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House Republicans’ Asphalt Socialism

The GOP lauds the virtues of the free market---until it's time to subsidize their cars.
cuba mural car havana

The House of Representatives has hit on a clever new strategy for funding the bankrupt Highway Trust Fund: raid the Federal Reserve. Their plan calls for transferring nearly $60 billion from the profits earned on the Federal Reserve’s operations—basically fees paid by member banks—to bail out the Highway Trust Fund.

For years, many macro economists have been urging the Federal Reserve to stimulate the economy by using its power to effectively print money in the form of a “helicopter drop”—simply crediting every American with a certain amount of extra dollars in their bank accounts. The idea has been suggested as a way to jump start consumer spending in a moribund or deflationary economy by economists of some stature, including Ben Bernanke and Milton Friedman. The idea was advanced as a way of accelerating the sluggish growth we’re currently experiencing in an article in Foreign Affairs. But while it might make theoretical sense to economist, it was simply politically impossible, because as The Economist intoned, the idea of a helicopter drop would be anathema to Republicans.

But when it comes to a helicopter drop for highways, there’s no such problem. Remarkably, the proposal to tap the Federal Reserve’s funds comes not from radical Keynesians, but from the Republicans in the very conservative House of Representatives. And apparently, the same people who preach personal responsibility in almost every other field of endeavor want to insulate automobile drivers from paying the costs of the roads they drive on. While they may espouse the virtues for the free market in almost everything else, this position makes them “asphalt socialists” when it comes to transportation.

The best estimates are that drivers now pay only a tiny fraction of the direct costs of building and operating roads, not to mention causing huge externalities in the form of crash-related injuries and deaths and pollution. As we’ve noted before, the heaviest road users are the ones who get the biggest subsidies: The Congressional Budget Office estimates that trucks already cost the public as much as $129 billion annually more than they pay in road user fees. And a report from TransitCenter and the Frontier Group recently detailed the $7.3 billion in parking tax subsidies drivers get every year as well.

(Even with these subsidies, however, increasing fuel efficiency and the decline in per capita driving have pushed down revenues for the Highway Trust Fund, and contributed to the current crisis.)

While this latest chapter of dysfunctional public finance and ideological hypocrisy is playing out at the federal level, it’s equally prevalent in the way states and localities treat driving, too. Local governments have parking requirements that drive up the cost and drive down the supply of housing to subsidize car ownership. In Seattle, parking requirements add something on the order of $250 a month to the price of a typical apartment.

The new transportation bill will favor cars in other ways, too. Local highway projects will get an 80 percent federal match, but transit projects will get only 50 percent. Meanwhile, important sources of funds for transit, pedestrian, and bicycle programs, including TIGER grants and the Transportation Alternatives Program, were cut or imperiled.

While advocates of the road system regularly cloak their arguments in the rhetoric of choice and the free market, our transportation system is actually characterized by heavy government intervention on behalf of private vehicles. Massive, taxpayer-supported subsidies effectively bribe people to drive, and insulate them from the financial consequences their choices impose on others.

Drivers want more roads—as long as they don’t actually have to pay for them. The fact that there’s no stomach for increasing the gas tax—even though gasoline prices have fallen by more than a dollar a gallon in the past year—shows that when put to the test of the marketplace, there’s actually little demand for more transportation.

The irony, of course, is that transportation is clearly one policy area where traditional free market principles would put a serious dent in the problems of traffic congestion, air pollution, and safety. If car users faced anything close to the actual costs of building and operating roads (and mitigating or preventing the injuries and pollution effects), we’d see much less driving, and much less demand for additional capacity.

Joe Cortright is President and principal economist of Impresa, a consulting firm specializing in regional economic analysis, innovation and industry clusters. This commentary appeared originally at CityObservatory.org. City Observatory is an independent think tank on urban policy issues supported by the John S. and James L. Knight Foundation.

Follow New Urbs on Twitter for a feed dedicated to TAC’s coverage of cities, urbanism, and place.

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