In a speech to union supporters in Wisconsin, President Obama announced his intention to take the country $50 billion deeper into debt in order to finance more public infrastructure projects. The president defended his abysmal economic record by claiming that he has had to take on “powerful interests who had been dominating the agenda in Washington for too long.”
The president’s populist rhetoric is at odds with the fact his latest spending proposal would benefit special interests that have dominated his agenda: unions and state governments. The unions want more federally-financed infrastructure projects because federal requirements, such as Davis-Bacon rules, mean higher union wages.
Looking ahead, there are no technical or economic reasons why the highways of the 21st century should not be private toll roads once again. Modern GPS-based technology enables mileage-based tolls to be debited to road users, and the revenues credited to road providers, without vehicles having to stop, and without invading the privacy of road users…
While payment for road use by fuel taxes involves paying into opaque government-controlled funds with no knowledge about how the revenues are spent, mileage-based fees can provide precise and transparent information on the payments being made for each road segment, and thus illuminate the costs and efficiencies of different road providers. Such information, which could be made available without revealing the identities of the road users, would be sure to be publicized, and thus help move the control and financing of roads from nonresponsive government funds to competitive suppliers operating in open markets.
By subsidizing the states to provide seemingly "free" highways, federal financing discourages the construction and operation of privately financed highways. A key problem is that users of private highways are forced to pay both the tolls for those private facilities and the fuel taxes that support the government highways. Another problem is that private highway companies have to pay taxes, including property taxes and income taxes, while government agencies do not. Furthermore, private highways face higher borrowing costs because they must issue taxable bonds, whereas public agencies can issue tax-exempt bonds.