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.

Is 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.