historical restoration projects. The largest Highway Trust Fund diversions that should be eliminated include:

  • Mass transit. Nearly one-fifth of trust fund spending is diverted to inherently local transit projects that are rarely cost-effective, do not live up to congestion reduction or environmental promises, and serve a small subset of the population.
  • Congestion Mitigation and Air Quality. Despite its name, this program funds few projects that effectively reduce congestion, instead focusing on transit and local trivia like bicycle-sharing programs.
  • Transportation Alternatives Program. Possibly the worst offender, this program siphons highway dollars to local projects such as recreational trails and beautification projects.
  • Funding for other non-priorities. Further funding is directed to various local or improper federal programs such as ferry boats, the federal lands access programs, scenic byways, and education programs.

Reprioritizing Highway Trust Fund spending would put gas tax dollars back to work repairing the aging national highway system and put the trust fund on a path to solvency. Ultimately, responsibility for raising and spending highway funds should be shifted back to the states, further improving the accountability and flexibility of transportation funding.

End the Airport Improvement Program and Roll Back Burdensome Airport Regulations. The federal government is extensively involved in funding and regulating the nation’s airports. Unlike many other developed nations, U.S. airports remain under local government—rather than private—ownership, largely because of outdated federal policies that constrain airport development.

The federal government provides funding for public-use airports through the Airport Improvement Program (AIP), which is funded by taxes on airfare and other aviation taxes. AIP grants can only be used for certain types of “airside” capital improvements, such as runways and taxiways, and are tied to strict regulations that govern how airports can operate. The AIP functions as a middle-man scheme that redistributes fliers’ resources from the most significant airports to those of far less significance. For example, the 60 largest airports in the U.S. serve nearly 90 percent of air travelers. Though these large airports have the greatest need for capital investment, they receive only 27 percent of AIP grants. Non-commercial airports—which serve less than 1 percent of commercial fliers and thus contribute a trivial share of revenue—receive about 30 percent of AIP grants.

Further federal laws prohibit airports from freely charging the fliers who use the airport’s facilities. Instead, airports must seek permission from the Federal Aviation Administration (FAA) to administer a local user fee known as the Passenger Facility Charge, which is regulated and price-controlled by the federal government.

This restrictive federal management of local facilities overly constrains airports from serving their customers, quashes innovation, and deters private investment in airports. Congress should eliminate the AIP, reduce passenger ticket taxes, and reform federal regulations that prohibit airports from generating and spending their own revenues. These reforms would eradicate the inefficient and inequitable distribution of flier resources and would allow airports to fund capital improvements in a local, self-reliant, and free-market manner.

Pare Down Costly Infrastructure Mandates and Regulations. Federal regulations, permits, and mandates attached to federal spending unnecessarily increase the cost and completion time of infrastructure projects. Complying with the Davis–Bacon Act—which requires the use of union pay scales and work rules—increases project costs by an average of nearly 10 percent. Construction costs for federally funded projects are further inflated by federally required project labor agreements and “Buy America” restrictions. These burdensome rules should be eliminated.

Furthermore, all major infrastructure construction projects are subject to federal permitting and environmental review processes. The federal government administers 59 different permits through 12 different agencies. Environmental reviews alone take an average of five years and can cost millions of dollars. Many major projects take a decade or longer to permit.

Allowing states to certify that projects meet federal requirements would accelerate the permitting process by removing it from slow-moving, centralized Washington bureaucracies. Other improvements that can be made at the federal level are:

  • Establishing time limits and making concurrent reviews the norm rather than the exception;
  • Empowering a lead agency to guide projects through multi-agency reviews;
  • Expanding the Permitting Dashboard established in 2015;
  • Requiring agencies to submit data on the length of their permitting decisions to increase transparency and accountability; and
  • Streamlining the National Environmental Policy Act (NEPA) by including only major environmental issues, excluding greenhouse gases from the review process, and requiring NEPA to incorporate previous analyses into similar projects.

Privatize Federal Transportation Services. The transportation assets that the federal government owns and operates are of vital interstate importance and could substantially benefit from improved management and market incentives. Congress and the Administration should comprehensively privatize the federally owned infrastructure in the following areas:

Amtrak. Established in 1971, Amtrak is a federally funded government corporation that holds an effective monopoly on intercity passenger rail. The majority of Amtrak’s lines provides poor service and require large taxpayer subsidies, largely due to its monopoly status and government mismanagement. Ideally, Congress and the Administration should eliminate federal subsidies for Amtrak, privatize any viable lines (chiefly the Northeast Corridor), and open up intercity passenger rail to competition. Management of current state-supported routes could be turned over to the states, which would then have the option to cover the full cost of providing passenger rail service.

If complete overhaul is not politically possible, an alternative approach would be to lower federal subsidies for the long-haul and state-supported routes, allowing states to replace the subsidy difference if desired and Amtrak to shutter underperforming routes. The Northeast corridor could also be entered into a public-private partnership by bidding out the right to operate and maintain the Northeast corridor for a set period to a private firm, under the condition that the operator maintains a certain level of service and infrastructure conditions.

Air Traffic Control. The FAA’s Air Traffic Organization (ATO) is responsible for providing air traffic control services. Worldwide, it is one of the last air navigation service providers that is housed within an aviation safety regulatory agency, and indeed, there is bipartisan agreement that air traffic control is not inherently a government function. Government bureaucracy has led to an ATO that is slow to react, mired in red tape, and managed by Congress, when it should be run like an advanced business. Billions of dollars have been spent on technology modernization, while the ATO struggles with basic business functions such as hiring employees, investing in capital improvements, and improving efficiency in its current structure. Full privatization of air traffic control would bring private-sector flexibility and efficiency to the essential service and allow it to innovate outside the realm of federal bureaucracy.

St. Lawrence Seaway Development Corporation. Congress and the administration should privatize the St. Lawrence Seaway Development Corporation (SLSDC), which maintains and operates the U.S. portion of the Saint Lawrence Seaway under 33 U.S. Code § 981 and 49 U.S. Code § 110. Privatization would end taxpayer contributions to maintenance and operating activities, mirroring SLSDC’s Canadian counterpart, which was privatized in 1998.

Inland Waterways. The Army Corps of Engineers owns and manages the bulk of the United States’ vast infrastructure across 12,000 miles of inland waterways. The Corps has done a poor job of updating and maintaining this vital infrastructure, the majority of which is past its intended design age of 50 years, resulting in substantial delays and bottlenecks. The waterways rely on taxes that are inadequate to cover its capital costs, while operating costs are wholly covered by general funds, resulting in an effective 90 percent subsidy—by far the most of any freight infrastructure.

Congress and the Administration should completely transition away from the inadequate fuel tax to a direct user-fee system. This approach has bipartisan appeal, garnering support from both the Trump and Obama Administrations. Following the authorization of user fees, the federal government should privatize the locks, allowing private companies to operate and maintain the locks, dams, and other inland waterways infrastructure. If outright privatization is not politically feasible, the Corps should bid out the right to operate and maintain waterway infrastructure at certain specifications to private operators.


Facts and Figures


FACT: The condition of the nation’s major infrastructure is not dire; it is steadily improving.

  • The percentage of the nation’s bridges deemed structurally deficient (not necessarily unsafe, but necessitating maintenance) by the Federal Highway Administration (FHWA) has decreased by more than half since 1992, from 22 percent to 9 percent in 2016.
  • In 2008, the FHWA rated the pavement quality of the National Highway System (measured as a share of vehicle miles traveled) 57 percent “good,” 35 percent “acceptable,” and just 8 percent “not acceptable”—a marked improvement since 2000.
  • Ninety-eight percent of U.S. airport runways are in good or fair condition. U.S. airports safely move more people than those of any other country.

FACT: Congress has mismanaged the nation’s surface transportation dollars.

  • Congress has continuously overspent from the Highway Trust Fund, requiring more than $140 billion in general fund bailouts since 2008. After Congress exacerbated trust fund deficits in 2015, the trust fund is expected to incur a negative balance in 2021 unless reforms are made.
  • The latest highway bill, Fixing America’s Surface Transportation (FAST) Act (Public Law 114–94), diverts nearly 30 percent of authorized spending allocations to programs that are unrelated to highway construction or rehabilitation.
  • In 2013, less than 50 percent of Highway Trust Fund expenditures went to highway construction projects, and just 6 percent was allocated to major projects of $500 million or more.

FACT: U.S. airports are held back by outdated policies.

  • Although U.S. airports are effective at safely moving air travelers, consumers did not rank a single U.S. airport in the world’s top 25.
  • The U.S. has only one major private airport (SJU in San Juan, Puerto Rico). In Europe, nearly three-quarters of passengers fly through private or partially private airports.
  • Government taxes and fees account for 14 percent of the price for an average airline ticket.
  • The federal AIP redistributes fliers’ resources to airports they will likely never use. The 60 largest airports in the U.S. serve 88 percent of air travelers, but receive only 27 percent of AIP grants. Non-commercial airports—which serve less than 1 percent of commercial fliers—receive about 30 percent of AIP grants.
  • The Passenger Facility Charge—the local fee that an airport can charge passengers for using its facility—has been capped at $4.50 since 2000. Adjusting for inflation, that price cap has eroded roughly 60 percent of the value that airports can assess on its users.

FACT: Federal transit programs are wasteful and counterproductive.

  • Although mass transit receives about 20 percent of Highway Trust Fund spending, only 5 percent of workers rely on mass transit for their commute. Overall, just 2 percent of personal trips are made on mass transit.
  • After billions in subsidies, mass transit’s share of urban travel dropped by nearly one-fifth between 1980 and 2015.
  • Federal subsidies for transit construction have led to large cost inflation. Rail projects that received federal funding between 1980 and 2015 generally exhibited cost overruns between 40 percent and 50 percent.

Selected Additional Resources


Wendell Cox, “America Needs a Rational Transit Policy,” Heritage Foundation Issue Brief No. 4368, March 24, 2015.

Matthew Grinney and Emily Goff, “Bringing Transportation Decisions Closer to the People: Why States and Localities Should Have More Control,” Heritage Foundation Backgrounder No. 2902, April 9, 2014.

Michael Sargent, “Highway Trust Fund Basics: A Primer on Federal Surface Transportation Spending,” Heritage Foundation Backgrounder No. 3014, May 11, 2015.

Michael Sargent, “End of the Runway: Rethinking the Airport Improvement Program and the Federal Role in Airport Funding,” Heritage Foundation Backgrounder No. 3170, November 23, 2016.

Michael Sargent and Nicolas Loris, “Driving Investment, Fueling Growth: How Strategic Reforms Can Generate $1.1 Trillion in Infrastructure Investment,” Heritage Foundation Backgrounder No. 3209, May 8, 2017.

Ronald D. Utt, “‘Turn Back’ Transportation to the States,” Heritage Foundation Backgrounder No. 2651, February 7, 2012.