The Financial Crisis on ALL Streets

One of the biggest worries about the current financial crisis on Wall Street is that it will spill over and affect “Main Street”. Yet Main Street is not the only street we should be worrying about, ALL streets could be affected. In other words, this economic emergency will surely impact the next transportation bill in a variety of ways.

To begin with, the large increase in transportation spending that many in Congress are calling for may not be possible given the massive amounts of debt the government will soon take on if it finances a bailout. The current transportation revenue mechanism, the Highway Trust Fund, is already faltering, unable to raise enough money to keep up with authorized spending. Forget about increased spending, even spending at our present level in the future is impossible unless either new transportation fees are levied or money from the general fund is appropriated. Given that the general fund is already maxed out, something has got to give: either more national debt or higher transportation charges for users.

It is highly unlikely, but conceivable, that spending on transportation would decrease, but that would be a huge mistake. An efficient transportation system is fundamental to economic growth, and while underinvestment in infrastructure may not cause pain today, it surely will down the road. But, as we have mentioned in various other places, there are at least two things that can be done to improve transportation without increasing spending: more effectively invest what we already have, and better price the existing system to increase its efficiency.

We cannot expect to improve the transportation system simply by throwing more money at it; that was tried with the last transportation bill and it has failed. What is needed is smarter investment, investment that is prioritized on national goals and on performance outcomes. As obvious as that sounds, it would be a sea-change in how things are done today.

In addition to performance based investment, better pricing of the current system would improve efficiency overnight. For example, a free, bumper-to-bumper lane on the highway carries many fewer cars per hour than a priced lane that has free flowing cars.

These are simple ideas, but recent transportation bills have not addressed them directly. Perhaps the financial crisis will necessitate a back to basics approach in the next go-around, which would help the transportation system without costing a dime.

-Daniel Lewis