Addressing a rally at the obsolete Brent Spruce Bridge connecting Kentucky and Ohio, President Obama recently challenged Republican leaders to pass his American Jobs Act: "Mr. Boehner, Mr. McConnell, help us rebuild this bridge. Help us rebuild America. ... Pass this bill." Good political theater, perhaps, but not effective economics. Neither House Speaker John Boehner nor Senate Minority Leader Mitch McConnell, nor 287 other Republicans in the Congress, will enact the taxes Obama has proposed to pay for bridge and highway construction.
America desperately needs to rebuild more than 150,000 deficient and obsolete bridges, just as it must rebuild its stressed and crumbling ports, airports, highways, waterways, and power grids. But with state and federal budgets fully committed to entitlements, defense, and the essential functions of government, there is very little money to renew the nation's infrastructure. Nor will voters agree to higher taxes. Meanwhile, more than 14 million workers are unemployed, and two million of them have construction experience. America has the resources (an idle construction industry), it has an urgent need (crumbling infrastructure), but it doesn't have the finance.
The answer to this impasse can be found straight from the pages of American history: toll finance. In the early days of the Republic, the Philadelphia and Lancaster Turnpike (opened in 1795), the Erie Canal (opened in 1825), and much else were financed by tolls. Toll bridges and highways operate to this day in parts of the country—for example the Golden Gate Bridge and the New Jersey Turnpike, but they are a distinct exception, not the general rule.
Extrapolating from Department of Transportation counts, in 2012 the United States will have 73,000 structurally deficient bridges and 80,000 functionally obsolete bridges, together totaling more than a quarter of all bridges. Rebuilding will cost $150 billion.
Highways are also in bad shape, as anyone who drives a car or truck well knows. Around 10 percent of the rural interstates are graded poor and mediocre, and more than 20 percent of the urban interstates also receive failing grades. A 2008 study presented to Speaker Nancy Pelosi and Vice President Richard Cheney estimated that productive investment to renew bridges and highways should run $225 billion annually (in 2006 dollars) through 2020. Yet the US Highway Trust Fund, which relies on the federal gas tax at a rate of 18.4 cents a gallon, gathers only $35 billion annually.
For the moment let's tackle bridges and leave highways to the Trust Fund. President Obama should seek Congressional authority for the Department of Transportation (DOT) to acquire every deficient and obsolete bridge on behalf of toll authorities that would issue bonds to pay for their reconstruction. To ensure stable finances, each toll authority would be responsible for hundreds of bridges in its region. The bonds would not be backed by the full faith and credit of the United States. The bonds would not add to the debt obligations of the US Treasury. They would be backed only by the tolls collected—which would be used both to keep the bridges in good repair and to pay the bond holders. Toll collection is a nuisance, to be sure, but far easier since the advent of EZ Pass technology. We envisage that nearly all trucks and the vast majority of cars would acquire these electronic devices as an integral part of the shift to toll finance. Rough arithmetic suggests that annual toll collections of $15 billion would comfortably pay principal and interest (at 8 percent) over 30 years on $150 billion of bridge bonds, leaving $2 billion for annual maintenance. If construction were done on a "hurry up" schedule—a concept pioneered by the consortium that built the Hoover Dam in the 1930s—and deficient bridges were rebuilt in 3 years, at a cost of $50 billion a year, about 350,000 construction workers would find jobs.
Equally important, if America can rediscover toll bridges, it might well rediscover the toll system for financing ports, airports, highways, waterways, and power grids. With a sounder financial footing—no longer competing for tax revenues with Medicare, Social Security, prisons, and education—American infrastructure might again become the envy of the world, matching China's impressive accomplishments. Extending toll finance to all forms of substandard infrastructure would put more than a million American construction workers back to work. They would make a truly valuable social contribution over the next decade, at a time when prospects for home builders and commercial real estate are bleak.