The U.S. Transportation System Has $100 Billion Worth of Inefficiencies
You don't have to be an economist to know the American transportation system is in bad shape. The country's roads and bridges are crumbling despite what seems like endless construction. Public transportation operates under the continual threat of service cuts or fare hikes, or both. Airplanes sit on runways and metro area commuters sit in rush-hour traffic. Lots and lots of traffic:
Chart via Winston, C. (2013). On the Performance of the US Transportation System: Caution Ahead. Journal of Economic Literature, 51(3), 773-824.
But it does help to be an economist if you want to convert this sad state of affairs into a monetary figure. Clifford Winston of the Brookings Institution has done just that. In an incredibly thorough overview of the American transportation system (introduction here, full text here), Winston calculates that its many inefficiencies are worth more than $100 billion:
[O]ur hugely important transportation system has been compromised by policies that have resulted in inefficient pricing, suboptimal investments, and inflated production costs that are manifested in congestion, delays, budget deficits, and excessive money and time costs to users and excessive government expenditures on transportation.
Winston's report is far too detailed to convert into a quick summary. But he makes some points that concern us all — particularly metro area residents — so we've plucked out the inefficiencies he describes and itemized them here. Keep in mind these are extremely conservative estimates; the actual inefficiencies no doubt cost America much more:
- Car traffic: $45 billion. The estimated costs of congestion vary widely, but Winston focuses on travel delays that occur as a result of highways being free to drivers rather than priced to reduce traffic.
- Road damage: $87.3 billion. This figure includes truck wear-and-tear ($10.8 billion), repairs of insufficient highway pavement ($12.5 billion), and car and truck maintenance that's needed as a result of bad roads ($64 billion).
- Inefficient highway funding: $13.8 billion. Federal gas taxes are sent to Washington then reallocated back to the states; Winston (and others) believe this system is flawed because it fails to redistribute more money to the most-congested cities.
- Air traffic: $16 billion. These are takeoff and landing delays caused primarily by a lack of runway capacity.
- Transit subsidies: $10.6 billion. Winston argues that transit fares are too low and that systems don't manage their routes efficiently — running more buses and trains than are needed.
- Economic regulations: $7.4 billion. In particular, Winston cites reduced airline competition at airports and regulations that hinder certain foreign carriers.
A quick tally puts the total far in excess of $100 billion — in the area of $180 billion. The list isn't perfect; cities often run empty buses for perfectly good reasons, for example, though Winston counts this practice as an inefficient transit subsidy. But the broader point about there being massive room for improvement remains all too true.
What to do about the problem? Winston offers two types of suggestions. The first is to improve public-sector management — both by reforming the transportation finance system (i.e. the busted gas tax) and by spending more money on infrastructure. The second is to expand the role of the private sector via deregulation. Both options are broad solutions that carry cautions of their own.
The best response might be to target these inefficiencies bit by bit, as Winston suggests, through local experiments. A thorough congestion pricing scheme in and around a major American city, which might include not only interstate toll lanes but downtown charging zones, has reduced commuter delays dramatically in other parts of the world. Such a plan wouldn't eliminate the entire annual social cost of American traffic, but with a problem this big you have to start somewhere.