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April 8, 2013

Government by default

The federal government's failure to deal with the infrastructure crisis has states—and even corporations—thinking about stepping in. That could prove a mixed blessing.

By Clifford F. Lynch

By now, it's pretty clear to everyone in the country that we have a serious transportation infrastructure problem. Many bridges and highways are in deplorable condition, and the amount of time we spend stalled in traffic increases with each passing year. In 2011, the average commuter lost 34 hours due to traffic delays, compared with 14 hours in 1982. The cost of this congestion exceeds $100 billion annually, according to the Texas A&M Transportation Institute. These delays, combined with the cost of fuel and restrictive driver hours-of-service regulations, also contribute to the ever-increasing cost of moving goods by truck.

Certainly, the federal government is aware of the issue. President Obama mentioned it in his most recent State of the Union address. Congress has passed several bills and conducted hearings on the subject. The first hearing of the new House Transportation Committee focused on the topic and reinforced the president's concern. So what's the problem? The problem is that no one has developed a plan for improvement or a mechanism for paying for the improvements. And they won't come cheap. The U.S. Chamber of Commerce has urged Congress to increase the federal fuel tax, which has not been raised since 1993. Obviously, that is a political football; but if nothing is done, the Highway Trust Fund (the primary source of funding for surface transportation projects) will be depleted within two years.

In fact, it appears the effects of the funding squeeze are already being felt. On Christmas Day, 2012, a headline on the front page of The Memphis Commercial Appeal read "Memphis – Kentucky I-69 Quietly Shelved." As the story explained, after 20 years of planning, design, and spending, the state of Tennessee has decided to discontinue work on the 156-mile segment of Interstate 69 stretching from southern Kentucky to northern Mississippi. This is particularly disappointing in that I-69 has been designated the NAFTA Highway, since it would provide a direct connection with Canada and Mexico. Why has Tennessee backed away from the project? The federal government has not provided the funding necessary to complete the work.

In the face of the federal government's failure to act, states are beginning to take matters into their own hands. Two months ago, the Virginia General Assembly passed a transportation bill that among other things, would eliminate the retail fuel tax and replace it with a wholesale gas tax. The general sales tax would be increased by 0.3 percent. The total bill is expected to generate about $850 million annually for transportation projects. The increased taxes will not be universally popular, but the commonwealth appears to be on track to alleviate congestion. Virginia is also encouraging investment by private entities and has been doing so for some time. Last month, Maryland passed legislation similar to Virginia's, and bills are also being considered in New Hampshire and Massachusetts.

It's not just the states that are attempting to tackle the infrastructure problem. The powerful business advocacy group The U.S. Chamber of Commerce has joined in the effort through its "Let's Rebuild America" initiative. One of the program's key goals is to encourage public/private partnerships, and the chamber points to several instances of how such partnerships have resolved significant infrastructure issues.

While I have always been an advocate of the federal government's doing its job by developing a plan and providing the funds, I am finally convinced that this simply is not going to happen. Still, the private/public partnership route could prove a mixed blessing. To me, the one big risk is that the states and corporations will do what is best for them, but not necessarily best for the country.

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