7 Themes Shaping U.S. Infrastructure Policy
Editor’s note: This is the fourth release in a new TLP series surveying major domestic and foreign policy issues facing the country. These articles will explore the basic factual context shaping each policy area, examine the major positions on offer across the ideological spectrum, and evaluate which ideas are best—or if new ideas may be needed—to help advance a common-sense perspective in American politics and policymaking.
There’s a widespread perception that America’s infrastructure is deficient, popularized by the reports like the ASCE Infrastructure Report Card or the Texas Transportation Institute’s Urban Mobility Report. Americans also look with envy at foreign infrastructure accomplishments such as China’s high speed rail network or gleaming new airports. While America’s surface transportation infrastructural problems may or may not be as dire as these reports argue, American infrastructure does face a number of structural problems.
Some broad themes and structural factors in infrastructure must be resolved in some manner to update America’s surface transport system for the twenty-first century. These include:
Different and largely irreconcilable visions for transportation and land use between left and right.
The maturity of the US surface transport system.
Spatial inequalities, particularly in population growth and the viability of passenger rail.
Inability of current funding mechanisms to address local roads and streets.
Inordinate delays and cost in constructing infrastructure in the U.S.
Fiscal impact of increasingly fuel-efficient vehicles and the electric vehicle transition.
The advent of autonomous vehicles.
Surface transportation in the US is built and financed through a federal-state partnership. Most highways and transit systems are built and owned by state and local governments but receive financial support from the federal government. Intercity rail is provided primarily by Amtrak, a federally charted corporation. (Freight rail is the province of private companies.)
The federal government levies a tax of 18.4 cents per gallon on gasoline and 24.4 cents per gallon on diesel fuel. Funds collected go into the Highway Trust Fund, which is supposed to be self-sustaining, but which in recent years has required transfers from general funds to finance outlays. About 13 percent of fuel tax revenues are transferred to transit, and transit accounts for around 20 percent of surface transport expenditures. A small amount of money also goes to alternative transportation modes like trails.
This basic architecture has been in place for some time. However, the themes and structural listed above will put increasing pressure on this system.
Theme One: Different and largely irreconcilable visions for transportation and land use between left and right.
The principal challenge for American transportation is the different and largely irreconcilable visions between left and right around the way Americans should live as expressed in its land use and transportation patterns. The left’s view is more well-defined and ideological: in the name of environmental sustainability and other considerations, it is hostile to suburban sprawl and automobile use, and desires to reduce both. It wants dense, mixed-use development oriented around public transport, walking, and bicycling. In effect, the goal is to make America more urban as traditionally understood. There are variations of intensity around this objective, with more pragmatic and more activist versions, but this is the general pattern of thought. More extreme versions are promoted primarily by the activist community, which has an impact disproportionate to its numbers.
The right’s view is more inchoate, but roughly the opposite of the left. It sees low density sprawl and the automobile as the natural state of affairs and preferred by the market, and thus desires to prevent government action to reduce them—and indeed wants to continue to promote them. The right is also typically skeptical of public transit because they view it as a financially unsustainable, and because transit is concentrated in cities that politically skew far to the left. Some of the right’s views undoubtedly arise due to simple opposition to the left, and some derive from an antipathy towards cities similar to the left’s antipathy towards suburbs. The right is also generally favorable to privatization of infrastructure despite its mixed track record in the United States.
These very different goals make changes to the present federal system difficult. Some on the right are open to new approaches, including devolution, which would eliminate the present federal surface transport funding regime and turn over responsibility fully to the states (possibly with some small federal role retained purely for maintenance on the interstate highway system). Devolution would create a “federalist” solution to incompatible visions; red state and blue states would be free to pursue their own preferences. However, devolution remains unlikely because the current system redirects gas tax dollars to left priorities such as transit and trails. It also provides a mechanism for imposing rules that advance at least some left environmental and social goals as conditions for federal funding. Meanwhile, the right will not allow the share of funding going to roads to be much reduced. Overall, it’s a formula for stasis.
One example of this dispute playing out is in Austin, Texas, America’s fastest growing major metropolitan area. Austin has only one major through freeway (Interstate 35) and no beltway. The Texas Department of Transportation wants to expand I-35 through the city, but with significant opposition from the left which prefers investment in transit instead. Even in a rapidly growing, under-freewayed, and sprawling region, the left opposes roadway expansion.
Theme Two: The U.S. surface transport system is mature.
Americans often envy China’s investments in infrastructure, like its high-speed rail network. However, China envy is misplaced because China is building much of its infrastructure new for the first time, whereas the United States built its infrastructure—transit lines, highways, water and sewer lines, electric transmission lines, and so on—long ago. America’s infrastructure base is largely mature, and our challenge is to renovate, maintain, and in some cases upgrade this infrastructure.
Declining return on investment for expansion represents one major indication of the maturity of our infrastructure system. Early investments in surface transport produced game-changing reductions in transportation time and cost. The Erie Canal, for instance, reduced transport time by 95 percent. The creation of the railroads and, later, the interstate highway system similarly reshaped the nation. But by the 1980s, the rate of return on new highway expansions had fallen to just five percent. Many of the problems intended to be solved by constructing new highways could be achieved through simpler means; for example, congestion can be reduced or eliminated via roadway pricing, as in Singapore.
The maturity of our transport systems produces particular challenges in America. Maintenance is less politically attractive than new builds. Our major transport facilities are in heavy use, making renovations highly disruptive. And some of our infrastructure was built to now-obsolete standards, with right of way and geometries that make upgrades difficult.
A paradigmatic example of these challenges is the New York City subway system. Much of this system is over 100 years old, and its signaling technology dates to the 1930s. Many of its stations lack modern design elements like elevators. Much of the physical infrastructure is old and in poor condition. At the same time, it is heavily utilized, making it difficult to upgrade due to the need to maintain service.
Theme Three: Spatial inequalities, particularly in population growth and the viability of passenger rail.
The original construction of the railroads and interstate highway network were of universal applicability. Every city wanted to be connected to the railroads and interstates. Indeed, building the interstates was a national program that included every state except Alaska.[1]
While there are still some universal elements to surface transportation infrastructure policy, from the construction of trail systems to electric vehicle charging networks, today’s mature infrastructure augurs for incremental expansion in select markets. In particular, population growth has become concentrated in a limited number of Sunbelt boomtown locales: Phoenix, the Texas Triangle, Nashville, Florida, and the like. These rapidly growing areas require significant investment in transportation infrastructure expansion. By contrast, much of the United States has slow or even negative population growth; these areas should probably not be building new or expanded highways.
Similarly, rail transit is only viable in a small number of legacy transit cities like New York and Chicago. High speed rail, should it ever be built in the U.S., is also viable in only a limited number of markets.
These types of concentrated versus universal needs are a bad fit for a national infrastructure plan—especially in our federalist system, which requires some level of spreading funds around to work politically.
The maturity of our transportation system, our spatial concentration of growth, and overall decelerating levels of population growth make “abundance” a questionable national goal for transportation. Many places already have not just an abundance but a surplus of transportation infrastructure that they cannot maintain.
Theme Four: Inability of current funding mechanisms to address local roads and streets.
When people complain about pothole-ridden streets, they’re often complaining about local roads and streets. Several cities have released studies showing multibillion dollar backlogs of needed street repairs. But most of these streets are outside the federal aid system, and thus are not eligible for federal funding. Many states share state gas tax revenues with localities, but this move is generally insufficient to cover maintenance needs and leaves these communities dependent on general or property tax funds to make up the difference. As a result, road maintenance is often crowded out by public safety or other higher priority local needs. No additional amount of federal funding will address this problem of local street maintenance.
(My Manhattan Institute report “Beyond Repair? America’s Infrastructure Crisis Is Local” discusses this problem in more depth.)
Theme Five: Inordinate delays and cost in constructing US infrastructure.
The length of time it takes to implement major transportation projects has grown substantially in recent decades, much of it due to ever increasing environmental studies. As I previously wrote in American Affairs:
Despite few changes in federal law, the process of completing [Environmental Impact Statements] has continued to increase in length. A study by the Regional Plan Association (RPA) found that the average length of time to complete an EIS increased from slightly over two years in the 1970s to eight years by 2011. A 2008 study by Piet and Carol A. DeWitt found that the time required to complete an EIS was increasing at a rate of 37 days per year. A report by Philip K. Howard cites the example of a project to merely raise the bridge deck on the already existing Bayonne Bridge in New York: The environmental reviews for this basic project totaled around 20,000 pages and took five years to complete. According to Howard’s analysis, in several categories of infrastructure, the cost of a six-year delay in building projects resulting from environmental review adds up to more than the ASCE’s estimates of what it would take to pay for needed repairs. The cost of delays is higher than the cost to build.
State-level environmental rules in places like California compound this, adding delays even to projects like bus or bike lanes. The left generally likes these environmental rules as it provides a method to delay or prevent highway construction. Their frustrations over the negative impact on transit and bicycling at the state level have led to a movement to carve out specific exemptions for their preferred forms of infrastructure. However, such exceptions are unlikely at the federal level.
Apart from these delays, the cost of infrastructure construction in the US can be far higher than in other countries. For example, the United States has become notorious for having by far the world’s highest rail transit construction costs. Alon Levy and Eric Goldwyn at NYU’s Marron Institute have done significant research detailing these cost gaps and their complex causes. Little progress has been made to date in addressing these issues, however.
Theme Six: Fiscal impact of increasingly fuel-efficient vehicles and the electric vehicle transition
Aside from legacy toll roads, most federal and state finance of surface transportation comes from motor fuel taxes. However, growing fuel efficiency and especially the transition to electric vehicles threatens to render the current transportation finance system obsolete. The electric vehicle transition trumps traditional concerns over the fact that the federal gas tax has not been indexed to inflation.
Some change to the transportation finance system will be needed, such as increased use of tolling or some type of tax based on vehicle miles traveled. Modern toll collection and GPS systems allow this to be done in a non-intrusive manner, but also raise privacy concerns. Alternatively, there could be a shift away from user fees as a finance mechanism.
Theme Seven: The advent of autonomous vehicles.
The potential arrival of autonomous vehicles introduces significant uncertainty into the future of surface transportation. Companies such as Waymo and Cruise are already offering robotaxi services in a limited number of markets, and Tesla has also made significant strides towards self-driving cars.
Whether or not true self-driving vehicles will be able to operate at scale nationwide remains uncertain at this time. But the real possibility that this might happen introduces significant uncertainty into what the transportation needs of the future might be. A wide range of impacts to the transportation-land use nexus are possible.
This uncertainty raises the risks for present day transportation investment. It should operate to raise the effective discount rate used in financial cost-benefit calculations, and thus bias against constructing new or expanded highways in marginal cases.
Uncertainty around the impact of remote work operates similarly. In the near term, remote work most impacts transit systems in major cities, which rely heavily on fares as a revenue source and have experienced a significant drop in ridership that threatens their financial future.
Future Scenarios
The recent Infrastructure Investment and Jobs Act (IIJA) significantly increases surface transportation spending above the previous baseline, with a heavier skew towards transit over roads than previously. There’s an additional $110 billion for roads and an additional $39 billion for transit. It also significantly expands Amtrak funding and creates a number of new programs. But it basically follows the contours of the existing funding structure, with its major new program including funding to build out an electric vehicle charging network.
What about future infrastructure bills? Given the significant differences between the left and right visions for transportation and land use in America, along with general partisan polarization, the most likely scenario for the future of transportation policy is an extension of the status quo with minor variations, as occurred with IIJA. At some point, however, an alternative to the gas tax will need to be found, but this need not overturn the basic funding formulas in use.
There is currently at least one vision on the political right for major change to the current system: devolution. That is, eliminating or mostly eliminating the federal role in transportation funding under the belief that the need for a federal role has ended with the completion of the interstate highway system.
Devolution has a number of advantages and merits consideration. It would resolve the differing visions of left and right at the national level through a federalist (not federal) solution, though not at the state level. It would allow for states to experiment with different funding structures, such as a vehicle miles traveled (VMT) tax. Just as with electronic toll collection systems like EZ Pass that span state boundaries, this would likely evolve towards cooperative and reciprocal systems at the national or regional level.
Devolution would also allow left-leaning, pro-transit states to move away from the gas tax as a means of funding transit, a method that paradoxically leaves those states dependent on continued car use. These states could also direct significantly greater sums of money towards transit compared to today’s system; the need to set up a state-level replacement for the federal system provides a political platform for doing this. States containing legacy rail transit systems would need to find a way to reform construction and operations to bring them into line with global best practices, or at least the global median. Most other places should avoid construction of rail transit systems.
Devolution would also force slow-growing states to fully internalize the cost of highway expansions they don’t need. For right-leaning states, it frees them from the perceived burden of cross-subsidizing transit and allows them to build as many roads as they want—as long as they pay for them themselves.
It also provides a vector for rolling back some of the federal rules that extend project timelines. Additional federal permitting reforms would still need to be implemented, however; Philip Howard’s proposal “Two Years Not Ten Years” details some potential changes that could be made. Since much of the environmental process seems designed primarily to stave off potential legal challenges, one simple reform would be to eliminate judicial review over environmental determinations.
One future funding scenario for highways in a devolved world would be a combination of freeway tolls and a VMT tax. Tolls enable the implementation of congestion pricing as a substitute for freeway expansion in many areas, important since slow growing regions simply do not need to be building many new or expanded roads. They should also adjust their discount rate or rate of return calculations for new or improved transport facilities to account for the uncertainties around autonomous cars. States should be restructuring their finance systems to prioritize maintenance, particularly to provide significantly increased state aid for local roads and street repairs.
While this analysis has been limited to surface transportation, some elements likely apply to other infrastructure as well. America’s power, water, and sewer systems also face the problems of maturity. They require major investment to renovate and modernize, but the public would perceive little benefit from this spending, creating political barriers to action. There is also an unequal distribution of need, with older legacy cities like Cleveland and St. Louis facing some of the highest bills for things like sewer upgrades. (I addressed some of this in a previous Manhattan Institute study on combined sewer overflow mandates.)
Aaron Renn is a writer and consultant based in Indianapolis who is a co-founder and senior fellow at American Reformer. Previously in his career, Renn was also a partner at Accenture and a senior fellow at the Manhattan Institute. He now writes his own self-titled Substack newsletter focused on social, cultural, and economic transformation in American life.
[1] Alaska has “interstates” labeled A1, etc., funded as interstates, but which are not designed to freeway standards.