These days it seems impossible to say the word infrastructure without attaching the obligatory adjective ‘crumbling’. I don’t know who first used the term, but every time I hear it, it makes me angry. Not because my city doesn’t have decrepit roads (it does… with lots of potholes), but because it makes me question where all the money is spent?
According to the Energy Information Administration, the United States consumed 142 billion gallons of gasoline in 2007. The federal tax on each gallon of gas is 18.4 cents; the average state tax is 21.59 cents. In total, this indicates that the state and federal governments collect $56.8 billion annually to build, maintain and repair our roads. By comparison, the stimulus bill only has $48 billion, or 6% of the $787 billion stimulus package, for transportation projects, such as bridge and road construction, and mass transit.
I would love to see how much money that equates to per construction worker, per mile of road, or per pothole. Because the money is broken down and distributed to state governments, it is unfortunately difficult to look at it from this top down approach.
A second example is the public water system. Every month I pay $43 for my water and sewer service. The District of Columbia, the city in which I live, has about 250,000 households. Thus, the government should receive about $10.5 million per month. Between 2001 and 2004, the city’s water supply had high levels of lead in the water, which the city claims it fixed. One man recently sued the city for not reporting the high lead levels in the tap water. (Shocking, right?) Where is all that money being spent?
With municipal bonds and other cheap financing methods (i.e. taxes), one can calculate an approximate value for the total value of infrastructure that these payments should support. In this way, it is like a lease. If we use a conservative 6% discount rate, Washington should be able to support roughly $180 billion for water lines. For roads, $1 trillion in fixed costs would be supported by $56.8 billion in gasoline tax revenues.
Perhaps privatization is then the answer? I would agree with this, as long as the information or owners were public companies. Near D.C., there is a privately owned toll road that is owned by Toll Road Investors Partnership, II, L.P. (TRIP II). Wikipedia states TRIP II is a partnership owned by Bryant/Crane Family LLC and Kellogg, Brown, and Root. Unfortunately, the partnership is private, because I would love to see the revenues from this road. At about $1.25 each way and three lanes in each direction, the road backs up on a daily basis from heavy traffic volume. It seems to me this would be a great business that I would like to invest in.
As my other articles indicate, the inefficiency in government is outrageous. Yet, people continue to look to the government to perform more services for us? Why should we pay taxes for infrastructure and other ‘public works’ projects when we already subsidize them with other methods? If these methods don’t cover the costs for the projects, wouldn’t it make more sense to raise the rates, not taxes? These are just two small examples, but the principle is the same for other government run services: unemployment insurance, healthcare insurance, and retirement.
Personally, I would like to keep my money and control my own destiny. If things go wrong, at least I would know who to blame.
http://www.usatoday.com/news/nation/2009-02-17-leadpoisoning-case_N.htm
http://quickfacts.census.gov/qfd/states/11000.html
http://tonto.eia.doe.gov/ask/gasoline_faqs.asp
http://en.wikipedia.org/wiki/Gasoline
http://www.e-mdot.com/Transportation%20Revenues%20and%20Expenses/index.html
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