Interstate 2.0: Modernizing the Interstate Highway System Via Toll Finance
Source: Reason Foundation
The Interstate highway system is America’s most important surface transportation system. With just 2.5% of the nation’s lane-miles of highway, it handles some 25% of all vehicle miles of travel. It served to open the country to trade and travel, enabling the just-in-time logistics system at the heart of U.S. goods movement. Yet the first-generation Interstate system is wearing out. Most of the pavement has exceeded or is nearing its 50-year design life, meaning that nearly the entire system will need reconstruction over the next two decades. In addition, more than a hundred interchanges are major bottlenecks, needing redesign and reconstruction, and about 200 corridors need additional lanes to cope with current and projected traffic.
The need for massive investment to transform the first-generation Interstate into what this report calls Interstate 2.0 occurs just as our 20th-century highway funding system—based on fuel taxes and state and federal highway trust funds—is running out of gas. Steady increases in vehicle fuel economy, the lack of inflation indexing of fuel tax rates, and political gridlock over increasing fuel tax rates all make it very difficult even to maintain current pavement and bridge conditions and prevent congestion from getting even worse. The transportation community agrees that we need to phase out fuel taxes and replace them with a more sustainable funding source, generally agreed to be mileage-based user fees of some sort. But no consensus exists on how and when to do this.
This study seeks to address both problems: replacing the aging Interstate system with a 21st-century Interstate 2.0 and taking the first major step toward implementing mileage-based user fees. It proposes that the United States finance the Interstate 2.0 project based on per-mile tolls collected using all-electronic tolling (AET). Over several decades, the transformation of the Interstate system, state by state, would convert at least one-fourth of all travel from per-gallon fuel taxes to per-mile charging.
The study makes quantitative estimates for each state of the cost of reconstructing the existing Interstates, identifies specific corridors in each state that need widening, and estimates the cost of doing so. Reconstruction is estimated at $589 billion in 2010 dollars and lane additions at $394 billion, for a total 2010 cost of $983 billion. To get a handle on the feasibility of toll financing, the study models a tolling system based on 3.5¢/ mile for cars and 14¢/mile for trucks, indexed annually for inflation. Using state-by-state estimates of annual growth in travel by cars and by trucks, over a 35-year period, it calculates the net present value (NPV) of toll revenue and compares that with the net present value of construction and reconstruction costs. Overall, the NPV of revenue equals 99% of the NPV of cost, indicating that the overall system is likely to be toll- financeable.
20th Annual Highway Report on the Performance of State Highway Systems
Source: Reason Foundation
Reason Foundation’s 20th Annual Report on the Performance of State Highway Systems tracks the performance of state-owned highway systems of the United States from 1984 to 2009. Eleven indicators make up each state’s overall rating, including highway expenditures, interstate and primary road pavement condition, bridge condition, urban interstate congestion, fatality rates and narrow rural lanes. The study is based on spending and performance data submitted by the state highway agencies to the federal government.
The system’s overall condition improved dramatically from 2008 to 2009. Six of the seven key indicators of system condition showed improvement, including large gains in rural interstate and urban interstate condition, and a reduction in the fatality rate. Only rural arterial condition worsened slightly, but poor mileage is still only a fraction of 1 percent. These improvements were achieved despite a slight reduction in per-mile expenditures. All seven indicators of performance improved between 2005 and 2009. Overall, expenditures for state-owned roads have increased about 18.8 percent since 2005, but in the 2008-09 recession expenditures actually decreased slightly between 2008 and 2009, dropping about 0.6 percent. States were also more cost-efficient with their money in 2009: administrative costs dropped about 14 percent (possibly through the states disbursing funds received earlier). In addition, money was shifted to capital and bridge expenditures (up 3.5 percent) and maintenance expenditures (up 11.0 percent).
The U.S. economic downturn, which began in 2007 and continued in earnest in 2008 and 2009, is an important background factor influencing these trends. In 2008 total U.S. annual vehicle-miles traveled (VMT) fell about 3.5 percent from 2007 levels, lowering congestion slightly from prior years. Also, beginning in late 2008 and continuing into 2009 and 2010, federal stimulus funding contributed an additional 22 percent to funding resources.
North Dakota continued to lead the cost-effectiveness ratings, followed by Kansas, Wyoming, New Mexico and Montana. But some large states—notably Missouri, Texas and Georgia—were also top-12 performers. At the bottom were Alaska, Rhode Island, Hawaii, California and New Jersey.
Source: Reason Foundation
This report studies the prospects for high-speed rail in the U.S., examining how well high-speed rail works in countries like France, Germany and Japan, and how this country differs from Europe and Asia in travel patterns, spatial structure, car ownership and other factors.
From a financial standpoint, things don’t look good. The majority of high-speed rail lines require large government subsidies from both general taxpayers and drivers. Even with generous subsidies, traveling by high-speed rail is still more expensive than flying for 12 of the 23 most popular high-speed rail routes in the world. The evidence suggests that high-speed rail can only be competitive on routes that are between 200 and 500 miles in length.
High-speed rail is also very expensive to build. Most new routes cost at least $10 million per mile to construct. And while operating costs vary, the cheapest European rail line costs more than $50,000 per seat to operate annually. This means that a U.S. high-speed rail line would need ridership of between 6 million and 9 million people per year to break even. Compare that to the high-speed Acela service, which despite operating in the busy Northeast Corridor averages only 3.4 million passengers per year.
Advocates cite other advantages in support of high-speed rail, but most of these fall apart under close examination:
- Environment: High-speed rail creates more pollution than it prevents because building a high-speed rail line is very energy-intensive.
- Economic Development: High-speed rail does not create much new development; it merely redirects development from one area to another.
- Safety: While high-speed rail is relatively safe, most potential rail passengers travel by an even safer mode—aviation. Thus high-speed rail is unlikely to increase transportation safety.
- Mobility: High-speed rail is also unlikely to improve mobility since most of its potential passengers already travel by air.
- Choice: There is some value in providing travelers a choice of mode. However, customers can already choose between a low-cost bus, a fast plane or a personalized car trip.
Reason-Rupe Poll: 55 Percent of Americans Say We’ve Given Up Too Much Freedom and Privacy in the Name of Security Since 9/11
With the 10th anniversary of the Sept. 11 terrorist attacks approaching, 55 percent of Americans say “we have given up too much freedom and privacy in the name of security” since the attacks, according to a new national Reason-Rupe Public Opinion Survey of 1,200 adults.
Nearly, 79 percent of Americans feel we have less privacy now than we did before 9/11 and 62 percent say we have less personal freedom today. However, 81 percent have faith that the security measures implemented since the attacks make us safer overall.
Only 15 percent of the public is “very confident” that the Department of Homeland Security, created following 9/11, will prevent another terrorist attack on U.S. soil. Another 40 percent are somewhat confident and 21 percent are slightly confident that the agency will prevent an attack.
When it comes to airport security, 49 percent of Americans believe the Transportation Security Administration (TSA) would catch a terrorist trying to board a plane at a U.S. airport, while 44 percent say the TSA would not. Confidence in the TSA is notably high among Democrats, who, by a margin of 54 percent to 38 percent, believe the TSA would capture a terrorist trying to get on a plane. Conversely, by 51 percent to 45 percent, Republicans do not think TSA screeners would spot a terrorist.
+ Full survey results (PDF)
Unmasking the Mortgage Interest Deduction: Who Benefits And By How Much?
Source: Reason Foundation
The deduction of mortgage interest from federal income taxes subsidizes homeownership, making it more affordable to become a homeowner. Or so we’ve been told. It is a highly popular tax break, yet one that is not without criticism. For example, it turns out the mortgage interest deduction (MID) primarily benefits those who would choose to own homes anyway while encouraging them to simply buy bigger and more expensive homes. Those who are on the margin between renting and owning tend not to itemize deductions, thus they cannot benefit from the MID. As a result, if the goal is to increase the homeownership rate, the MID is an ineffective tool. Furthermore, it creates a distortion in the choice between financing owner-occupied housing with debt or other assets, and in the choice between investing in residential real estate or other assets.
Despite its popularity among voters, the mortgage interest deduction has long been a target for elimination. Most recently, President Obama’s deficit reduction commission (Simpson-Bowles) had it in its sights. While there is general sentiment among voters that the mortgage interest deduction is a good idea, there is little understanding of its impact. In order to understand the potential impact of closing this loophole, this study examines specifically who benefits from the MID and how much they benefit. It also provides an estimate of how much tax rates could be reduced if the deduction were eliminated but revenues were held constant as well as a discussion of other possible changes to the mortgage interest deduction.
+ Summary (PDF)
+ Full Report (PDF)