Thursday, July 23, 2015

How to Fix Roads and Bridges without Increasing the Fuel Tax: Reform Federal Highway Policy and Use the Savings for Roads

By Tracy C. Miller & Megan E. Hansen of Mercatus.Excerpts:
"Before resorting to an increase in the federal gas tax, policymakers should first review the regulations for federal transportation projects. They should pare back requirements that raise the cost of building and maintaining roads while offering questionable benefits. Regulations like the Davis-Bacon Act of 1931 (Davis-Bacon) increase the cost of labor for federal infrastructure projects. Environmental regulations such as the National Environmental Policy Act of 1969 (NEPA) create complicated requirements that result in delays that drive up the costs of federal infrastructure projects. Besides causing delays, regulations force the government to hire additional federal employees to make sure that requirements are met."

"The FHWA has developed a set of procedures that must be used on every highway project it funds. According to one estimate, complying with federal rules raises overhead costs to approximately 25 percent of project costs, while overhead costs represent only about 5 percent of project costs for locally funded roads that do not have to comply with federal rules. These costs could be reduced considerably if the federal government gave each state a grant and allowed that state to decide how to spend the money, subject to an audit process to ensure that certain minimum standards are met, such as making sure the money is spent on highways.

Another regulation that raises highway costs is the Buy America program. This program requires that iron, steel, and manufactured products used for highways must be made in the United States unless using domestically produced materials would raise costs by more than 25 percent. Although many highway materials, such as concrete and asphalt, are not internationally traded, eliminating this requirement can still reduce some costs, particularly for bridges, which use a considerable amount of steel."

"Federal transportation projects must comply with 65 different environmental regulations."

"Because they have to meet so many different requirements...major highway construction projects take as long as 10 to 15 years to complete."

"Since NEPA [National Environmental Policy Act of 1969] became law, the average time required to complete an environmental impact statement for a federal infrastructure project has increased from two years to more than eight years."

"The Obama administration recognized the burdensome nature of the NEPA process when it exempted 179,000 stimulus projects from environmental review... these recent exemptions have not led to an environmental catastrophe..."

"The Davis-Bacon Act of 1931 set a price floor for the wages of workers on most federally funded construction projects based on the “prevailing wages” of workers in that area. In practice, this means paying higher union wages, since the level of prevailing wages is often determined based on union wage data. James Sherk found that Davis-Bacon regulations increase the cost of federally funded construction projects by 9.9 percent. Although some would argue that this represents a benefit for local workers who are employed by federal projects, in reality Davis-Bacon leads to higher costs that must be borne by US taxpayers."

"repealing Davis-Bacon would save $13 billion in discretionary spending from 2015 through 2023."

" federal regulations increase project costs by 20 percent. Reducing these regulatory costs could save more than $8 billion per year."

"reducing or eliminating programs that spend trust fund money for purposes other than highway construction and maintenance could save additional costs."

"If the FHWA reformed highway policy by giving grants directly to the states, eliminating Davis-Bacon, and reducing programs that require trust fund money to be allocated for purposes other than highway construction or maintenance, total savings could be as much as $10 billion or more."


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