Thomas Frank on tolls in the Wall Street Journal (MEDIA)

The Wall Street Journal's columnist Thomas Frank is usually so shrill in his loonie left diatribes as to not even be annoying. Today's he's stomping around on our turf with a piece against tollroads. And actually this time Frank picks up some common critiques and is worth debating.

see http://online.wsj.com/article/SB123310436361422253.html

Frank's piece is headlined "Toll Roads Are Paved With Bad Intentions" but it really isn't so much against tolls as against private sector tolls.

Some comments interpolated between some of the more important excerpts:

FRANK: "Back in the days when the market was a kind of secular god and all the world thrilled to behold the amazing powers of private capital, the idea of privatizing highways and airports and other bits of our transportation infrastructure made a certain kind of sense.

"Private businesses did everything better than the state, we were told. And that meant even tasks as inherently public as maintaining bridges and roads."

TRnews: Roads and bridges are maintained and operated for the use of the public just like privately operated rail tracks or airliners. All business is public. And there is nothing inherent in 'public' (governmental) ownership and operation of roads and bridges. Most early US bridges and major highways were charters of private joint stock companies. Public ownership was an early and mid 20th century artifact. Robert Moses, not usually a hero of the left developed America's first major public toll authorities. Roads and bridges have been a changing mix of governmental and business operation.

Frank: "And a group of infrastructure-privatization boosters, including Merrill Lynch and Morgan Stanley, have recast their project as a sort of 'private stimulus.' As one of the group's members told The Wall Street Journal last week, private infrastructure investment is 'really a perfect fit with Obama's objectives.'

TRnews: the real issue is whether toll projects, public and/or private will be discouraged and displaced by the stimulus grant money, or whether grant money will encourage user fee road projects. If they lead to the abandonment of toll financing plans then state and local governments will end up with a larger maintenance burden and private capital will remain untapped.  That would hardly be smart government.

Frank: "..state governments are in straitened circumstances these days, scarcely able to afford the upkeep on the roads and bridges they inherited from our statist ancestors. Indeed, one scarcely ever sees the word 'infrastructure' without the inevitable qualifier, 'crumbling.' And few are willing to raise the gasoline taxes which pay for the repairs."

TRnews: Maybe the public are right to resist higher gasoline/diesel taxes to finance more roads? Maybe their experience is that it doesn't get the job done very well?

Frank: "So the thing to do is give up. Lease those roads and bridges out. Let a private company collect the tolls, widen the lanes, and fill the potholes. They can make it work, and when they do, they will create jobs...

"But there's good reason to be reluctant to privatize. It doesn't take an MBA to figure out that we didn't build our Interstate highways in order to create opportunities for venture capitalists. The purpose was public service."

TRnews: Venture capitalists and many combinations of public and private can provide public service. USPS, UPS and Federal Express all get along providing public service moving stuff.   Only socialists and civil service labor unions think public service must be fully government provided. Who is being ideological now?

Frank: Transferring (interstates) to the private sector, at the very least, complicates this mission.

TRnews: True it's complicated and no one is doing it much, or fast. Pure government is complicated too. And don't forget government has been using private contractors for design, construction, and increasingly maintenance of roads and bridges for eons.

Frank: At worst (toll financing) will effectively close those roads to the part of the population that can't afford the revolutionary tolls that private ownership will surely bring.

TRnews: Tolls don't close roads to low and modest income people any more than McDonald's and Walmart's prices do. Higher gasoline taxes also cost low income people.

Frank: The cost of, well, just about everything will start to rise as more pieces of the transportation system embrace their for-profit destiny and start charging whatever the desperate commuter will bear.

TRnews: where there's a monopoly situation toll concessions can be governed by caps on toll rates preventing charges at "whatever the desperate commuter will bear."

Frank: Wear and tear on the remaining public-sector roads will certainly increase as traffic is driven off the tollways.

TRnews: Diversion to tax-supported roads is sometimes a problem, sometimes not.  Where it's a problem regulations can limit through truck traffic or tolls can be imposed to equalize the charges.

Frank: And even if your governor's heart is set on immediately extracting the long-term value of a highway, privatization isn't the cheapest way to do it. Public borrowing is costly these days, true, but interest rates on municipal bonds are still considerably lower than those borne by corporate debt. Allowing a private rather than a public entity to take over your toll road merely means that your tolls will have to be that much higher to cover their more expensive debt.

TRnews: Interest rates on municipal bonds are often lower because they get a tax break and therefore cost taxpayers as compared to private sector financing which is taxed. The federal government has in recent years tried to level the capital playing field with so-called private activity bonds and a program called TIFIA. The private sector does have advantages in capital raising through its ability to deploy patient capital by way of equity, so it isn't necessarily higher cost. Moreover there are other costs where the private sector can have the advantage.

Frank: Perhaps it's best to go back to the ideological beginning. One of the reasons our roads and bridges are falling apart is public hostility to tax increases -- gasoline taxes in particular. This attitude, in turn, is largely the product of the generalized distrust of government that conservatives have stoked for decades.

TRnews: hostility to tax increases isn't necessarily ideological. A lot of it is a sense that tax increases don't end up helping much.

Frank: So we've starved the beast for years, and now the utterly predictable consequences have come to pass. But the ideologues responsible aren't really to blame. Governments have failed not because the right undermined them for decades. They've failed because it is their nature to fail.

TRnews: well what is it then?

Frank: The answer is to throw ourselves on the mercy of the market - to embrace this last, worst outsourcing scheme of them all.

TRnews: No, the answer is to make pragmatic and intelligent use of the market where it helps mobilize and manage resources better than politics and bureaucracy.

Frank: And once you've signed on to that, they've got a 99-year lease on a bridge they'd like to sell you.

TRnews: true, true.

TOLLROADSnews 2009-01-28