TCS Daily

The Price Is Wrong: Why Our Roads Are So Clogged

By Joseph Giglio - February 13, 2007 12:00 AM

This week the Bush administration asked Congress for $175 million for state and local governments to reduce traffic congestion, in addition to the $105 million earmarked last year. One of the White House's marquee projects is congestion pricing, or charging motorists a fee for using a particular roadway based on its traffic volume at any given minute.

Recent reports seem to claim congestion pricing is a sop to Democrats, or as the Christian Science Monitor put it, jumping on "the Al Gore bandwagon." The Wall Street Journal's John D. McKinnon finds it "reminiscent of ... Gore's 2000 campaign proposal to relieve traffic and other effects of urban sprawl through 'smart growth' initiatives" and portrayed it as part of a "climate change strategy."

In other words, the press is playing the story as a Republican president weakened by mid-term elections who is trying to outflank the Kyoto wing of the House and Senate majority.

But the fact is that congestion pricing is conservative economics at its best. For decades, conservatives have championed market-oriented solutions to highway problems as a means to allocate scarce resources. Congestion pricing gives consumers the opportunity to decide when it is in their economic interest to ride crowded roads, and whether the price charged for a given trip is worth their travel time savings.

In the former Soviet-bloc states, the standard way to allocate scarce goods was to set the purchase price low enough for everyone to afford, but to make consumers wait in long lines to buy them. The real price depended on what value consumers placed on their time.

This approach is the way we've always allocated access to most roadways in capitalist America - access is "free," just like for a public park. But our real cost skyrockets when we consider the time we spend crawling along in bumper-to-bumper traffic and with no option to pay extra for a faster trip.

And even without factoring in the cost of time frittered away listening to satellite radio, highways have never really been "free," but subsidized by taxpayer dollars. Congestion pricing is not a tax increase, but a user fee, which, conservatives agree, is a better way to divide costs. Indeed, economists across the political spectrum have long waxed enthusiastic about the superior logic of levying market-based prices for access to roadways; but until recently it remained little more than an interesting classroom concept since there was no practical way to charge motorists directly.

The advent of Electronic Toll Collection technology changed all this. Now we can charge motorists for using roadways without forcing them to stop at toll-booths, or even slow down. Just as consumers are billed for water, electric power, cooking gas, and other essential utilities, motorists pay according to how many miles they travel, how large a vehicle they're driving, how much air pollution they generate, and whether they're subject to certain physical or economic disadvantages that entitle them to special discounts. This can be especially important for commercial vehicles where time saved translates into fewer operating costs. And let's remember that the main purpose of surface transportation is to facilitate and enhance economic activity.

Congestion pricing means true consumer sovereignty, while liberating the roadway system from dependency on already inadequate revenue sources, like motor vehicle fuel taxes, and construction grants from the Federal Transportation Trust Fund. Not least of all, it's an opportunity to improve the efficiency of our roadway systems.

Here's one scenario: A state government deeds an independent commercial enterprise the rights for all roadways in its largest metropolitan region. The enterprise would support itself by implementing variable rate user prices on the region's limited access highways. These prices would be designed to generate sufficient revenue to cover the costs of operations, maintenance and expansion to keep pace with rising travel demand generated by a growing economy - while offering a competitive return on the initial investment.

Some corporate bodies like the Texas Department of Transportation have already started to work out a few of the most obvious kinks. That is, without any competition to hold down prices, the natural instinct of the enterprise's private owners would be to charge motorists the highest possible rates while providing the least amount of service.

So, the answer is to introduce a competing agenda - namely, the one represented by the same state and local governments that are going to be getting the federal government's funding windfall. They're not interested in maximizing profits, but in winning votes by providing lots of service while keeping user charges as low as possible. Giving both the private and public sectors a share of the common good assures fiscal responsibility and good service at reasonable prices. And if Al Gore and the Birkenstock crew want to take credit for sound conservative economics, then everyone's happy.

Joseph Giglio, author of Mobility: America's Transportation Mess and How to Fix It, is Vice Chairman of the Board of Trustees at Hudson Institute and on the board of Quixote Corp.


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