Jacob C. Maichel
It
is hard to deny that healthy transportation infrastructure and support
systems are paramount to economic growth and success. Unfortunately
American roads and highways systems are crumbling more and more by the
day and no matter how much the government spends the trend does not seem
to shift. A study by the American Society of Civil Engineers determined
that 32% of urban roads are in extremely poor condition, with Kansas
having the 5th worst roads in the United States1! What can we do to fix our continually deteriorating roads?
The right answer is not continuing to pour billions of federal dollars into infrastructure projects, atleast
without private partnerships. The Trump administration in their 2018
budget proposal meetings began to increase federal spending on
infrastructure by $200 billion which continued to undermine the power of
American decentralization3.
Federal spending and regulation will continue to hamper private
responses to these problems if there is not a significant shift in
federal policy.
One
of the first barriers is effect that the heavy red tape of regulation
is having on development as a whole. Not too long ago in 1970 mandated
reviews by the National Environmental Protection Act took an average of
2.2 years while today we are looking at around 6.6 years on the low end2!
In the same timeframe we have seen environmental laws raise from only
26 to 70 in total when it comes to infrastructure development3.
I am all for the environment but I am also for progress. Instead of the
government pouring money into infrastructure perhaps they could spend
it elsewhere to bolster environmental protections and cut back
regulations allowing states or private industry take over. This way
projects could be determined by supply and demand and the most pressing
concerns can be addressed first by the people that use the systems,
rather than bureaucracy!
A
major factor that prevents someone else from taking the reins from the
federal government is the distortion caused by subsidies which reduces
other projects return on investment. American investment banks and large
pension funds seek to invest in infrastructure projects but often turn
to foreign development particularly in Canada, Asia, and Latin America2.
Instead of a top down approach the power should be given to states and
allow private public partnerships. This is currently difficult to do as
any project that receives any federal funds must return all the grant
money if it decides to go private. States have also learned to become
willingly helpless as they just hold out until roads become so bad the
federal government has to pay for the repairs themselves.
The
fact of the matter is that private or local governments are able to do
projects exceedingly more efficient. Federal projects have a long track
record of having pork barrel spending tied to projects, usually a
product of political favors completely removed from the people the
project is meant to serve3.
Not only have private projects both in and outside of the US been
completed cheaper and faster they also remove all the risk from the
taxpayer and shift it to the investors backing the project. These
projects also create new revenue for the federal government instead of
sucking out an ever growing amount of money.
Something
that should very seriously be considered is allowing all 50 states to
collect toll revenue from interstate systems and use it to maintain the
roads. This has worked incredibly well for India’s toll road which is
one of the busiest systems in the world2.
Allowing states to tap into this capital to modernize and maintain
roads would be a very welcomed shift by anyone who uses these roads on
their daily commutes. If the states also had the ability to team up with
local innovators they could completely transform the way infrastructure
is managed. Economies of scale can help private investors to offset
large investments while trying to earn a return, incentivizing efficient
allocation of resources.
The
fact remains that the more power is given to the private sector and
smaller localized governments the better the results are. If the federal
government was able to produce cheaper high quality infrastructure it
would make sense for them to control all the means of production… which
has failed in every socialist country in the history of humankind. State
and local governments should be encouraged to collaborate with the same
people they served rather than penalized for taking part in building up
their communities. Page Break
- Chris Edwards, “Privatization,” https://www.downsizinggovernment.org, Cato Institute, July 12, 2016.
Jacob C. Maichel is a Graduate Assistant at the Gwartney Institute and an MBA student at Ottawa University
Great article!
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