Making Highways and Airports Pay

In today's Wall Street Journal is an opinion piece entitled "How to Make Highways and Airports Pay". I apologize about the WSJ paywall if you are not a subscriber, but the gist of the article is that federal and state localities should adopt a feature called Asset Recycling which allows the government to lease assets such as highways, bridges, tunnels and airports to private consortiums and they, in turn, charge consumers to use the asset. The government then takes the money it gets from the private businesses and invests that money into other meaningful projects.

Problem #1 is that money which the government receives is virtually NEVER sequestered for use only as intended. Problem #2 is that while private concerns can usually get things done cheaper than government, there is that pesky problem of profit. The management company needs to show a profit for all of the out years and a 75 year lease can be a long run to fund. I think there is a place for privatization with government services, but I do not think it includes infrastructure.

I wrote back to the Journal and since they have never published any of my responses, I thought I would share it with you. Here it is in its entirety:

Dear Opinion Editors,

I would like to chide your headline writer for leaving out one word in Monday’s opinion piece. The headline should read “How to Make Highways, Airports and Motorists Pay”. Notably missing in the piece is how much it would cost for motorists (both private and commercial) to drive on these newly completed infrastructure projects.

Using a very generous 25 mpg for automobiles and 7 mpg for a tractor trailer, current national average fuel prices show that a car costs about 11.5 cents per mile in fuel to drive and it costs 47 cents per mile for a semi. This means that the feds get $0.00736 per mile from cars and $0.0348 per mile from trucks. Granted, this is not a lot of money even when multiplied by the 3 trillion-plus miles driven in the US each year.

Given that the fuel tax has not risen since 1993, we are due for an increase. We have seen our fuel costs double and triple since that time. The economy is still humming and a record number of miles were driven last year. The point is that fuel taxes do not adhere to classic elasticity of demand curves, since the price of the fuel is so variable and the demand is, in many cases, inelastic.

It costs roughly 10 cents per mile to drive the length of the NJ Turnpike for a car. In southeastern Virginia we toll bridges and tunnels. It costs anywhere from $1.73 to $2.09 for a car and $5.17 to $8.33 per truck to drive under a body of water. In metro Washington DC, demand tolls have turned publicly funded HOV lanes into gentrified, speedways while non-payers slog it into the district at 3 mph on the freeways.

Would I be willing to pay 10 or 15 cents per mile to have wonderful highways, bridges and tunnels? When calculated backwards into the price of gasoline, if the “toll” were added to federal gasoline taxes, I see that my gasoline price would go up between $2.50 and $3.75 per gallon. A trucker would pay between $0.70 and $1.05 per gallon more but they would burn through so much more fuel that the effect would be the same. (Note, there would have to be a separate, higher tax for diesel-fueled passenger vehicles since it would take about 10 seconds for the public to figure out that diesel was $2 per gallon cheaper than gasoline and everyone would switch to diesel.)

These calculations do not even take into consideration electric vehicles (EVs) which effectively pay NO highway fuel tax nor does it consider how to continue to charge more for “demand lanes”.

Bottom line… are we, as citizens, willing to pay $3.00 or more per gallon to drive but have no tolls and wonderful highways? I suspect that the answer is no, especially in flyover country, but in dense metro areas and the Northeast, it might be yes. Whatever the answer, if these billions of dollars are collected, they MUST all be spent on highway, bridge and tunnel improvements otherwise the American people will become a special kind of angry.