Carnegie Endowment Releases Plan to Reform Transportation Funding

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A strategy to address the nation's infrastructure needs through increased funding and institutional reform, Road to Recovery: Transforming America's Transportation, has been released by the Carnegie Endowment for International Peace's Leadership Initiative on Transportation Solvency.

Carnegie CoverThe non-partisan plan was developed by former Senator Bill Bradley, former Secretary of Homeland Security Tom Ridge, and former Comptroller General of the Government Accountability Office David Walker -- a Democrat, Republican, and independent, respectively. The authors seek to address the chronic underfunding and disinvestment that has caused American transportation infrastructure, once the best in the world, to sink to 23rd in international rankings.

Currently, the National Highway Trust is insolvent and relies on frequent bailouts by taxpayers to make ends meet. The Carnegie plan advocates restoring transportation spending to a sound financial footing, and returning to a "pay-as-you-go" model in which capital investments are paid for immediately, as opposed to the current practice of "deferred maintenance." The authors refer to deferred maintenance as nothing more than "a hidden tax, with interest," as delaying needed repairs or improvements only raises the total project cost for taxpayers, often relying on borrowing money. The authors point out that consistent majorities of Americans believe we should invest more in our transportation infrastructure, and they lay out a strategy for raising additional revenue to do so immediately, rather than relying on deficit spending.

The centerpiece of the plan is a bold proposal to levy a tax on oil at the point of production or importation, and put a corresponding tax on fuel sold to consumers at the pump. According to the report, this would stabilize the price of oil and protect the American economy from sharp changes in the price of oil, while providing a steady and predictable stream of revenue to pay for transportation infrastructure.

Under the plan, a 5 percent tax will be put on every barrel of oil produced or imported as long as oil prices are rising, while a fuel tax paid by consumers at the pump will rise if oil prices fall. The tax burden, therefore, falls both on oil companies and gasoline consumers, and stabilizes the price of fuel at the pump within a narrow range. This insulates the American economy from the volatility of the oil market and lessens our dependence on the unstable regimes that provide much of our oil. Because revenue is collected whether oil prices are falling or rising, funding for transportation projects can be predicted accurately well in advance, providing a solid footing for planning our infrastructure.

There are additional benefits to making transportation costs more transparent to users, the report continues. When the full cost of driving is paid for at the pump, rather than passed to the next generation through deficit spending, drivers have more information to make mobility decisions. This will lead to less driving, the authors believe, which in turn eases congestion on roads and requires smaller oil imports. Reducing our dependence on foreign oil not only enhances our national security, it also narrows our trade deficit. Less driving also means a reduction in air pollution and carbon emitted by vehicles.

Besides proposing a mechanism to pay for the infrastructure we use in a responsible way, the report also advances a new method of disbursing transportation spending. Currently, most of our transportation dollars are allocated to states and municipalities according to formulas or earmarks in legislation, which the authors describe as having unclear goals and little accountability for performance. In lieu of this, the authors discuss a wide variety of metrics that can be used to measure the value of a transportation project, and advocate prioritizing those programs with the most social benefit. To this end, the report proposes placing a permanent ban on earmarks, streamlining federal agencies to reduce redundancy and improve transparency, and insulating transportation investment decisions from political pressure. This would be accomplished through creating a National Infrastructure Bank which would use objective cost benefit analysis to select the most deserving infrastructure projects, rather than funding the most politically-connected projects.

It is encouraging that serious thinkers are carefully considering the national infrastructure challenge. As Bradley, Ridge, and Walker point out, strong leadership will be required to set our transportation system on a financially sustainable path and meet the mobility needs of a changing population. We hope the Carnegie Endowment's report will spark a deeper discussion on how to best provide the transportation infrastructure we need in the 21st century.

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