Improving the Efficiency of the U.S. Highway System

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Improving the Efficiency of the U.S. Highway
System

• Clifford Winston
• The Brookings Institution

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Overview

• Summary comments on roads
• Raising revenue efficiently
• Reducing costs efficiently
• Spurring technical innovation

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Highway PerformanceDelays

• Average Annual Traffic Delay in Major
  Metropolitan Areas, 1982-2001

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Highway Performance Finances

• The road system is always balanced but that is
  misleading
• Revenue sources (the fuel tax) are volatile
• Costs can be reduced by deferring maintenance and
  expansion
• Innovation is rarely considered

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Mode Shares
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Revenues Efficient Pricing

• Fuel tax is largely unrelated to motorists
  contributions to delaydoesnt vary by time of
  day or location
• Efficient tolls (road pricing)
• mitigate delays
• raise revenues efficiently (self financing)
• improve land use (other effects)
• Redistributive effects exaggerated

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Efficient pricing (continued)

• Fuel tax provides wrong incentives for trucks to
  reduce weight per axlethe primary source of
  pavement damage
• An axle-weight tax should be used to reduce
  maintenance costs
• Generally, the fuel tax is an inefficient tax
  (emission, safety)

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Reducing Costs X-Inefficiency

• Eliminate Davis Bacon (reduce labor costs)
• Optimize capital/maintenance cost tradeoff with
  thicker pavement
• Make contracting more flexible
• Improve oversight to reduce cost overruns

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Reducing Costs Improve Allocation of Funds

• Allocate highway expenditures to reduce total
  highway costs, accounting for users cost of
  congestion
• 1 of spending reduces users congestion costs 11
  cents under optimal allocation 1 reduces costs
  25 cents
• Eliminate demonstration projects
• Use prices as efficient signals of
  investmentcannot build our way out of congestion

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Innovation Motivation of Privatization

• Vast pricing and investment inefficiencies in
  highway
• Efficient pricing and investment would produce
  billions of dollars in welfare gains
• Objectives of privatization
• Reduce costs
• Make suppliers more responsive to users
• More rapid introduction of innovations

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Developing Evidence to Make the Case for
Privatization

• The experience with deregulating intercity
  transportation in the United States
• Foreign experience with privatization private
  road builders
• Experiments in the US to show competition can
  develop