Director of Economic Policy Studies Kevin Hassett examines the problems with the nation's highway infrastructure that are exacerbated by high fuel costs.  While lawmakers plan to pour more government money into our roads, Hassett suggests that private-sector partnerships may offer the best solution for a deteriorating transportation infrastructure.

Senior Fellow Kevin A. Hassett

When the workday ended on July 31, the Hassett family loaded into the minivan and headed to New England for a short break. The trip presented the kind of travel nightmare that has become all too common on America's "highways to hell" and offered a glimpse of what awaits you if you are heading onto the roads for your summer break.

The fun began with construction delays north of Baltimore. Then came traffic stoppage related to an accident, congestion on the New Jersey Turnpike at the toll booths, and then the mother of all delays on Interstate 84 in Connecticut, where highway-construction workers created a 45-minute delay when they took the road down from three lanes to one.

The last inconvenience presented what has become the classic American highway experience. After untold miles of creeping forward in stop-and-go traffic, we finally got to the construction site, where a handful of workers and trucks were doing very little work, if any, while we passed. At least they were kind enough to wave.

The experience is common because we now have a crumbling and inadequate infrastructure, and efforts to repair it are failing miserably. Catastrophes like the Mississippi River bridge collapse in Minneapolis are almost certain to be repeated.

This is both because too little money is being devoted to construction and because highway building is managed so poorly. The objective seems at times to be the erection of a slow-motion perpetual jobs machine, rather than a road or a bridge.

Blame Gasoline Prices

The issue has been festering for years, but it's coming to a head now because of high gasoline prices.

Americans have responded to these soaring prices by cutting back their driving. Department of Transportation figures released last week show that Americans drove almost 10 billion fewer miles in May 2008 than they did a year earlier. Gas consumption is also projected to fall this year for the first time since 1991.

While this is good news for congestion in the abstract, this year's decline in highway travel will do little to reverse the 20-year trend of increased vehicle travel by Americans. Statistics from the Department of Transportation show that Americans now travel twice as many miles by vehicle as they did in 1980.

According to the National Surface Transportation Policy and Revenue Study Commission, we spend an average of 81 minutes behind the wheel every day, up from 40 minutes in 1983.

Export Surge

The commission also reports that surging exports are increasing congestion, especially in sections of the highway and rail systems that were built more than 50 years ago. In terms of volume, international trade is handled through a limited number of gateway seaports, mostly in congested urban areas. Capacity at these ports is becoming severely constrained.

And the flip side is that the decline in driving affects highway funding. It starves the government of the revenue needed to fix the inadequate infrastructure. This is because gasoline taxes, unlike most other sales taxes, are imposed on a per-unit basis: 18.4 cents of every gallon of gas sold and 24.4 cents per gallon of diesel goes toward highway funding. When prices skyrocket, those taxes stay the same and tax revenue drops with falling gasoline usage.

As a result, government revenue from fuel taxes has declined dramatically this year. Transportation officials are estimating a $3.1 billion budget shortfall for the Highway Trust Fund in 2009, primarily due to consumers' responses to high gas prices.

Congress Involved

The crisis in highway funding brought transportation policy to the forefront of Congress's agenda last week. In an effort to avoid a disruption in hundreds of highway projects across the country, the House passed a measure to inject $8 billion into the Highway Trust Fund, even with the president's veto threat.

The dispute is over whether drivers themselves should pay for roads, or whether funding can come from general revenue.

That squabble will surely resolve itself this year, but even if it does, the fix is likely to be only a drop in the bucket. While we now spend less than $90 billion on transportation infrastructure, a recent report by the National Surface Transportation Policy and Revenue Study Commission said $225 billion per year is needed for infrastructure maintenance and upgrades.

That need is so large that it seems unlikely, given all of the other demands on government revenue, that an adequate fix will come anytime soon.

Privatize the Roads

Clearly, what is needed is a long-term solution, one that asks motorists to contribute to fund their roads.

What will the federal government do? In the end, it seems that spending pressures are likely to force us to consider thinking of highways not as a fiscal drain, but as a revenue spigot.

That is, it seems inevitable that the federal government will follow the example of Chicago, which leased the Chicago Skyway, a 7.8-mile strip of highway to a private investment company in 2005 for more than $1.8 billion. The trend is accelerating. Indiana followed that example in 2006 by leasing its toll road for more than $3.8 billion. Just this year, Abertis Infraestructuras SA, a Spanish-based company, and Citigroup Inc. leased the Pennsylvania Turnpike for $12.8 billion.

When federal highways are leased, lean private companies rather than inefficient and corrupt bureaucracies will manage our roads. There will be no more perpetual job machines.

Traveling will be more costly because of the tolls, but agonizing trips like last week's "bogus journey" through Connecticut will be a thing of the past.

Kevin A. Hassett is a senior fellow and the director of economic policy studies at AEI.