Great discussion!

1. The interest charge that I estimate is not the relatively minor “real” payment on invested HTF monies, but rather is interest I impute to both the capital outlay and user payment accounts. This imputed interest does not show up in the accounts of transportation agencies, which report annual capital outlays and receipts. (By contrast, I estimate annualized capital costs, which include an interest charge.)See the paper for more discussion.

2. I have submitted a paper to the journal Energy Policy on the military costs of oil use in the U. S. They’ve reviewed it, and now I am revising it. The paper is based on Research Report #15 in my Social Cost Series, on my faculty web page (www.its.ucdavis.edu/people/faculty/delucchi/index.php).

3. There has been a lot of research on the social return on investments in highway infrastructure; as I recall, the general finding is that the rate of return was relatively high 40 years ago, when the system was new and expanding, but now is no higher than the return on other public investments. This may (or may not) be relevant to the discussions about who should pay for the highways..

Charles — I am looking at Delucchi’s Table 2, “Motor-vehicle infrastructure and services provided by the public sector, 2002.” I see in WOC #1:

Annualized cost of highways
Highway law enforcement and safety

I am not seeing public expenditures on non-highway road construction or maintenance. I am happy to be corrected; can you point out what I am missing?

Good point. I said something similar in “Crossroads,” a companion report I did in 1995, also for TSTC, on taxpayer subsidies for roads in New Jersey:

“While it is true that non-drivers benefit from freight movement and municipal services that require roads, New Jersey’s roadway infrastructure has grown far beyond the level of a “common carrier” offering a modicum of access to trucks, buses and public services.”

I hope to put up “Crossroads” on the Web soon.

Laurence (#17) –

Delucchi’s study addresses all roads, not just major highways. Your point on interest payments is beyond my scope; I’m fwd’ing your comment to Mark for possible response.

1. Delucchi includes the category “Interest earnings on payments invested to cover highway and other capital” as a payment made by motor vehicle users for the use of highways. He is referring to the excess monies collected for the Highway Trust Fund, which are invested in Treasury securities. This category represents 37-74 percent of Delucchi’s most stringent calculation of payments (WOC #1). It represents 28-66 percent of Delucchi’s second-most stringent calculation of payments (WOC #2).

Delucchi reasons that motor vehicle users contributed the original capital in the form of gas taxes. Therefore, the interest that is earned on that capital also qualifies as a payment made by motor vehicle users.

This is logical from an accounting point of view. But I’m not sure I buy it from a fairness point of view. That interest on Treasury securities is being paid by all U.S. taxpayers, regardless of whether or how much they use motor vehicles.

2. Delucchi’s study only addresses highways and highway expenditures. The National Highway System has 162,000 miles of roadways, which is 4% of the 4 million miles of roadways in the U.S.

How are the other 96% paid for? Ultimately, most of the money comes from property, sales and income taxes. Local roads are more subsidized than highways, and get little or no financing from motor vehicle user fees.

IMHO, motor vehicles are more subsidized than Delucchi implies.

The inevitable response by some is “the poor”, who will no longer be able to afford the apple. Whatever… all I know is the amount of money out of my pocket probably won’t change either way. I just feel that a simpler tax system would make our true costs easier to understand — although government doesn’t want that.

A substantial share of the money collected by local governments is fee revenue, not taxes. It is a fee if you are only charged if you use a public service or facility, and only to the extent that you use it.

Fees can be regressive, unless fees for services consumed by the better off are used to cross-subdsidize less extravagant facilities for the worse off.

As I wrote on Room 8, fees are appropriate if by using a public facility or service, the user is doing some kind of public harm — by taking a share of something that is scarce, for example. That’s why we are charged for the most basic of goods, water — because when it was free people wasted both the water and sewage treatment capacity.

That’s a great post and I agree with you on just about everything. I do think we shouldn’t be careful to overstate the case though. When you say “A rail subsidy wouldn’t be needed if there wasn’t a powerful government subsidy drawing people away from rail and into their cars” I think we may be just doing that.

Gasoline in Europe easily costs 20-70 cents per gallon more in Europe (actually it’s roughly twice the American price in many Western European countries) so assuming that the costs for the road network are roughly the same in Europe, this price at least equals the true market price. Yet rail in Europe still requires government subsidies.

There are, I imagine many reasons for this, including policy reasons (e.g. even this higher price fails to capture all negative externalities involved in car travel or the train price does not capture the positive externalities of the resulting pleasant cities etc.). There are probably other reasons that people could supplement.

The only country that has a supposedly unsubsidized and functional rail network is Japan — and even then, some people claim that it’s not really unsubsidized. (I don’t really know the details of this debate).

However, the funding for bike amenities and mass transit subsidies tends, in most states, to come out of “highway” trust funds, which are funded by gas taxes. Bike facilities cost a piddling amount of money — a bike activist I know in Wisconsin likes to say that all of the state’s bike projects could be funded by the rounding error in a single major highway project — and these “diversions” are more than offset by the money that goes from general revenues to automotive subsities.

But these “diversions” do create the illusion that motorists are subsidizing other forms of transportation, which gives “motorists’ rights” activists something to whine about. It would be nice to find a more straightforward way to finance transportation in this country, but I suppose it’s unlikely that this will happen.

How can government interfere with the private market by getting into the business of running a railroad?

Swirl those words “government” and “business” around with one another and see what happens:

Government . . . business . . . government . . . business . . . Communism!

In fact, government interference with the private market is no less present in the enormous hidden automobile subsidy that Komanoff and Delucchi have drawn our attention to.

A rail subsidy wouldn’t be needed if there wasn’t a powerful government subsidy drawing people away from rail and into their cars.

The problem is that people across the entire political spectrum, myself included, can easily imagine a private railroad, but have difficulty seeing how the accomodations for the automobile could be anything but publicly funded (although the consistent conservatives in one of the reddest states in the nation are trying.)

The reason for this dichotomy I suspect is that the public involvement in roads has been ancient and incremental (the dirt post roads that carried Paul Revere’s horse are the direct ancestors of the Interstates), while the public involvement in railroads and buses has been abrupt and recent (caused when the rail systems collapsed after massive public investments in road paving etc. began after World War II).

Ed, in New York, the food you eat arrives by truck for two reasons 1) the George Washington Bridge, and 2) the Verrazano Narrows Bridge. If it arrived by rail, you wouldn’t have to pay for its shipment as a taxpayer. Energy sipping freight railroads are generally expected to pay for maintenance of their right-of-way, while energy guzzling 18-wheelers benefit from your tax dollars maintaining our asphalt infrastructure.

And before we start getting into the idea that rail infrastructure benefits only “a private operator with exclusive use of the system,” let’s recall that anybody can board a train or a bus, but that the automobile is out of bounds for those too poor, too old, too young or too disabled physically or mentally.

Finally, this is relevant because as long as we are talking about creating congestion pricing as a way of reducing traffic, we should also be talking about all the ways that public policy is encouraging traffic by making driving cheaper than it otherwise would be.

Amtrak is not a private operator; it’s a government-chartered nonprofit corporation. If it ever got to a point where Amtrak’s revenues exceeded its expenditures there would be no investors getting rich; they would just use the “profits” to expand the network or reduce fares, save them for future use, or give them back to the government.

As for the issue of driving being too cheap in the U.S., that the state subsidies, oil wars, and negative environmental impacts are too great a cost for us to bear, that I certainly agree with. I just don’t think the fact that car drivers don’t ‘pay their way’ is really noteworthy I’m sorry to say.

JK — thanks for kind words (Ed too). Even if the bucks are offered, someone else needs to do the updates, the work is so tedious.