According to the American Society of Civil Engineers, US infrastructure is in dire condition. The ASCE gave a D+ in its most recent report card. The report card, broken into sections, analyses aviation (D), bridges (C+), dams (D), drinking water (D), energy (D+), hazardous waste (D+), inland waterways (D), levees (D), parks and recreation (D+), ports (C+), railways (B), roads (D), schools (D+), solid waste (C), public transit (D-) and wastewater (D+) resources.
Consequently, President Trump has proposed $1trn in infrastructure spending to address this issue. However, more government funding is not a sustainable solution. Even as state governments continue to increase funding for infrastructure, the situation has gone from bad to worse. The only solution is to privatise America’s entire infrastructure network – from airports to road and highways.
The Case for Privatising
Under a system of private infrastructure, the government would not fund or build roads. Its only role would be to enforce contracts and protect property. In a private highway system, roads and highways would have tolls that drivers pay either every time they use the roads or on a monthly or annual basis.
The first argument for privatisation of the highway system is that it would save billions per year in annual spending, as well as bring in further revenue for the government, which finds itself deeply indebted. If Amtrak, a government-funded passenger rail service, was privatised, it would provide the federal government with $6bn. Given that the highway system and air travel are used much more frequently than passenger rail, privatising those would give the federal government much more than $6bn.
Secondly, the idea that private roads and highways would allow road owners to hold drivers and businesses (indeed, the economy) to ransom. However, this claim can be refuted by the fact that there are several ways to get from A to B. It is highly unlikely that there is only one route from New York to Pennsylvania. In addition, the ability for toll roads to become monopolies is severely limited by the fact that the longest toll road is 100km.
Further, a road or highway is not the only means of transport. There is also travel by rail and air. Not only are there alternative methods of travel, but historically there was even competition in the American railroad industry, an industry that is far more likely to be monopolistic than roads. For example, during the 1880s, there were an estimated 200 railroad companies competing.
Consequently, the years between post-Civil War and the ‘progressive era’ (1870-1913), saw freight prices continuously fall. As a result, the threat of other modes of transport and competition from another road-owner would give roadbuilders and operators the incentive to lower toll rates over time, whilst also making road travel as safe as possible. Further evidence can be seen in the aviation industry.
Thirdly, the cost of paying tolls would cost drivers less every year than under the current system. According to the US Department of Transportation, the average interstate toll road costs 6 cents per mile. Last year, Americans travelled an average of 13,000 miles per driver, meaning tolls would cost drivers an average of $800 per year.
On the other hand, the average driver consumed 650 gallons of fuel per year, with the federal, state and local gas taxes of 45 cents per gallon in total. As a result, drivers are paying an average of $290 per year. However, government ownership of roads means that government monopolies have no incentive to fix potholes, to extend existing routes and so on.
The result is that congestion and traffic are far worse than under a private system. This government inaction costs drivers an average of $1,200 per year. This puts the annual economic cost to drivers at just under $1,500 per year.
Of course, under a private system, there would still be traffic. However, it would be greatly reduced. This is because if there were large amounts of traffic on a private road, this would put upward pressure on toll rates. This would send a signal to the owners to expand the length of the road, increase the number of lanes and to fix potholes. Consequently, roads would be in better condition, hence reducing traffic times and therefore cost to drivers. As a result, the total annual economic cost to drivers under private system would be similar.
Privatizing Rail (Amtrak)
Amtrak is a rail service that is funded mainly by the federal government, but the trains are operated by for-profit corporations. In 1971, when Congress took over the passenger rail industry, rail fares were cheaper than airfares, and hence Congress thought Amtrak could pay for itself. However, over time, air fares have fallen (as they are private) and freight fares fell 60%, whilst Amtrak fares have increased 60%.
This implies that government ownership of transportation does not reduce prices, hence travellers would be better off using private means of transport. To make sure there isn’t a pure monopoly, passenger rail that is based on a region could be sold to different companies, so that the railroad competition seen during the late 19th century can be replicated.
Once the infrastructure has been privatised, what should the government do with the revenue? The best solution is not to reduce the deficit. This is because the deficit will be $600bn this year, and privatising infrastructure and other state-owned companies would unlikely cover the whole $600bn.
Hence, the best solution is to return the money to the purchasers, so they can use it to make capital improvements. Lastly, just because local governments no longer build roads or parks does not mean people have to pay to use them. Residents of a community can all contribute to building and maintaining a road or park or benefactors can donate to parks, much like how museums are funded by donations.
Have your say. Sign up now to become an Author!
More on US
The Hidden Dangers of Chinese Economic Global Integration
The trade war between the US and China has sparked a lot of debates and initiated further research into the...
China Responds to US Tariffs
In response to Washington’s imposition of a 25% duty on hundreds of Chinese imports, Beijing hit back with a retaliatory...
The Future of the Oil Industry in a World of Green Transportation
As oil majors such as Shell and Total are starting to expand their holdings portfolios by investing in utilities companies,...