Randal O’Toole: Taking Liberties With the Facts

The Cato Institute's Randal O’Toole gets under the skin of many of those interested in building a more rational and green metropolitan geography, but in many ways he’s an ideal opponent. It would be difficult to concoct more transparently foolish arguments than his. The man is an engine of self-parody.

spaghetti_bowl.jpgIs this spaghetti bowl turning a profit? Photo: Infrastructurist
A recent post at Cato’s @ Liberty blog provides a nice example. In it, he quotes George Will’s description of Transportation Secretary Ray LaHood as “Secretary of Behavior Modification” en route to calling LaHood a “central planner in waiting.” This is one thing I’ve never understood about the libertarian love affair with highways; they seem utterly blind to the fact that it has required and continues to require massive government action to build and maintain the road network. The interstate highway system is perhaps the single largest government intervention in the economy in the 20th century. Reading O’Toole you’d think it was a wonder of the free market.

The source of his blindness on the issue seems to be due to his belief that roads pay for themselves, and that congestion exists only because governments shift gas tax revenue to pay for transit and other smart growth projects. Nothing could be farther from the truth.

In the first place, gas tax revenue comes nowhere near paying for roads. Federal gasoline tax revenues cover barely half of the annual budget of the Federal Highway Administration. Add in diesel tax revenues and you’re still short. And that’s just the federal budget picture.

Taking into account all gas tax revenues and road spending generates an even starker picture. The Texas Department of Transportation recently developed an asset value index, intended to gauge the cost-effectiveness of a road over the whole of its life cycle. They discovered that most roads don’t come close to paying for themselves. In one typical road analysis, it was determined that a real gas tax rate of $2.22 per gallon would be necessary, simply to break even. No stretch of road in the whole of the state covered its costs.

But that’s not all we should consider. On top of the cost of the actual road, drivers impose costs on other motorists, pedestrians, and society as a whole. Carbon emissions from driving impose an annual cost of about $20 billion on society. Costs from congestion total nearly $80 billion per year in lost time and wasted fuel. And the annual cost of automobile crashes (which claim nearly 40,000 lives per year) is around $220 billion. In the absence of driving alternatives, all of those numbers would be higher still.

But of course, O’Toole thinks that the reason we suffer from so much congestion is because we are diverting money to transit rather than building more roads. This is completely incorrect, and a basic failure to grasp economic analysis. Road space is scarce -- that is, not unlimited. It therefore has a positive value, which should be reflected in a market price. If it isn’t -- if prices are fixed at zero (as is the case with most roads) -- then a shortage will result. This is well understood; if the president attempted to fix the price of any other good at a below market rate, libertarians would cry foul and immediately argue that shortages would result. Yet when free roads produce congestion, they conclude that the best solution is to spend taxpayer money on more roads.

O’Toole makes a great show of the fact that transit ridership is low, but the implication of this factoid is not what O’Toole would have you believe. For decades, roads have received massive government subsidies, and drivers have not been forced to pay the true cost of their driving. In the meantime, backdoor subsidies to driving have been rampant. An example -- most communities have rules establishing minimum parking requirements for new construction. Cheap and plentiful parking is a significant subsidy to driving, and such parking requirements make it difficult or impossible to build more compact and walkable streetscapes.

Transit use has lately been on the rise as congestion and fuel costs have exploded. Cities with transit systems have benefited enormously from the availability of a substitute to driving, and those without have suffered from their inelastic dependence on cars in an environment of increasing costs. The simple truth is that government has intervened heavily to create the road network so beloved by libertarians, and the country continues to bear heavy costs as a result. Any clear-eyed examination of costs and benefits will indicate that the time to rebalance investments away from highways and toward transit is long overdue.