Tag: infrastructure

Protectionism Is Crippling Atlantic and Gulf Coast Ports

George Will writes in his column today about the importance of the Port of Charleston – and by extension, trade – to the economy of South Carolina. Recent completion of the 10-year project to widen the Panama Canal to accommodate more traffic and passage of a new class of container ships with nearly triple the capacity of their immediate predecessors has exposed a logistics snafu that could cost South Carolina’s economy billions of dollars: Charleston Harbor is too shallow to accommodate these much larger, “Post-Panamax” ships efficiently (only limited sections of the harbor are deep enough and only during high tide).

According to the American Society of Civil Engineers, these vessels can lower shipping costs from 15-20 percent, but harbors need to be at least 47 feet deep to accommodate them. The U.S. Army Corps of Engineers reports that only seven of the 44 major U.S. Gulf Coast and Atlantic ports are “Post-Panamax ready.” American ports must be modernized if the United States is going to continue to succeed at attracting investment in manufacturing and if U.S. companies are going to compete successfully in the global economy.

As I wrote in the Wall Street Journal last year:

The absence of suitable harbors, especially in the fast-growing Southeast, means fewer infrastructure- and business-development projects to undergird regional growth. It also means that Post-Panamax ships will have to continue calling on West Coast ports, where their containers will be put on trucks and railcars to get products from Asia to the U.S. East and Midwest—a slower and more expensive process.

The problem can be traced to one major issue: funding.  And that issue is made more complicated by another problem: protectionism.  Most funding of infrastructure inevitably come from federal and state budgets – taxpayers, who should have a voice in the debate about whether these infrastructure projects constitute wise public investments.  But a couple of long-standing, though obscure, protectionist laws have conspired to reduce capacity in dredging services, ensuring that projects take twice as long and cost twice as much as they should.

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The Who-Gets-to-Decide Crisis

“There is now a consensus that the United States should substantially raise its level of infrastructure investment,” writes former treasury secretary Lawrence Summers in the Washington Post. Correction: There is now a consensus among two presidential candidates that the United States should increase infrastructure spending. That’s far from a broad consensus.

“America’s infrastructure crisis is really a maintenance crisis,” says the left-leaning CityLab. The “infrastructure crisis is about socialism,” says the conservative Heritage Foundation. My colleague Chris Edwards says, “There is no widespread crisis of crumbling infrastructure.” “The infrastructure crisis … isn’t,” the Reason Foundation agrees.

As left-leaning Charles Marohn points out, the idea that there is an infrastructure crisis is promoted by an “infrastructure cult” led by the American Society of Civil Engineers. As John Oliver noted, relying on them to decide whether there is enough infrastructure spending is like asking a golden retriever if enough tennis balls are being thrown.

In general, most infrastructure funded out of user fees is in good shape. Highways and bridges, for example, are largely funded out of user fees, and the number of bridges that are structurally deficient has declined by more than 52 percent since 1992. The average roughness of highway pavements has also declined for every class of road.

Some infrastructure, such as rail transit, is crumbling. The infrastructure in the worst condition is infrastructure that is heavily subsidized, because politicians would rather build new projects than maintain old ones. That suggests the U.S. government should spend less, not more, on new infrastructure. It also suggests that we should stop building rail transit lines we can’t afford to maintain and maybe start thinking about scrapping some of the rail systems we have.

In Africa, Institutions Matter More than Infrastructure

Washington Post article recently highlighted the impressive but uneven progress that Africa has made in its struggle against poverty. The article looked at questions pertaining to material wellbeing, including “the number of times that an average family had to go without basic necessities.” On that measure, Cape Verde saw the most rapid improvement. And so the article asks, “What did Cape Verde do right?” 

Cape Verde’s superior infrastructure, the Washington Post explains, is partly responsible for that country’s economic progress. Surely that cannot be the full answer. The United States did not have an interstate road network till the Eisenhower Administration – decades after the United States became the richest and most powerful country in the world. Similarly, Germany was the most powerful and richest country in Europe a long time before constructing its famous autobahns. 
  
In fact, it is Cape Verde’s policies and institutions that we should look to as reasons for that country’s superior performance relative to, say, Liberia, where poverty increased the most – according to the Washington Post. According to the Center for Systemic Peace, Cape Verde is a democracy. Liberia, in contrast, is far behind.

Highway Bill Extends Big Spending

Here is the first paragraph of an Associated Press story about the new House highway bill:

Despite years of warnings that the nation’s roads, bridges and transit systems are falling apart and will bring nightmarish congestion, the House on Thursday passed a six-year transportation bill that maintains the spending status quo.

Yet some of the government’s own data—as I cite here—shows that, rather than “falling apart,” the nation’s bridges and Interstate highways have steadily improved in quality over the past two decades.

I wish reporters would explore the data themselves, rather than just parroting what the transportation lobby groups say. I also wish they would use their imaginations a bit and realize that if bridges and highways were actually nightmarish and falling apart, then state and local governments—who own the bridges and highways—have the responsibility and full capability of fixing them themselves.

The Folly of Centralized Spending

I’ve argued that the centralization of government spending in Washington over the past century has severely undermined good governance. Citizens get worse outcomes when funding and decisionmaking for education, infrastructure, and other things are made by the central government rather than state and local governments and the private sector. The problem is the same in the European Union, as a new article in Bloomberg on the funding of Polish airports illustrates:

Local authorities are spending some 205 million zloty ($58 million), including more than $44 million in EU subsidies, to build runways and a new terminal that could accommodate more than 1 million passengers a year. The Olsztyn Mazury Airport is scheduled to open next January, but traffic and revenue forecasts developed by the project’s backers are “very far from reality,” says Jacek Krawczyk, a former chairman of LOT Polish airlines who advises the EU on aviation policy through its European Economic and Social Committee.

Szymany adds to a burgeoning supply of costly new airports across Poland. Since 2007, the EU has spent more than €600 million ($666 million) to build or renovate a dozen Polish airports.

… Mostly, though, Poland’s new airports have been a financial bust. A report in December by the European Court of Auditors found that EU-subsidized airport projects in Poland, as well as others in Estonia, Greece, Italy, and Spain, had “produced poor value for money.” Traffic at most airports fell far short of projections, and there was little evidence of broader economic benefits, such as job creation, the report found.  

With respect to U.S. infrastructure, there is ongoing pressure to increase federal investment, despite decades of experience on the inefficiency of it. Politicians and lobby groups constantly complain that America does not spend enough on infrastructure. But they rarely discuss how to ensure efficiency in spending, or cite any advantages of federal spending over state, local, and private spending.

I’ve discussed the many downsides to federal aid for infrastructure and other local activities here and here. But I was alerted to an additional argument against aid from this Regulation article by William Fischel and this book by James Bennett. Federal aid encourages local governments to expropriate private property, often for dubious purposes.

The article and book discuss the expropriation of Detroit homes for the benefit of General Motors in the 1980s. The “Poletown” project would not have happened without $200 million in federal and state loans and grants to the city. So Fischel makes the point that (abusive) government uses of eminent domain—such as the Kelo case in New London, Connecticut—are encouraged by the flow of federal and state funds to cities. That is, money for “economic development” and the like.

State and local governments would make better decisions if they were responsible for their own funding of programs and projects. The annual flow of more than $600 billion in federal aid to state and local governments should be phased out over time and eliminated.

Too Much Money Going to the Wrong Places

It appears that the Amtrak crash that killed seven people Tuesday resulted from speeding, but big-government advocates are already using this accident to make their case for more infrastructure spending. In fact, the problem is not too little money, but too much money going to the wrong places.

In 2008, President George Bush signed a law mandating that most railroads, including Amtrak, install positive train control (PTC) by December of 2015. PTC would force trains to slow or stop if the operator ignored signals or speed limits.

In 2009 and 2010, President Obama asked a Democratic Congress to give him $10 billion to spend on high-speed trains, and Congress agreed. Not one cent of that money went to installing PTC in Amtrak’s Northeast Corridor.

PTC would have prevented this accident. There was plenty of money available to install it, but the Obama administration, in its infinite wisdom, chose to spend it elsewhere. Two days ago, it would have been embarrassing to think that the government-run Amtrak hadn’t yet completed installation of PTC on its highest-speed corridor. Today, it’s a tragedy. But how is it the fault of fiscal conservatives?

This accident is just one more example of a political fact of life: Politicians are more likely to put dollars into new construction, such as high-speed rail, than to spend them on safety and maintenance of existing infrastructure. As John Nolte says on Breitbart, “Amtrak is not underfunded; it is criminally mismanaged.”

Transportation journalist Don Phillips presents one example of Amtrak mismanagement in the June issue of Trains magazine: instead of promoting a culture of safety, Amtrak has a culture of don’t care. Phillips points to a February report from Amtrak’s Inspector General that found that Amtrak has the least-safe working environment of any major railroad. Amtrak employees are more than three times as likely to be injured or killed on the job as employees of BNSF, CSX, Norfolk Southern, or Union Pacific.

This poor record, says the report, is a direct result of a lack of accountability “at all levels.” Employee injuries in 2013 were only one-twelfth as likely to result in disciplinary action as in 2009, resulting in employees who believe today that they “can ignore rules and safe practices with impunity.” Safety is of so little importance in the organization that three out of four of the employees interviewed by the inspector general believed that Amtrak’s safety record was better, not worse, than other railroads.

One reason why Amtrak has a poor safety culture may be that Congress has legally limited Amtrak’s liability for any single crash to $200 million. Imagine the outrage if Congress limited the liability of oil companies, pipeline companies, Monsanto, or other private corporations. Yet the progressives who wrote Amtrak legislation considered such a liability limit perfectly acceptable.

If Congress were to respond to this crash by increasing federal infrastructure spending, it is all too likely that much if not most of that money would go for useless new projects such as new high-speed rail lines, light rail, and bridges to nowhere. We don’t need intercity trains that cost several times as much but go less than half as fast as flying; we don’t need urban trains that cost 50 times as much but can’t carry as many people per hour as buses; we don’t need new bridges if bridge users themselves aren’t willing to pay for them.

As I’ve documented elsewhere, infrastructure that is funded out of user fees tends to be better maintained than infrastructure that is funded out of tax dollars. User fees also give transportation managers signals for where new infrastructure is really needed; if people won’t pay for it out of user fees, it probably isn’t necessary.

Before 1970, America’s transportation system was almost entirely funded out of user fees and it was the best in the world. Since then, funding decisions have increasingly been made by politicians who are more interested in getting their pictures taken cutting ribbons than in making sure our transportation systems run safely and smoothly.

This country doesn’t need more infrastructure that it can’t afford to maintain. Instead, it needs a more reliable system of transport funding, and that means one based on user fees and not tax subsidies or federal deficit spending.

Getting Returns from Infrastructure

While many interest groups are promoting increased federal spending on infrastructure on the grounds that it will spur economic growth, the Wall Street Journal reports that the “benefits of infrastructure spending [are] not so clear-cut.” Yet there is a simple way to determine whether a particular infrastructure project will generate economic benefits.

Spending on transportation infrastructure, for example, generates benefits when that new infrastructure increases total mobility of people or freight. New infrastructure will increase mobility if it provides transportation that is faster, cheaper, more convenient, and/or safer than before. 

In 1956, Congress created the Interstate Highway System and dedicated federal gas taxes and other highway taxes to that system. The result was the largest public works project in history and one of the most successful. Today, more than 20 percent of all passenger travel and around 15 percent of all freight in the United States is on the interstates.

Moreover, this is all new travel; the interstates didn’t substitute for some other form of travel, as other highway and airline travel) have also significantly increased in those years. (Rail passenger travel decreased, but that decrease was a lot smaller than increases in other travel.) The interstates were successful because they provided transportation that is faster, cheaper (because it saves fuel), more convenient, and safer than before.