Over at TNR, Rob Puentes laments the end of the Pennsylvania plan to toll I-80. Meanwhile, the Post reports on the transportation funding disaster in the Washington metro area, revealing that Maryland might not be able to make good on its commitment to Metro. We’re talking about the defunding of Metro, which has been the foundation of high value development projects in suburban Maryland, while Maryland’s highways are among the most congested in the nation, going into a summer in which gas prices are likely to rise above $3 a gallon.
I’ve gone on and on about how foolish it is to forgo the use of congestion tolls or charges. It’s really foolish, and it leads to a lot of waste and inefficiency.
But the issue is more significant than one of relative efficiency, at this point. Government finances, and the local, state, and federal level, are in very bad shape. The federal government is facing a debt level unlike any the country has seen since the Second World War. And a number of important variables look far worse than they did in the years after the war — expected growth rates, demographic profile, the term structure of the debt, and so on. It is going to be very difficult to fix this mess.
Meanwhile, state governments are trying desperately to close cyclical budget holes, but looming over the horizon is a major crisis of funding of state pensions. The off-books liabilities associated with pension costs are often 100% or more of the value of outstanding bond holdings.
And the rub is, state and local governments have not used the debt binges of the past two or three decades to invest in the care, maintenance, and upgrading of critical infrastructure. Those needs have largely gone unaddressed, even as utilization has increased.
The bottom line is this: we can no longer afford to not tax important negative externalities. We can no longer afford to not do the stuff we really ought to have been doing in the first place. The options we have are to ratchet up current taxes with bad incentive effects and diminishing returns, or to cut spending on important priorities, or both. But cutting back on education spending and infrastructure investment while increasing taxes on income will squeeze growth, making the task of closing these financial holes harder.
Or we can bite the bullet, suck it up, and start charging an appropriate amount for valuable public infrastructure. We can stop giving away space on roads and parking spots for free, costing everyone a lot of wasted time. We can stop letting companies foul the air and slow-cook the earth with no negative impact to their bottom line. And then we just might have enough dough to keep critical infrastructure running. We might even be able to invest in a new and better infrastructure capacity.
I get that these policies aren’t popular. If they were popular, they’d have been adopted already. But they’re the best available policies. If we refuse to use them, things will just get crappier. And we ought to have the courage and the sense to quit whining and go for it.