After The Fall: Saving Capitalism From Wall Street—and Washington

by Nicole Gelinas

As they assume the majority in the House of Representatives, Republicans have a chance to do something about the nation’s long-deteriorating infrastructure. The opportunity lies in the federal transportation bill, which must be renewed every six years but has languished in Congress for a year. Judging from past bills and early talk, lawmakers could authorize as much as $500 billion for infrastructure investment, most of it to be funneled through the states. Though that sum sounds hefty, it isn’t nearly enough: the American Society of Engineers figures that we must spend $1.3 trillion over five years to get our transportation infrastructure into acceptable shape. It follows that Congress should make the most of whatever figure it decides on, and one way to do that would be to assign the funds not through the usual pork-barrel politics but instead through a competition among the states.

In such a competition, Washington would reward states that move to fix their infrastructure assets quickly and efficiently and with a view toward supporting future private-sector growth. Congress would offer a holiday from federal rules that govern infrastructure investment, from environmental to wage and union requirements. States could then design their own programs more easily and figure out what works best. Congress could further reward states that begin to address their long-term liability problems—including unaffordable public-employee benefits—so that they’ll have more money to pay for road and rail maintenance decades down the road. And the law could reward states that beef up their depleted transportation trust funds.

The bill should give states broad autonomy on ideas, though. If California thinks that high-speed rail will help its economy grow, it could use its funds to augment the 2009 stimulus bill’s paltry contribution to the cause. If New York wants to build bike lanes and Texas wants highways, fine. The freedom to compete, state by state, includes the freedom to screw up.

Republicans should be able to get moderate Democratic senators to join them in passing such a bill, especially if they offer something big in return. To that end, the incoming head of the House Transportation and Infrastructure Committee, John Mica of Florida, may have to sacrifice his opposition to raising the federal gas tax, a fixed levy—18.4 cents per gallon—that hasn’t moved in nearly two decades, even as the cost of living has risen. Manhattan Institute fellow Josh Barro has suggested indexing the tax to inflation. “Gas taxes wouldn’t be any higher today, but they would rise over time,” he notes, generating money for infrastructure.

There’s little risk to the GOP here, especially as voters wouldn’t see an immediate tax hike. Further, infrastructure is a political winner. When Obama first proposed an infrastructure stimulus two years ago, 85 percent of people thought that “repairing roads and bridges” was “a good idea,” according to a poll by the Wall Street Journal and NBC News. Voters don’t oppose infrastructure spending; they oppose politicians who say they’re going to fix infrastructure and then don’t follow through.

The best part of an infrastructure competition is that governors would be in charge of the money as it reaches the states. Some of the Republican Party’s stars, from Nikki Haley in South Carolina to Chris Christie in New Jersey, would thus be able to do something positive in this time of austerity—and do it by 2012.

Nicole Gelinas, a City Journal contributing editor and the Searle Freedom Trust Fellow at the Manhattan Institute, is a Chartered Financial Analyst and the author of After the Fall: Saving Capitalism from Wall Street—and Washington.