Stuck in Traffic: Free-Market Theory Meets the Highway Lobby

Put a conservative in the driver’s seat, and he can sound like a utopian Marxist. If you ask him about food, housing, or health care, he’ll explain how buying it and selling it in the marketplace creates the best of all possible worlds. But his car has an inalienable right to free parking and open roads. “To each automobile according to its needs” is a truth so self-evident that it need not be uttered.

As a right-wing economist might have warned if she had not specialized in transportation, what is distributed without charge has been consumed to excess. Lavish federal and state subsidies for highway building have stimulated suburbs to spread ever farther, and driving has ballooned. The mileage that the average American drives in a year has risen steadily, growing 11% in the nine years from 1993 to 2002. Roads fill up with cars and trucks faster than new ones can be built. Major metropolitan areas suffer ever-more-severe highway congestion, with traffic in suburbs often even worse than downtown.

What to do about traffic is a political issue of growing importance. The cost of road-building is increasing, and a growing body of research shows that sprawl development stimulated by new highways quickly makes new roads just as congested as the old ones. Should congestion be relieved by continuing to add more road capacity? Or should investment be shifted toward mass transit?

Conservatives have, in the main, lined up on the highway side of this debate. They have not been unanimous. Urban business interests and a coterie of light rail enthusiasts led by the political activist Paul Weyrich have joined with liberals in advocating a shift toward transit, and they have won some support from Republicans in Congress. But the majority of the right has aligned itself with the highway lobby in opposition to transit spending.

Broadsides against transit issued by researcher-publicists like Wendell Cox, Randal O’Toole, Peter Gordon, and Sam Staley set the tone of conservative thinking. These writers present themselves as free-market fundamentalists. The American transportation system, they argue, is a success, its domination by the automobile a reflection of consumers’ preference for driving their own cars. But when you scratch below the surface, their devotion to the sovereign consumer and the efficient market is a pose; concealed beneath the rhetoric is a defense of ever-increasing subsidies to the highway lobby.

One of Cox’s favorite arguments against new light rail lines, for example, is that the cost of construction is enough to buy a Mercedes for each future rider. Not factored into this computation is the price of the road the Mercedes will drive on — no small item when a new highway in the Washington, DC, suburbs is expected to cost $39,000 for each daily round trip that crosses its busiest point. But since roads — as Cox likes to see the world — are as free as the air we breathe, railroads must be wasteful because they run on expensive tracks!

Even more revealing is the transit opponents’ take on “Smart Growth” — the movement to concentrate new development in walkable mixed-use neighborhoods. Traffic congestion and shifting cultural preferences have made urban life once again fashionable. At transit stations located in upscale suburbs, property values have spiked upward, leading to a surge of apartment construction. This puts the highway lobby and its apologists in a bind. In their market worldview, it is an article of faith that prices reflect consumer preferences. The rising price of urban real estate irrefutably contradicts the claim that suburban sprawl is what people want to live in.

The anti-transit school came to terms with these new facts in a manifesto called the Lone Mountain Compact. Issued in 2001, this response to Smart Growth advocates was signed by all the leading transit opponents alongside a gaggle of academics and a scattering of right-wing luminaries led by former Senator Malcolm Wallop. It starts out, as expected, with ringing affirmations of the free-market faith. “The most fundamental principle is that… people should be allowed to live and work where and how they like,” and “Densities and land uses should be market driven, not plan driven.”

Such principles might logically have led into a defense of property owners’ rights to build as many apartments near transit stations as tenants want to rent. But here the manifesto took a detour. The free-market faith may be strict; it is not unbending. The Lone Mountain Compact does not reject all constraints on landowners’ right to develop their property — it condemns only those that are “centrally directed.” It’s just fine for small wealthy enclaves to infringe on property rights with snob zoning that excludes apartment buildings. Even better if renters are denied the right to vote on these rules: “Local neighborhood associations and private covenants are superior to centralized or regional government planning agencies.” Land use regulation, it turns out, is not evil per se. It’s wrong only when it’s enacted democratically for the benefit of the whole community.

And regulation is especially welcome when it promotes highway-building. In the real world of zoning, the regulatory arrangements advocated by the Lone Mountain Compact could not be better designed to frustrate the market pressures that fuel Smart Growth. Development around transit stations routinely runs up against opposition from surrounding neighborhoods. As toll-road advocate Peter Samuel has described the process, “It is always the `bad’ developers who want denser development, and local governments respond to popular pressure in preventing it.” To gain approval, developers must convince rulemakers to put the broader community interest ahead of localized “Not In My Back Yard” sentiment. Samuel and his fellow Compact signers would make such zoning decisions impossible. In the housing market they prefer, you are free to build a home only in places that you need a car to get to.

The toll roads that Samuel champions have been heavily promoted by free-market transportation thinkers, and they have attracted growing interest from policy-makers. A confluence of forces puts tolls at the center of the current transportation agenda. As suburbia spreads out, people must drive farther to reach their destinations, so cars spend more time on the roads. The cost of highway construction has exploded as suburbs spread, with price tags often approaching two or three billion dollars even for roads that serve only one sector of a metropolis. State highway departments, squeezed between the growing costs of maintaining existing highways and the difficulty of raising taxes in a conservative political environment, find their ability to add road capacity falling farther and farther behind traffic congestion. Toll roads seem like an obvious solution, one consistent with the broader political climate that prefers user fees to taxes and favors privatization of public services.

Advocacy of toll roads has not been altogether disinterested, of course. Toll highways overseas have long been operated by private companies, and these businesses are now seeking to enter the United States market. Large American construction companies like Fluor and Bechtel also seek to become road owners. The confluence of genuine need, political fashion, and pecuniary interest has stimulated a stream of pro-toll research and writing, which has as yet been subjected to little serious criticism.

In principle, the new emphasis on tolls is a long-overdue move in the direction of a more rational transportation system. The concept is unassailable; if drivers pay the full cost of the roads they use, environmentally damaging and economically costly overuse of the automobile will be discouraged. Funding better mass transit with toll revenues can advance both social equity and environment protection. These ideas have long been close to the hearts of transit advocates and environmentalists. But toll road proposals do not always accomplish in practice what tolls promise in theory. Many tolling schemes now under discussion would preserve and expand the highway lobby’s subsidies rather than curbing them.

This is especially true of the latest fad among the free marketeers, what are known as express toll lanes. These are pay lanes added to existing highways that currently don’t charge tolls. Toll rates vary from hour to hour, increased at times of heavy traffic in such a way that the toll lanes never back up. The main advantage of this procedure is that the driver who pays the toll is guaranteed a fast trip; on the busy suburban highways where these lanes are under consideration, there is so much traffic that simply widening the road would not get rid of congestion. Proponents argue that express toll lanes give the consumer more choice than building additional free lanes — when you need to get somewhere in a hurry, you pay the toll; when your time is less valuable, you don’t.

Express toll lanes were quickly dubbed “Lexus lanes.” Their promoters indignantly reject this appellation, claiming that the lanes benefit all income groups. But a 1999 survey of drivers on the first such project in the United States, SR 91 between Riverside and Orange counties in southern California, showed that drivers with incomes above $100,000 were about four times as likely than those who earn less than $40,000 to have used the toll lanes on their last trip on the highway.

Even more telling is the comparison with an earlier survey, taken in 1996 when the tolls were modestly lower. Rising tolls did not affect use of the toll lanes at the highest and lowest income levels, but provoked a sharp falloff among drivers with incomes between $40,000 and $60,000. This suggests the existence of an income threshold below which a toll becomes unaffordable to most people. The higher the toll, the higher the threshold; so when tolls rise, toll-lane use falls most among drivers with incomes close to the threshold. The data fall short of being definitive, but they are the best we have. More recently, tolls on SR 91 have risen sharply — the peak toll has gone from $3.50 to $8.50—but the survey has not been repeated and the income distribution of drivers willing to pay these high tolls has not been measured.

These survey results suggest that the “Lexus lanes” moniker is well deserved. Who uses pay lanes is mostly determined by income. For most of the people in the free lanes, consumer sovereignty is a fiction. They haven’t made a voluntary decision that their time isn’t worth the price of a quicker commute. They are sitting in traffic jams because the toll exceeds what they can afford to pay.

Even if this is true, toll lane supporters respond, the lanes still benefit lower-income drivers. Those who can’t afford to use the new lanes benefit from the added road capacity tolls pay for. With the wealthy on the new lanes, fewer drivers are squeezed into the free lanes, and everyone has a faster commute. The argument is logical, but it does not fit the facts. It turns out, excepting rare circumstances, that express toll lanes added to existing highways cannot raise anywhere near enough revenue to pay for their construction cost.

On one project that has just broken ground, the widening of a ten mile stretch of I 95 north of Baltimore, the tolls won’t even raise enough money to cover the extra costs of building toll lanes instead of free lanes. A trip is expected to cost around $1.50 in rush hour and 50¢ at other times. The revenues these charges will yield can be estimated from experience on SR 91; both have the same length and number of toll lanes, and tolls will be adjusted so both carry the same number of paying vehicles. Current tolls on SR 91 run four or five times higher that what is predicted for I 95 and bring in $39 million a year, so annual revenues for the I 95 toll lanes should be in the vicinity of $8 to $10 million. But putting toll lanes on the highway requires extra access ramps, so construction will cost $270 million more than adding the same number of free lanes. The toll revenue won’t even be enough to cover the interest on the extra $270 million, let alone pay the entire $830 million price of widening the highway.

In such circumstances, express toll lanes only modify the failed policy of subsidized highways so as better to preserve it. When it becomes impossible to keep traffic moving freely on all lanes, express lanes give an affluent minority the open roads that can no longer be provided for everyone. Tolls in this scheme are primarily an allocation mechanism, and only incidentally a source of revenue. Their purpose is to deter those less able to pay from using the new lanes. Only those wealthy enough to afford the tolls bypass the traffic jams, but everyone who is backed up on the free lanes gets to pay the bills.

Can market principles be used in other ways to deal with highway congestion, so as not to contradict egalitarian principles? There are indeed a variety of new ideas for doing so. The most prominent and most widely applied of these comes from Europe, where its political sponsors have mostly been on the left. It is the congestion charge, a daily fee assessed on anyone who drives into a congested downtown.

The best-known congestion charge was introduced in London by Mayor Ken Livingstone. Most people who drive in the central city during the workday must pay a fee that is now about $15 per day. Payment can be made by telephone or internet in advance, on the same day, or one day afterwards. Enforcement relies on a network of street cameras that photograph license plates. While public opinion was closely divided before the charge went into effect, it is now widely regarded as a success. Its initiation in February 2003 (at a lower initial rate of $9) caused an immediate 15% drop in driving within the fee zone and a concomitant improvement in traffic speed. One unexpected result was that subways became less crowded; buses moved so much faster that people switching from rail to bus outnumbered switches from car to rail.

The London congestion charge was enacted by a left-of-center city administration and has faced continuing opposition from British conservatives. American rightists join the criticism, with Wendell Cox weighing in loudly. The Bush administration’s ambassador, a former auto dealer, ostentatiously refuses to pay — although diplomats posted to the United States routinely pay tolls on our roads and bridges.

Congestion fees recently applied in Stockholm are similarly supported by Social Democrats and Greens while opposed by the right. In Norway, where congestion fees were first introduced to Europe, the politics are more complex. The first plan, a toll charged since 1986 to enter the city of Bergen, was introduced by agreement between the Labor and Conservative parties as a means to raise revenue for road projects. As fees expanded to cover four cities and a portion of the revenue was given to public transit, there has been less consensus; disagreement, however, centers on how much money to divert to transit more than on the principle of the fees.

While London and other European cities show the potential value of market techniques in devising progressive solutions to American traffic congestion problems, European transportation policies cannot be copied blindly. Essential to the success of the London experiment was the availability of transit as an alternative to driving. Even before the congestion charge, only 10% of those entering central London came by car, and a massive expansion of bus service accompanied the new fee. No American city outside New York comes close to London in making it easy to get around by transit.

Decades of highly subsidized automobile use have introduced vast economic distortions in American transportation and land use. They impose an increasing price in economic inefficiency, environmental damage, and loss of livable communities. But the misguided policies of the past have been built into the landscape, and they will not be easily undone.

Escape from traffic gridlock requires a shift toward price mechanisms in transportation; but the transition can only occur at a measured pace. It took more than half a century to build our present sprawl, and it will take decades to replace it with something better. Far too many homes and jobs are located in places that can only be reached by long-distance driving, and intolerable hardships would be imposed by suddenly making drivers pay the full cost of the roads they use. The precondition to the needed shift is a massive expansion of public transit; when transit is not a good alternative to driving, fees charged for using the roads become regressive and unpopular taxes rather than signals to switch from a car to something better.

The specifics of transition to a more price-based transportation system have only begun to be worked out. Equity demands that highways must continue as a universal service, with the same facilities shared by rich and poor. But to be sustainable, the road network must be a public service like the Post Office, where no one expects to mail a letter without buying a stamp. Planners like Michael Replogle of Environmental Defense are working to find effective and equitable ways to introduce charges for highway use; they have much to do.

Not the least of the obstacles this endeavor must overcome are the highway apologists posing as free-enterprise fundamentalists. They hail efficient markets, but would feed the road-building lobby’s insatiable appetite for subsidies. They laud consumer sovereignty, but would let a wealthy few deny choices to the less affluent majority. Their principles, on examination, are a chimera; their defense of established interests is all too real.

Benjamin Ross is president of the Action Committee for Transit, an advocacy group in Maryland. He writes frequently for Dissent.

Sources of data on express toll lanes: For SR 91, data on the income of toll road users are from Edward Sullivan, Continuation Study to Evaluate the Impacts of the SR 91 Value-Priced Express Lanes, Section 3.4; and toll revenue is from the 2005 Annual Report of the 91 Express Lanes Enterprise Fund of the Orange County Transportation Authority (available at the SR-91 web site by clicking on “annual report” under “general information”). For I 95, predicted toll rates are from the Conformity Determination report isued by the Baltimore Regional Transportation Board in August 2005, p. 31; the cost differential for building toll lanes is from the Maryland Transportation Authority’s Alternatives Analysis for the project; and the total construction cost is from the Authority’s press release announcing the groundbreaking. These documents are available on the internet.

Note also that the paper on Norwegian toll policy linked in the text is a pdf file but may not be recognized as such by browsers.