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transit, then it seems reasonable to spend 10 percent of

transportation dollars on transit.  And if the only major

source of transportation dollars is highway user fees, then

it appears sensible to divert some of those fees to transit

modes.

It also appears sensible to use a rational planning

process to determine what share of transportation dollars

should go to each mode.  And since autos are notorious for

causing air pollution and congestion, it seems sensible to

dedicate a share of highway user fees to congestion and

pollution mitigation.

In actual practice, those ideas turn out to be not so

sensible at all.  In the hands of various interest groups,

each with its own agenda, the rational planning process

intended by ISTEA produces extremely irrational results.

The problem is not with ISTEA's goals but with its

means.  Instead of finding new sources of revenue for pedes-

trians and transit, ISTEA made highway funds available.  A

portion of federal gasoline tax revenues is dedicated to

highways, and a portion is dedicated to transit, but a large

share is "flexible," available for highways, transit, or

pedestrian ways.

The flexible funds have become a "commons," leading

advocates of the various modes and regions to try to get

their "fair share" before some other mode or region gets it.

As the executive of Portland's metropolitan planning agency

recently said about ISTEA reauthorization, "The region must

take action to bring Oregon's fair share of federal trans-

portation dollars back home or they will be lost to other

regions of the country."9

Making billions of dollars of highway user fees avail-

able for a variety of nonhighway uses creates incentives for

people to distort the process in their favor.  Since rail is

so expensive, for example, building a useless rail line

helps a region to get its "fair share" (or more) of federal

dollars.  Rail construction creates many local engineering

and construction jobs.  Although buses are nearly always a

far more cost-effective form of transit, most money spent on

buses goes to bus manufacturers.  Unless a city is home to a

bus manufacturer, then, city politicians get little politi-

cal benefit from spending federal dollars on buses.

The problem is exacerbated by the structure of the

Department of Transportation.  The department's Federal

Highway Administration, which distributes highway construc-