The political economy of highway finance: Economic efficiency, equity, and political reality

Extreme congestion on America's highways demonstrates the failure of our current road finance system. User tax financing of highways has generated a system that relies on the political process to determine the allocation of highway revenues. This combination of highway user taxes and political resource allocation decisions results in a distortion of prices and resource allocation compared to market-driven solutions.; This dissertation examines alternative strategies to combat highway congestion and evaluates alternative methods of highway finance, in terms of economic efficiency, equity, and political reality. This procedure yields public policy recommendations regarding such issues as peak-load pricing versus user taxes and public versus private ownership and operation.; Chapter one provides an overview of the evolution of the U. S. highway system. In chapter 2, various highway-finance methods are evaluated in terms of economic efficiency, equity, and potential ability to combat congestion. Chapter three addresses the importance of considering the impact of the political system on the enactment of alternative highway-finance policies. The final chapter evaluates the potential of the "build-operate-transfer" approach to highway financing by providing a case study of the Dulles Greenway.; This analysis indicates that the direct pricing of highways, and especially peak-load pricing, can contribute to an efficient and equitable allocation of resources in providing the solution to the growing problem of congestion on America's highways. The private sector operator, less dependent on the political process, is better able to implement direct pricing. Further, the build-operate-transfer mechanism appears to be a politically feasible method for transferring road-building back to the private sector. While both public and political attitudes remain resistant to explicit price rationing, privatization may provide the best means to achieve explicit pricing with minimal public and political opposition.