How to Improve the Stimulus Bill

There has been much discomfort in the transportation community about the amount of funding for transportation infrastructure in the stimulus, or economic recovery, bill reported out of the House Appropriations Committee a week ago Of course, we do not yet know what the final bill will contain for transportation or even the degree to which the House language is reflective of what the new President and his Administration desire, but this first significant legislative action on economic stimulus is an opportunity to remind ourselves of our goals and purposes.

I am not an economist, but it seems to me that the purpose of a stimulus bill is to stimulate the economy and, more specifically, to stimulate job creation. That is why there has been a focus on "shovel-ready" projects and why the House bill contained "use it or lose it" language. Nonetheless, as the Congressional Budget Office noted, there is some delay (often, fairly significant delays) before transportation authorizations are turned into outlays, that is, before they become money actually spent and invested in the economy. Indeed, even though every recent surface transportation authorization bill has been primarily justified on the basis of job creation, no one really knows how many jobs are created by transportation bills or how quickly. My limited exposure to this issue during my service at the U.S. Department of Transportation left me skeptical that there was very much authenticity in, or analytical rigor to, the estimates of "X number of jobs are created for $1 billion of spending" in this sector.

Nonetheless, while we may not know for certain how many jobs are created, or how quickly, by surface transportation spending, clearly these investments make fiscal sense in the current economic environment. With that in mind, let's continue to remember that job creation is the purpose of the transportation spending in this stimulus bill. The transportation sections of a stimulus bill are not designed to correct the serious shortfalls that we have had in infrastructure investment in this country for many years or to correct the fact that much of the surface transportation money that has been authorized by Congress in recent bills has not always been spent wisely.

Our goals should remain constant: however much money for transportation is contained in the final stimulus or economic recovery bill, those funds should be spent on "good" projects. That means projects that are likely to bring the greatest economic returns in the shortest time. Most often, these will be projects designed to restore transportation facilities and networks to states of good repair and to enhance the operational efficiency and productivity of existing systems.

Moreover, the principles of transparency, tracking, and accountability that are in the House stimulus bill should be retained in the final legislative language.

This discussion reminds us that we need significant long-term change in federal surface transportation programs. That is unlikely to happen in a stimulus bill, but we should be certain that the stimulus bill does not set this effort back. There was -- and, I suppose, there remains -- a risk that the attention on the total level of transportation funding in a stimulus bill would divert us from this purpose and would "swallow-up" the debate over national transportation goals and over the need to establish performance-driven and accountable surface transportation policies.

We need to articulate these national transportation goals, to redefine the federal role in transportation, to assure funding mechanisms that advance performance and accountability, to "get the prices right" in transportation (as the Eddington Report advocated for the U.K)., and to reform fundamentally federal surface transportation programs. These challenges will only be met in the surface transportation authorization bill yet before us, and these challenges will remain, no matter the level of transportation funding in the final stimulus bill.

-Emil Frankel

National Transportation Policy Project Reception at TRB Tonight

Dear Readers,

The Bipartisan Policy Center's National Transportation Policy Project is hosting a reception tonight, Wednesday, the 14th, as part of the Transportation Research Board Annual Meeting. The reception will be at the Omni Shoreham (by Woodley Park metro), in the Congressional Room, from 6-7:30pm. All are invited to attend.

The reception will feature two of NTPP's Co-Chairs, former Congressman Sherwood Boehlert and former Detroit Mayor Dennis Archer. Several members of the NTPP will be in attendance as well, including former FAA administrator Jane Garvey. Senator Mark Warner, a former NTPP Co-Chair, will also be stopping by early in the evening, and there may be a guest appearance by a former Senator...

Thanks for reading.

Congressman LaHood and the Department of Transportation

During his career in the U.S. House of Representatives Congressman LaHood had a reputation for approaching public problems with an open and pragmatic mind.  I am confident that this attitude will translate into a willingness to consider significant reform in the transportation sector during his leadership of U.S. Department of Transportation.  Many necessary changes can only come through legislative action, but DOT can undertake administrative and regulatory changes to promote greater linkages between transportation policy, economic growth and competitiveness, energy security, and climate change. Addressing these issues, which are deeply interwoven with transportation policy areas, is essential in developing a forward-looking federal vision – and DOT can play an important role in this task.

There are a number of steps DOT can begin today to reform the system. Perhaps the most dramatic might be a reorganization of DOT’s structure along functional, rather than modal, lines. The leading example of such a departmental restructuring comes from the United Kingdom. The goal is to better align priorities, objectives, and process while reducing inefficiency and providing incentives for success. A restructuring would help clarify and consolidate the grant-making agencies within the DOT (like merging the highway and transit agencies into one) and the more regulatory-oriented agencies that deal with goals like safety. Within the limits of existing statute, the new Secretary might consider a reorganization of DOT around national goals and purposes, such as transportation in metropolitan regions, major trade and goods movement corridors, and intercity passenger connectivity.  In addition, the new Secretary might undertake – again, within existing law – a consolidation of the Department’s regulatory activities that deal with goals like safety.

DOT can lead in other areas as well. In focusing on energy security and environmental goals, Cong. LaHood, as Secretary, should begin the process of further increases in CAFE standards for all classes of vehicles and should direct DOT’s operating agencies to develop guidance to state, local, and metropolitan agencies that will encourage genuine strategic transportation planning and linkages between transportation, economic growth, energy, and climate change at those levels. To improve operations DOT can take action to enhance the role and capacity of the Bureau of Transportation Statistics to collect data critical to insuring performance and accountability; without better data it is hard to develop accountability much less set goals. DOT can also move to put a greater emphasis on operating improvements and restoration of existing assets and, to the extent possible under existing law, using DOT programs and authority to allow state and local governments to utilize pricing in the management of systems. 

Even if all of these goals cannot be fully accomplished in the next few years, a DOT focused on opportunistically moving the ball forward when possible will help to ensure that critical long-term concerns are advanced.

Has Mass Transit Finally Arrived? - Guest Blog by Emil Frankel

An online forum hosted by the National Journal magazine recently posed that question to a diverse group of transportation stakeholders, myself included, and I will share here the reponse I posted for them.

While the question of whether mass transit’s time has arrived is an interesting one, I think it is a component of a broader question: how can transportation best serve national goals and purposes like economic growth, environmental and energy sustainability, national connectivity, metropolitan accessibility, and safety? Improved transit can and should be an important component of transportation programs that serve those purposes – but objectivity is required to assess realistically how far transit can move us in the right direction.

Transit is well-suited to many situations, but not all. Improved transit in high-density areas can improve accessibility, reduce environmental and energy security damages, and foster economic growth in ways that simply adding more highways might not. At the same time, however, transit works best when used in conjunction with a program of policies, such as road pricing, that encourage system flexibility and incentivize transit usage. Transit capacity will meet the goals people want it to serve only if it is actually used. An approach that integrates the planning and prioritizing of road, rail, and transit programs is key to maximizing each mode’s performance towards national goals.

The long-running debate about how to allocate money between the various modes is out-of-date. If we are speaking about the federal role, we should be focused on funding that achieves outcomes tied to national goals, not in preferring one mode over another. Many people would agree that significant transit expansion in major metropolitan areas is likely to be a valuable tool in meeting national goals – but we also cannot ignore that improving the operations of existing highway and road networks might also play an important role. We need to understand trade-offs and to prioritize operations and projects within broad, cross-modal programs.

So before we jump to a conclusion about how to allocate funding - whether to give transit or highways more money - let’s ensure that we have a performance-based approach that can help us identify and prioritize programs that achieve national goals.

To that end, the Bipartisan Policy Center's National Transportation Policy Project, which I direct, is bringing new voices to the transportation debate and creating a dynamic and enduring framework for the next transportation authorization and beyond.

-Emil Frankel

Obama's Department of Transportation (Possibly)

As President-Elect Obama names the key personnel in his new administration, one department he has yet to address is Transportation. The Washington Post recently profiled some of the people who may be up for the top job - including Jane Garvey, a member of the National Transportation Policy Project - and it is certainly a talented group. Regardless of who is appointed, however, they may face both the necessity and the opportunity to dramatically restructure how the Department is organized. The current DOT structure is divided by modes (e.g. highway, transit, aviation), when it really should be built around goals.

What does that mean exactly, and how would it change things? The leading example of such a departmental restructuring comes from the United Kingdom. Following the release of the Eddington Report, which we have mentioned in previous blogs, the UK set out to restructure its Department for Transport in a way that aligned with the report’s recommendations. For instance, the report presented five governance principles, two key ones we will mention here being:

• 1.       The geographic scope of decision making should allow a whole journey approach – reflecting the economic and geographic reality of travel.
  
• 2.       To ensure decision makers consider all modes and policy options, they need power or influence over all modes and policy options.
  

To incorporate these principles the UK switched from a modal structure, like the US currently has, to one centered on goals and places.

The key impact of this kind of restructuring is that it better aligns priorities, objectives, and process; it reduces inefficiency and sets up incentives for success. A restructuring would help clarify and consolidate the grant-making agencies within the DOT (like merging the highway and transit agencies into one) and the more regulatory-oriented agencies that deal with goals like safety.  If America is to renew its transportation system so that it can meet environmental, energy, and economic goals, the DOT should be organized around ends not means. The current divisions along modal lines foster destructive competition about how much money each mode gets instead of a focus on what those modes are trying to achieve in cooperation. The transportation system is just that, a system composed of many parts that should be working in coordination, and it’s time that the DOT’s organization properly recognized that fact.

-Daniel Lewis

 

 

The Cost of Gas and Transit

A recent article in the Los Angeles Times highlighted some signs that transit ridership is declining as gas prices fall. Although much of the ridership evidence is anecdotal at this point, given the roughly 50% drop in gas prices over the last few months a return to cars would not be unexpected. However, more data will need to be gathered (and numbers from recent months more fully analyzed) before any firm conclusions can be made about driving trends. Even then the implications may not be clear, because several questions cloud the situation.

The first x-factor is the weak economy. Economic growth or weakness has in the past correlated quite closely with vehicle miles travelled (VMT) - with growth increasing VMT and weakness hurting it -although vigorous debate still exists about which way the causation flows. In fact, recent events may yield some insight for this debate. For example, a year ago the economy was still fairly healthy and gas prices were rising sharply – two forces that should pull VMT in opposite directions. In recent months the economy has been hit hard, yet gas prices have also plummeted, once again creating forces that usually pull VMT in opposite directions. The data is not yet available to clearly assess how this is playing out, but it will be interesting to look at more closely in the near future.

The second x-factor is uncertainty about future gas prices. As we have discussed in past blogs, a decision between driving and transit can be made day-to-day, thus gas prices have an instant short-term impact on transit usage. But expectations of higher prices in the future may be continuing to shape longer term consumer decisions about vehicle purchases and the location of housing. If that is the case, a full rebound to previous VMT levels (per capita) may not occur, despite current cheap gas.

The LA Times article underlines the importance of having a flexible transportation system with multiple ways to get from point A to point B. But more than just current gas prices are at work in influencing transit usage today, and it would be a mistake to draw conclusions about the long-term health and viability of transit from recent anecdotal evidence. 

-Daniel Lewis

Transportation in a Stimulus Package, Part Two

Debate about an economic stimulus package continues to dominate the news. Obama recently called for a plan that will save or create 2.5 million jobs by January of 2011. It is unclear how large this package would be and how it would be spent, but he has indicated that a substantial portion of it would go towards rebuilding transportation infrastructure. Some people disagree about whether transportation should be part of a stimulus, while others disagree about what types of projects should be funded if transportation is part of a stimulus. These questions are best illuminated with data, so let’s get into the figures.

The Federal Highway Administration’s most recent 2008 estimate is that $1.25 billion in highway capital investment supports (not creates) 34,779 one-year jobs. As other scholars and government agencies have pointed out though, these figures must be treated with caution. There are several important caveats to transportation spending, among them: 1) federal deficits to fund spending can “crowd out” private investment, causing job losses in other economic sectors (Ronald Utt at the Heritage Foundation articulates this point); 2) the FHWA cautions that only short-term resurfacing and preservation projects spend funds quickly in the first year and thus have a timely impact; 3) unless there is excess unemployment, job demand for construction will merely be met by shifting workers from other sectors.

In short, it is very difficult to be certain about how many jobs will be created from increased transportation spending in the short term. Nevertheless, it might be a good time to invest in transportation. For instance, data from the Bureau of Labor Statistics indicates that there have been significant job losses in the construction industry in the past year (although there is significant variation between states/regions), meaning that highway construction jobs might bring people back to work without substitution. With regards to the immediacy of transportation spending, our system is in such a poor state of repair that now is an opportune time to focus on fixing what we have, which fits nicely with a fast stimulus. Perhaps the most important caveat, however, is the fundamental proposition that government spending in one sector inherently stifles growth in other sectors. This is a classic economic question, and we will leave it to more sophisticated economists. For two contrasting opinions compare the views of Brian Riedl and Paul Krugman. Riedl, of the Heritage Foundation, argues that stimulus fails because “every dollar Congress ‘injects’ into the economy must first be taxed or borrowed out of the economy. No new spending power is created.” Krugman, a New York Times columnist and Nobel prize winning economist, makes the case in a series of columns that increased government spending, on infrastructure instead of rebate checks, can play a decisive and vital role in restarting a stalled economy.

While the short-term impact of transportation spending is perhaps unclear, it is more broadly accepted that government investment in areas like infrastructure and education can pay greater dividends in the long-run. These investments increase productivity by improving human and physical capital – and the private sector generally under-invests in these public areas because it cannot fully capture the gains.

It seems increasingly inevitable that transportation will be part of a stimulus package. Although we may lack a perfect understanding of the exact benefits of transportation spending in the short-run, there is some understanding about the most valuable transportation investments overall, like system preservation. An effective stimulus package should focus on the most valuable and timely transportation investments, and this need not conflict with a broader view on promoting long-term prosperity.

-Daniel Lewis