The Grand Deacon of the Infrastructure Cult

As Strong Towns advocates, we know that when someone offers us a “free lunch” it is going to come with strings attached. Some serious strings. For local governments, the Growth Ponzi Scheme has allowed national politicians to promise a free lunch while forcing those lower on the food chain to absorb the long term costs associated with hitting this quarter’s GDP targets. Our approach not only kicks the can down the road, it kicks it downhill.

For example, federal programs that pay 90% of the up-front capital costs but leave local governments with the long-term maintenance benefit those at the pinnacle of power today, a class that has little at stake when their schemes don’t work out as their theories suggest. It’s future Americans, however, struggling in their own neighborhoods to make good on all these promises that must pay with higher taxes, lower services, economic dislocation and reduced opportunity.

We believe a strong nation is made up of strong cities, towns and neighborhoods. Those with a more top down view – and they can be found in all political persuasions – believe that local success is a byproduct of national success. The Infrastructure Cult has trickle-down economics (market based and government based) as their core financial tenant. National GDP growth and unemployment are their metrics of success, regardless of how disconnected they are from what is actually happening.

Every cult must have its spiritual leaders, the people who reassure adherents of the soundness of their beliefs despite the obvious disconnect from the reality around them. For America’s Infrastructure Cult, former Treasury Security Lawrence Summers is a Grand Deacon. Writing recently in the Washington Post, he argued for large increases in the federal gas tax claiming:

Even after a 40-cent increase in the gasoline tax, gas would still be only 82 percent as expensive as a year ago and 79 percent as expensive as two years ago. A gas tax to finance road repair is about as close to a free lunch as we can ever get in economics.

Summers bases his assertion on two insights. The first is that there is a high cost to allowing our transportation system to decline. Americans waste time stuck in congestion and experience increased wear and tear on their vehicles when roadways decline. He cites a TRIP report – a report that is good Infrastructure Cult propaganda, but which I hold in very low regard technically – that estimates the costs to be in the hundreds of billions:

Maintaining our infrastructure directly benefits American families and businesses because with fewer potholes they have to spend less maintaining their vehicles. This effect turns out to be surprisingly large.

Surprising indeed. While I could go through and point out that the numbers in reports like these come from a theoretical world of economic fantasy where transportation advocates – divorced from any market feedback principles – assume drivers always act rationally in how they allocate the 45 seconds of time savings they calculate the next mega-project will provide, I’ve already done that. These numbers are bogus. You can’t apply economic gains measured in 1950’s interstate building to pothole repairs in 2015. It’s absurd.

What is even more absurd (and telling) about this assertion, however, is how – consistent with all top-down thinkers – it presumes what people should do. You should choose to spend 40 cents more per gallon on gas because that will save you more money in the long run. You should value your time at the office being economically productive more than you value time stuck in traffic. You shouldn’t purchase fewer things at Walmart because you are spending more of your cash on hand filling up your tank. You shouldn’t use whatever performance gains are provided by transportation investments to take extra trips during peak hours.

“How many hundreds of billions more are we going to continue to pour into these theories until we agree that they are not creating enduring prosperity in our places?”

In the mythical world of economic theory, adults are all rational and, as we say in Minnesota, the children are all above average. How many hundreds of billions more are we going to continue to pour into these theories until we agree that they are not creating enduring prosperity in our places? The world just doesn’t work the way their models tell them it does.

The second assertion Summers relies on is possibly more seductive than the first. It taps into the parallel belief in an oil revolution, the notion that American ingenuity has now created an energy panacea where we can expect cheap gasoline as far into the future as we can dare to consider. Here’s how he puts it:

Even after a 40-cent increase in the gasoline tax, gas would still be only 82 percent as expensive as a year ago and 79 percent as expensive as two years ago.

Those who measure infrastructure investments in terms of current spending and the payoff in terms of next quarter’s GDP and unemployment figures, fail to grasp that highways are long term commitments. They need continual maintenance. It is fiscally irresponsible to tie a multi-generational maintenance commitment of a core asset to a revenue stream as historically volatile as oil, particularly during the trough of the price curve. It is politically expedient; nothing more.

The reality that Americans must face is that we have overbuilt our transportation system. The perverse incentives championed by the Infrastructure Cult have led us to build more lane miles than we can possibly make productive use of. The system must now contract. The way this happens gracefully and thoughtfully is by finding a way to correlate supply for transportation with demand for transportation. In economic terms, that is called pricing.

Anything else is as much of a gimmick as the free lunch.

#NoNewRoads

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