National Academies Press: OpenBook

Freight Capacity for the 21st Century: Special Report 271 (2003)

Chapter: 2 Freight Capacity as a Government Policy Issue

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Suggested Citation:"2 Freight Capacity as a Government Policy Issue." Transportation Research Board. 2003. Freight Capacity for the 21st Century: Special Report 271. Washington, DC: The National Academies Press. doi: 10.17226/10568.
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2
Freight Capacity as a Government Policy Issue

The relationship of government policy to freight capacity is examined in this chapter. Freight transportation in the United States is a mixed public and private enterprise: government builds and operates the infrastructure of the highway and inland waterway systems as well as major components of airport and seaport infrastructure and regulates transportation firms. Private-sector firms provide rail infrastructure and parts of the other modes’ infrastructure as well as most vehicles, and sell transportation services to shippers. In this complex environment, it is necessary to define the scope of government responsibility and to analyze how government actions affect the provision of capacity by the private and public sectors.

The criteria that the committee believes should be the basis for justifying government involvement in freight transportation and guide decisions regarding provision and management of publicly owned facilities are identified in the first section below. Economic efficiency is the primary criterion. The conceptual difficulties in defining freight capacity, which can be clarified by applying the efficiency criterion, are also discussed.

The important immediate government policy issues affecting freight capacity are identified in the next section, and selected recent statements and proposals on basic policy issues related to freight capacity from government, past NRC committees, and others are reviewed in the final section. Most of the immediate policy issues arise in the context of established government programs. They illustrate the practical scope of policy choices to which the committee’s proposed principles ought to be applicable. Decisions on these programs are made continuously, and

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Suggested Citation:"2 Freight Capacity as a Government Policy Issue." Transportation Research Board. 2003. Freight Capacity for the 21st Century: Special Report 271. Washington, DC: The National Academies Press. doi: 10.17226/10568.
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together they determine the influence of government on freight capacity. The policy statements suggest the range of options open for changes in policy, although not all the statements are consistent with the principles proposed in the chapter.

PUBLIC RESPONSIBILITIES IN FREIGHT TRANSPORTATION

Disputes over public policy issues regarding freight transportation usually arise from differing conceptions of the proper role of government in the sector. Therefore, it is appropriate to state the principles regarding the government’s role that underlie the committee’s recommendations. The 1998 TRB study Policy Options for Intermodal Freight Transportation examined government responsibilities in freight transportation. It described how government’s historical responsibilities for construction, operation, and finance of transportation facilities and regulation of private-sector transportation firms have differed among the freight modes and have evolved over time (TRB 1998a, 20–28). The earlier TRB committee also analyzed the problem of defining government responsibility (TRB 1998a, 28–45, 94–98; Eberts 1998). The statement that follows is consistent with that committee’s conclusions. Consideration of these principles helps to resolve certain problems concerning the definition of freight capacity, as described at the end of this section.

Principles of Government Involvement

Economic efficiency ought to be the primary goal of government transportation policy. Efficiency requires that those investments in system capacity that yield net economic benefits be made and investments that do not yield net benefits be avoided. Efficiency also requires that existing capacity be operated in such a way that service is provided to all freight system users who value the service more highly than the cost of producing it and is not provided to others. The cost of freight transportation services includes congestion, environmental costs, and accident costs.

Application of the efficiency criterion implies that the private sector should be relied upon to provide transportation systems and services except in certain defined circumstances where the market cannot produce efficient results. In particular, such circumstances include checking monopoly power and dealing with nonmarket costs, including pollution, congestion, and accident costs that are not borne by the parties responsible for the accidents. One solution to the problem of nonmarket costs is for government to bring them within the functioning of the market. Congestion pricing and creation of tradable emissions permits are examples. This solution ensures efficiency but is often difficult to implement. In lieu of creating a market, government often relies on regulations—for

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Suggested Citation:"2 Freight Capacity as a Government Policy Issue." Transportation Research Board. 2003. Freight Capacity for the 21st Century: Special Report 271. Washington, DC: The National Academies Press. doi: 10.17226/10568.
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example, emissions limits, safety regulations, and traffic controls such as high-occupancy vehicle lanes—to reduce these costs.

Government also is responsible for ensuring transportation facilities needed for national defense and for management of parts of the system for which it has a historically established responsibility that is unlikely to be altered soon. Finally, under certain conditions institutional complexity may necessitate government leadership—for example, providing port access in large cities, where the difficulties of multiple government jurisdictions, dense development, and sensitive environmental issues must be overcome. Government leadership in these settings does not necessarily imply government subsidy of the costs of improvements.

In all these areas, the primary responsibility falls on state and local governments, while the federal government is responsible if a potential conflict exists between nationwide and local interests. For example, in the Interstate highway program, the federal government redistributes highway user excise tax revenue among the states, draws the national system map, and dictates design standards, on the grounds that completion of a nationwide network provides collective benefit beyond the benefit that each segment of the system provides to the residents of the state in which the segment is located.

There is a degree of consensus on these principles. They are partially reflected in the U.S. Department of Transportation’s (DOT’s) 1996 National Freight Transportation Policy Statement, which sets forth “principles of federal freight transportation policy” that include allocation of federal resources to cost-effective projects supporting national goals, removal of unnecessary regulation, efficient pricing of publicly financed transportation infrastructure, assurance of safety and environmental protection, application of technology advances to promote efficiency and safety, and satisfaction of defense needs (DOT 1996). The 1994 Presidential Executive Order “Principles for Federal Infrastructure Investments” requires that “infrastructure investments shall be based on systematic analysis of expected benefits and costs” and directs that “since efficient levels of service can often best be achieved by properly pricing infrastructure, the Federal Government—through its direct investment, grants, and regulation—should promote consideration of market-based mechanisms for managing infrastructure” (Executive Office of the President 1994). Congress has supported similar principles, for example, in creating road pricing pilot programs through provisions in the 1991 and 1998 surface transportation acts [the Intermodal Surface Transportation Efficiency Act (ISTEA) and the Transportation Equity Act for the 21st Century (TEA-21)] and in the project eligibility requirements for credit assistance under the Transportation Infrastructure Finance and Innovation Act created in TEA-21, all of which encourage private-sector participation and user charge financing.

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Suggested Citation:"2 Freight Capacity as a Government Policy Issue." Transportation Research Board. 2003. Freight Capacity for the 21st Century: Special Report 271. Washington, DC: The National Academies Press. doi: 10.17226/10568.
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Nonetheless, application of these principles frequently is controversial. Controversy is especially likely when proposals are made for changing existing practices regarding user fees or funding sources (e.g., instituting user charges on previously uncharged public facilities) and when particular industries or local interests argue that a project’s national significance justifies federal or state subsidy instead of funding through project-generated revenues. These arguments overlook the power that user-fee financing and rational pricing have to discourage poor investment choices and inefficient use of facilities. Making users pay for costs reduces the risk of building projects that are not worthwhile and can ensure that funds are available to pay for ones that are. When users pay, shippers and carriers have the right incentives to make decisions about logistics, equipment, and operations that are the most economically beneficial. Aligning fees with costs is a necessary but not sufficient condition for economic efficiency. Efficiency also requires that the managers of facilities operate them in a way that minimizes costs, and that investment funds go to the highest-payoff projects. While competition in the private sector will tend to produce these outcomes, they are not guaranteed in the provision of public infrastructure, even if appropriate fees are levied; however, the effectiveness of appropriate fees as a demand management tool, and the guidance that fee revenues can provide regarding which components of the transportation system warrant expansion, can promote efficiency and increase the benefits derived from public transportation facilities.

In addition to political controversy, practical problems can pose obstacles to application of the principles stated above. Often the costs relevant to setting user fees are not well understood, and some forms of fee collection can be costly and burdensome. Problems with estimating and levying improved transportation user fees have been examined in several recent NRC reports. The TRB report Regulation of Weights, Lengths, and Widths of Commercial Motor Vehicles, which proposes a new structure of user fees for certain trucking operations, describes difficulties in more closely matching fees to infrastructure costs and proposes solutions (TRB 2002, 148–150). The NRC study Inland Navigation System Planning: The Upper Mississippi River–Illinois Waterway points out demand management techniques for the inland waterways, including congestion pricing and use of tradable lockage permits, and recommends that the government evaluate these techniques as alternatives to physical capacity expansion (NRC 2001, 3–4). Paying Our Way: Estimating Marginal Social Costs of Freight Transportation, TRB Special Report 246, reviews the state of the art in estimating the external costs of individual freight movements by water, rail, and truck and considers policy applications of such estimates (TRB 1996, 115–123). That study concluded that:

Considering the effect of user fees on economic efficiency does not demand an all-or-nothing policy choice: developing sophisticated,

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Suggested Citation:"2 Freight Capacity as a Government Policy Issue." Transportation Research Board. 2003. Freight Capacity for the 21st Century: Special Report 271. Washington, DC: The National Academies Press. doi: 10.17226/10568.
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complex schemes versus ignoring efficiency altogether. For any two fee options under comparison, one will always be more efficient than the other—one will encourage economically beneficial use of the facility more than the other. These differences ought to be weighed carefully in decisions on tax policy. (p. 128)

The Problem of Defining Freight Capacity

Because this study considers the outlook for freight transportation capacity, some measure of capacity might seem indispensable. However, there is no generally accepted measure or even definition of system capacity in transportation (Morlok and Riddle 1999, 1–2). Applying the criterion of economic efficiency makes it possible, in spite of the absence of such a measure, to examine whether capacity is adequate.

The capacity of a link in a system—for example, a segment of road between two consecutive intersections—has a conventional definition as an engineering concept. As the density of vehicles on the road segment (vehicles per mile) is increased, initially the output of the road (the number of vehicles passing a point on the road per unit time) increases. Beyond some density the average speed of the vehicles begins to decline, and it is observed that the output of the road reaches a maximum, beyond which increasing density reduces output. The maximum output is the capacity of the road. A variation is to define capacity as the greatest output possible while maintaining a specified minimum acceptable level of service (e.g., a minimum speed).

This definition seems clear when applied to a road segment during a peak hour, but it does not provide an unambiguous answer to the question, “What is the annual capacity of the road?” and the concept is still more difficult to extend to a network in a useful way. A transportation network comprises multiple origins, destinations, routes, and modes. It produces a great number of distinct kinds of outputs, each characterized by the origin and destination of the trip, the time of travel, the characteristics of the goods or persons in transit, and the quality (e.g., speed and reliability) of the transportation service provided. The multidimensional nature of the output of a transportation network is the source of the difficulty of defining a measure of capacity. A further important complication is the sharing of many facilities by passenger and freight services.

Although similar conceptual difficulties arise in attempting to define capacity in the goods-producing industries, measures of industrial capacity have been produced for many years by the Bureau of the Census and the Federal Reserve Board. The primary purpose of the estimates is as an economic indicator for short-term forecasting. The Bureau of the Census conducts an annual survey of plant capacity in manufactur-

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Suggested Citation:"2 Freight Capacity as a Government Policy Issue." Transportation Research Board. 2003. Freight Capacity for the 21st Century: Special Report 271. Washington, DC: The National Academies Press. doi: 10.17226/10568.
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ing, in which it asks operators to report the value of their current quarterly output, the estimated value of production at full production capability, and their capability “under national emergency conditions.” According to the Bureau, “Plant capacity is broadly defined as the maximum or optimum level of production or output.” The survey showed, for example, that capacity was 132 percent of output in all manufacturing in the fourth quarter of 1996 (Bureau of the Census 1998).

The Federal Reserve Board publishes monthly capacity utilization rates for 76 industry groups in manufacturing, mining, and utilities using the Bureau of the Census survey and various other sources. The Board explains that its capacity measures “attempt to capture the concept of sustainable practical capacity, which is defined as the greatest level of output that a plant can maintain within the framework of a realistic work schedule, taking into account normal downtime, and assuming sufficient availability of inputs to operate the machinery and equipment in place” (Federal Reserve 1999). The estimates show that during the business expansion of the 1990s, manufacturing capacity utilization peaked in late 1994 at 85 percent.

These definitions evidently are imprecise. They depend on mostly unstated assumptions about which inputs are fixed, which inputs can be expanded without constraint, and what level of production costs is acceptable; and they treat the output of each plant or industry as homogeneous. The definitions suggest that measuring capacity in manufacturing is actually not much simpler than in transportation.

Measures of capacity in the freight transportation industry could be developed by methods analogous to those used to develop the Federal Reserve indexes. As an alternative, it is possible to develop measures derived from network models. Rail network capacity has been estimated using an optimization model simulating distribution of rail container traffic from west coast ports (Morlok and Riddle 1999). The model can be applied to maximize traffic on the system subject to facility capacity limits and delay relationships and constraints relating to equipment and labor availability, minimum level of service, and traffic patterns. The model therefore yields a measure of system capacity; for example, it is estimated that the simulated portion of the network was operating at 78 percent of capacity in 1987. Such an estimate depends on strong assumptions about demand characteristics; in this example, each port’s and inland destination’s share of traffic is assumed to be fixed. If assumptions about demand patterns were changed, the capacity estimate would change.

Quantitative estimates of capacity like those produced by the Federal Reserve surveys or by a network simulation model could be useful as indicators of current conditions or in forecasting system performance. However, for the purposes of this study, a total capacity measure was not essential. The policy question that the study is to help illuminate is

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Suggested Citation:"2 Freight Capacity as a Government Policy Issue." Transportation Research Board. 2003. Freight Capacity for the 21st Century: Special Report 271. Washington, DC: The National Academies Press. doi: 10.17226/10568.
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whether public investment or other public actions to expand capacity are justified, compared with alternatives that include changing operating and pricing practices. It is possible to decide whether specific freight system capacity expansion projects are economically justified without having a measure of total capacity.

The example of a single road segment subject to periodic congestion, described above, can illustrate this point. Even if traffic seldom reaches the road’s engineering capacity (that is, the traffic density at which the output of the road declines), the congestion that does occur might provide sufficient economic justification for capacity expansion. On the other hand, expansion of another road segment where traffic regularly reached the engineering capacity might not be economically justified—for example, if the construction cost of expansion were very high. Typically, providing so much capacity that users are never affected by peaking is not worthwhile. The scale is efficient if the total traffic on the present facility could not be served at lower total cost with a facility of some other scale.

Deciding whether building a new-scale facility would be efficient requires knowing all the costs and benefits, including the cost of delay to road users, the temporal characteristics of demand, the highway agency’s operating costs for the present road, and the costs of constructing and operating the new-scale facility; however, it does not require having a quantitative measure of capacity. The appearance of costs that are related to capacity constraints—congestion delays, rising maintenance costs, deteriorating service—is an indicator that expansion might be worthwhile, because avoiding these costs would be the payoff of expansion. Therefore, analysis to support government decisions on transportation system investment, operation, and regulation should emphasize determination of trends in costs and the nature of any constraints that are forcing costs to rise.

IMMEDIATE POLICY ISSUES AFFECTING FREIGHT CAPACITY

Freight transportation is an ongoing joint venture of government and the private sector. The performance of the system and the adequacy of freight capacity in the next decades will reflect the outcomes of government decisions on numerous spending, regulatory, and operational issues that arise in the course of administering established programs. Decisions on these issues often seem to address narrow concerns and often are guided by short-run considerations. Decision-making authority is dispersed. Decisions are state as well as federal responsibilities. At the federal level, they involve programs administered by several agencies and governed by various legislative acts. If there is to be a coherent government effort at the national level to improve freight efficiency and

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Suggested Citation:"2 Freight Capacity as a Government Policy Issue." Transportation Research Board. 2003. Freight Capacity for the 21st Century: Special Report 271. Washington, DC: The National Academies Press. doi: 10.17226/10568.
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provide adequate capacity, it must entail recognition of the cumulative long-run consequences of these decisions and provide a framework and principles to direct them. Otherwise, the various responsible government bodies are liable to be working at cross-purposes.

Box 2-1 lists examples of pending decisions that will affect long-run capacity. The purpose of the list is to illustrate the diversity of decisions that would require coordination as part of a comprehensive freight program. It is not comprehensive, and other program decisions affect freight capacity as well. The examples are grouped into areas corresponding to categories of government decisions: decisions on operation and regulation of transportation facilities, selection of funding sources, selection of investment projects, and definition of the division between public- and private-sector responsibilities.

The four categories of government activities are interconnected, and most of the issues listed could be classified under more than one category. For example, financing sources determine the scale of construction and influence where funds are spent, user fee collection can be a mechanism for managing use of facilities and for guiding investment, and regulations are integral to the management of public facilities.

In the following sections, each of these issues is defined, and its implications for long-run freight capacity are outlined.

Management, Operation, and Regulation

Decisions in this area relate to the rules that government applies to the users of freight transportation facilities, for example, traffic controls, economic regulation, and environmental regulation. Pricing (the fees charged to users of public facilities) is an important kind of operating rule. The section following this one, on funding, gives examples of pricing decisions.

Truck Performance Regulations

Federal and state regulations dictate many features of truck design and operation. Regulations limit the weight and dimensions of trucks, limit pollutant emissions, and require vehicle design features and operating practices to reduce accident risk. Congress and the state legislatures have adjusted the weight and dimensional limits on many occasions, although no major federal changes have been enacted since 1983. Liberalization generally has been supported by shippers and carriers. It has been opposed by railroads, sometimes by drivers, by some smaller trucking companies, and by motorist and safety advocacy groups. DOT recently completed an analysis of the consequences of changing limits (DOT 2000), and a TRB committee, responding to a congressional request, has recommended

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BOX 2-1

PENDING GOVERNMENT DECISIONS AFFECTING FREIGHT CAPACITY

Government management, operation, and regulation of transportation:

  • Truck performance regulation (size, weight, safety, pollution)

  • Railroad economic regulation

  • International aviation regulation

  • North American Free Trade Agreement freight transportation issues

Selection of funding sources for capital expenditures and operation of public facilities:

  • Harbor dredging funding

  • Toll funding of highways

  • Future of user fee finance in state highway programs

  • Port rate competition

Public investment choices:

  • Structure of federal-aid programs

  • Evaluating freight benefits in setting investment priorities

  • Public-sector technology development programs

  • Future development of the inland waterways system

  • Application of environmental regulations to infrastructure projects

Redefining government responsibilities:

  • Air traffic control reform

  • Government grants to freight railroads

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Suggested Citation:"2 Freight Capacity as a Government Policy Issue." Transportation Research Board. 2003. Freight Capacity for the 21st Century: Special Report 271. Washington, DC: The National Academies Press. doi: 10.17226/10568.
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changes in federal regulations. Opponents of liberalization have argued that increasing limits is undesirable because accidents and costs of highway construction and maintenance would increase, railroads would be weakened, and the comfort and convenience of motorists would be reduced. Past TRB and DOT studies concluded that liberalization would yield net benefits.

Truck size and weight regulations directly affect the freight capacity of the highway system. Raising the limits would allow a given quantity of ton-miles (or cubic-foot-miles) to be produced with fewer truck-miles. In addition, differences in truck standards among the United States and its trading partners hinder international commerce. The differences impede cross-border truck operation in North America, and because most countries have higher weight limits than the United States, loaded containers entering the United States by sea often cannot legally be carried on U.S. roads.

However, if U.S. limits were liberalized, an efficiency gain would be assured only if each truck’s user fees covered the cost of the truck’s use of the roads; otherwise, increasing limits could give rise to uneconomic demands on the road system and render highway agencies less able to afford maintenance and construction. As will be described in the section on funding sources, federal estimates indicate that combination trucks, on average, pay user fees nearly equal to the expenditures highway agencies incur to serve them, although the heaviest combinations tend to pay a smaller share of their costs and fees are not tied closely to the costs of individual movements.

Economic Regulation of Railroads

Since the Staggers Rail Act of 1980, economic regulation of railroads has greatly diminished, but the government retains oversight of rail rates, in part to prevent railroads from exercising monopoly pricing power in markets where competition is weak. Railroad mergers are also subject to Surface Transportation Board review. Since the act’s passage, disputes have arisen between the railroads and their customers over the degree of need for protection of shippers from rail market power. Recent rail mergers and ensuing service problems have increased the visibility of this issue. Legislation has been proposed that would require a railroad to offer a rate for service to any point of interchange with another carrier (to neutralize so-called bottleneck monopolies), make access over a railroad’s tracks by a second railroad easier to obtain at a shipper’s request, and add protections for small shippers (CURE 1999; Wilner 1999a). In addition, some shippers and competitors successfully opposed the most recent major rail merger proposal (Traffic World 2001).

Supporters of stronger government intervention on rail rates and competition have included certain shippers, notably producers of bulk

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Suggested Citation:"2 Freight Capacity as a Government Policy Issue." Transportation Research Board. 2003. Freight Capacity for the 21st Century: Special Report 271. Washington, DC: The National Academies Press. doi: 10.17226/10568.
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commodities like coal and grain, some consumers of these products like power plants, and shortline railroads. The major railroads oppose tighter regulation and have received some shipper support in their positions (AAR 1998).

Federal regulatory policy has had great consequences for rail freight capacity. The revival of the railroads since 1980 is the result of increased freedom to set rates, enter into contracts with shippers, control labor costs, and eliminate unprofitable services. The changes have benefited shippers (GAO 1999). As described in Chapter 3, railroad capital expenditures, which had declined for decades, have increased since 1980; productivity has been growing; and operating income has increased even though rates have continued to decline. Rail traffic is growing and railroads are competing successfully for some lines of business that they had previously ceded to truck.

A return to regulation that was too restrictive—preventing railroads from responding to changing market requirements and from setting prices sufficient to earn market returns—would be expected to once again lead to slowing of capital investment and loss of service to some customers who would have been willing to pay the rates necessary to make service profitable. On the other hand, if railroads are using monopoly power to set freight rates above competitive levels, they are excluding some freight that ought to be on the railroads; so utilization and eventually the capacity of the system will be less than optimal.

International Aviation Regulation

International air cargo probably is the most regulated major freight market. International competition is governed by the system of bilateral treaties that also regulates passenger traffic. The treaties restrict landing rights, nationality of ownership, cabotage, and other aspects of operations. An alternative would be to govern international air cargo, as is trade in other international services such as telecommunications and banking, by a multilateral free trade agreement. International agreements to reduce barriers to ownership, market entry, and cabotage would enhance competition. A proposal for such agreements has been made by the International Chamber of Commerce and other international business groups (ICC 2000; Parker 1999). In this proposal, international air cargo could be liberalized without changing the present rules governing passenger transport. The issue is timely because a new round of negotiations within the World Trade Organization structure is beginning. The past two administrations have declared liberalization of international cargo and passenger aviation markets to be a priority (FAA 2000; Mineta 2001).

Increased competition and increased carrier flexibility would be expected to yield the same improvements in efficiency in the interna-

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Suggested Citation:"2 Freight Capacity as a Government Policy Issue." Transportation Research Board. 2003. Freight Capacity for the 21st Century: Special Report 271. Washington, DC: The National Academies Press. doi: 10.17226/10568.
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tional air cargo system as they have in other transportation sectors. Increased efficiency means that better use is made of existing capacity. Lower costs would lead to more air cargo, but the system would be better able to respond to growing demand.

North American Free Trade Agreement Freight Transportation Issues

The 1994 North American Free Trade Agreement requires the United States, Canada, and Mexico to seek harmonization of regulatory standards in order to allow free operation by transportation companies across the borders. To date progress has been slow. Truck size and weight, emissions, safety, insurance, and liability rules differ widely among the three countries (FHWA 1997, 1–4, 33–35; Adams 2001). Immigration restrictions, the problem of drug trafficking, and concerns of organized labor are further constraints.

The growth of freight traffic among the United States, Canada, and Mexico has led to serious congestion at border crossings. Facilitating freight flows at the borders will require administrative changes in numerous agencies and jurisdictions, including customs and immigration authorities and state regulatory agencies, as well as public and private infrastructure improvements. TEA-21 created a grant program, the Coordinated Border Infrastructure Program, to fund infrastructure and operational improvements at border crossings and international planning activities aimed at this problem.

The borders are among the most prominent bottlenecks in the freight system. Greater resources for border facilities and operations would directly address congestion; opening borders might reduce congestion if it was accompanied by transference of some of the clearances that now take place at borders to origin and destination points. More important, open borders would offer shippers more choices of routes, carriers, and ports than they now have. A single continental network would have greater effective capacity than the sum of its three parts.

Environmental Streamlining

Legally required environmental reviews and approvals of public and private infrastructure projects serve an essential function. The reviews contribute to the efficiency of the freight transportation system if, by reducing environmental costs, they reduce the total costs of providing transportation services. However, the costs of the reviews themselves, in dollars, time to complete, and uncertainty, are substantial. The agencies controlling the reviews may be insensitive to these impacts, which do not directly affect their own budgets and mission. The states in particular are

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concerned with the costs of environmental reviews and are seeking streamlined federal review of highway projects (AASHTO 2000). Section 1309 of TEA-21 required DOT to work with the federal environmental regulatory agencies to develop procedures to facilitate reviews of highway and transit projects to reduce delay and costs. Streamlining environmental review is recognized to require negotiated interagency agreements, communication, and careful planning. Individual states and groups of states are successfully implementing such procedures, but nationwide procedures are not yet operating.

The outcome of environmental review ought to be better infrastructure projects, that is, projects with lower environmental and total costs than if the review were not conducted. Poorly managed reviews greatly complicate the problem of timely response to changes in demand by public- and private-sector providers of infrastructure. Project risk is increased and some worthwhile projects fail. The ability to respond to the market in a timely manner is critical to provision of adequate capacity.

Social Costs of Freight Transportation

Comparisons of the external costs of the various freight modes have taken on increasing prominence in discussions of government freight policy. External costs of freight transportation are costs that shippers and carriers do not primarily bear but that are borne instead by others. External costs of a freight shipment include the costs of the pollution, congestion, and accidents caused by the shipment, beyond the portions of these costs borne by the shipper and carrier.

External costs are relevant to the freight capacity problem in several ways. If these costs were better managed—through more cost-effective regulation, internalizing external costs through pricing, or technological breakthroughs—not only would freight transportation become more efficient, but the pattern of future development and expansion of the system would be altered. For example, better management of environmental and safety costs could result in changes in location decisions; changes in relative rates of regional growth; and changes in the relative growth of water, rail, and trucking. Second, government intervention in freight markets has sometimes been proposed as a policy tool for reducing environmental costs. The U.K. white paper A New Deal for Transport, summarized in the appendix, contains such proposals.

Another study referred to in the appendix, the 1996 TRB committee report Paying Our Way: Estimating Marginal Social Costs of Freight Transportation, compared market prices with social costs (i.e., the sum of all external and private costs) for freight services for case studies involving actual individual freight movements. The quantitative results suggest that the differences in social costs among the freight modes and

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Suggested Citation:"2 Freight Capacity as a Government Policy Issue." Transportation Research Board. 2003. Freight Capacity for the 21st Century: Special Report 271. Washington, DC: The National Academies Press. doi: 10.17226/10568.
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among types of freight movements are more complex than they are sometimes characterized (TRB 1996, 6–7).

The study’s recommendations emphasized significant practical obstacles to adopting a policy of internalizing all external costs of transportation through government imposition of charges on users (TRB 1996, 14–15). One problem identified is that charges imposed on the basis of poor information, or with insufficient attention to developing effective and practical fee structures, would risk detracting from welfare rather than enhancing it. The committee recommended, as first steps, research to understand the magnitudes of costs and their determinants and to develop methods for evaluating the effects of alternative fee structures on shippers and carriers.

Selection of Funding Sources

Finance and pricing decisions are elements of the public sector’s management of its transportation infrastructure. The mechanisms chosen to finance projects and to collect revenues from users and others will profoundly affect freight transportation system performance. The structure of user fees determines whether the best use is derived from existing facilities, and finance practices influence the quality of investment decisions. The four examples below are cases where immediate decisions on funding government transportation programs are called for.

Port Rate Competition

Although most of the largest U.S. ports experience congestion, many U.S. ports have slack capacity except perhaps at peak times for certain categories of cargo. Also, many U.S. ports are not wholly dependent on revenues from fees and rents, but receive aid from various government sources (MARAD 1998, 38–44; MARAD 2001, 3). These circumstances have led ports to charge fees to users that are below their costs and to be reluctant to raise fees for fear of losing traffic to competing ports, even as cargo volumes were growing rapidly during the 1990s (Burke 1996; Mathews 1997). State and local governments justify port subsidies on the grounds that the port is a source of economic growth, essential to the stature of its region as a commercial center.

Two recent proposals would curtail ports’ price competition to allow them to increase fee revenue. The Maritime Administration has suggested consideration of regional pricing compacts among ports (MARAD 1996, 44; MARAD 1998, 47–48). TRB’s 1993 port landside access study proposed creation of a federal port access trust fund, with revenues collected from port users devoted to port improvements (TRB 1993, 15). Such a fund would be analogous to the existing highway, airway, and inland waterways

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trust funds. The present administration recently has encouraged discussion of proposals for such a fund, to be called SEA-21 by analogy with the TEA-21 legislation governing the highway trust fund (Parker 2001).

The existing trust funds reduce the responsibilities of individual facilities to support themselves by redistributing revenue from heavily used to lightly used facilities and from one transportation mode to another. An alternative policy, which would reflect a fundamentally different perspective on the public interest in providing freight capacity, would be to reduce the availability of external funds to ports, forcing them to be more self-sustaining.

Increasing user fees could provide additional funding for justifiable port improvements. It would also to some extent diminish the volume of cargo handled at U.S. ports, through diversion to foreign ports and a decrease in trade as a result of higher prices. The persistence of subsidies at some ports indicates that excess capacity exists, at least for the present, in the U.S. port system and that some rationalization of capacity could improve efficiency. The form of any new or increased user fees and the use of the revenues generated would strongly affect the direction of rationalization. In particular, if each port were required to be self-sufficient, it is likely that the number of ports would decline. The debate over harbor maintenance fees described below raises the same issues.

Harbor Dredging Funding

The federal government funds most maintenance dredging of harbor channels. Appropriations for maintenance of navigation channels are made annually from the federal Harbor Maintenance Trust Fund. The fund receives receipts from the Harbor Maintenance Tax, which was enacted as an ad valorem tax applied to the value of cargoes loaded or unloaded at ports served by federally maintained channels. This funding mechanism was created by the Water Resources Development Act of 1986. In 1997, expenditures from the fund for dredging by the Corps of Engineers were $546 million (MARAD 1998, 64). In 1998, the federal courts ruled that the portion of the Harbor Maintenance Tax that applied to exports violates the constitutional prohibition on export taxes, and that fee ceased to be collected. The remaining fee on imports is vulnerable to charges of being in violation of international trade agreements (Subcommittee on Water Resources and Environment 1999; Godwin 1998; Taxpayers for Common Sense 2000). Therefore, a new revenue source for maintenance dredging is needed.

Congress has considered competing proposals to restructure the fee and to extend user fee finance to capital improvements as well as maintenance, or alternatively to abolish fees and fund dredging from other sources (CBO 2001, Section 300-12; Wilner 1999b). The American

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Association of Port Authorities (AAPA), shipper groups, and ocean carriers oppose a replacement user fee. AAPA has proposed that all federal funding of dredging come from general revenues. It argues that port user fees reduce the volume of trade and divert cargo to Canadian ports and that, because the benefits of ports are broadly distributed nationwide, channel maintenance is appropriately funded from federal general revenues (Godwin 1998; AAPA n.d.). Proposals to create a new federal trust fund, with revenues from import duties, to finance both harbor maintenance and capital improvements are described in the section above on port competition.

The resolution of the dredging funding issue may have broad implications for the federal role in freight and for transportation infrastructure finance principles. The user fee/trust fund mechanism has been used in the United States for highways, inland waterways, ports, and aviation. It has been seen as a means of providing a stable source of funding that is perceived to be fair by the payers and the public. User fees act, although imperfectly, as prices in regulating use of public facilities and signaling when and where expansions are justified. A stable funding source could similarly promote rational long-range development of U.S. port facilities. In addition, depending on how revenues from a fee were allocated, this funding arrangement could affect the future prospects of the less-utilized ports. To promote efficiency, fees must be structured so that the fee each user pays is as closely related as is practical to the cost of serving that user, and expenditures must be allocated to the projects that yield the greatest benefits. The federal highway program is an example of the effectiveness of the user fee/trust fund mechanism in providing a financial basis for continual development and long-range planning.

However, the trust fund mechanism may be less suitable for funding seaports than for funding highways. The highway trust fund has always functioned to redistribute funds from the high-traffic components of the highway system, which generate high revenue, to spending on components that generate relatively low revenue. Economic arguments, citing various possible kinds of external benefits or scale economies in the highway system (e.g., network externalities or indivisibilities), have been offered to justify this redistribution. However, historically, the motivation for redistribution through the trust fund mechanism can be seen as arising simply as a result of the impracticality of collecting revenues and assigning costs to individual system components. Although it would be technically feasible today to assess highway user fees from individual users as a function of route and time of travel, such systems were not available in the past, and their introduction now would be politically difficult. In addition, given the established institutional structure, a significant portion of highway spending serves systemwide functions (e.g., many aspects of planning, administration, engineering

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services, and law enforcement) and can only arbitrarily be allocated to highway segments.

None of the arguments that might be cited in support of the redistribution of funds among elements of the system through the highway trust fund applies in the case of seaports. Port user fees would all be collected at individual ports, and for particular services or facilities used at individual ports, and most ports are administratively autonomous. Arguments for cross-subsidies based on scale economies, whatever their validity for highways, do not apply to ports. U.S. seaports do not constitute a network that is analogous to the highway system, since the value of a port does not depend on the existence of other ports in the same way that the value of a road increases if its connectivity to other roads increases. Therefore, the highway program cannot be used as a model for justifying the use of revenues generated at high-volume ports to subsidize maintenance and improvements at low-volume ports.

Toll Funding of Highways

Highway tolling has generated renewed interest both as a source of new funds for roads (either public roads or various forms of public–private joint developments) and, in the form of congestion pricing, as a means to manage use of highway capacity more efficiently. Information technology has made toll collection more practical, but toll roads still face implementation difficulties. TEA-21 included two provisions, the Value Pricing Pilot Program and the Interstate Toll Pilot, to provide incentives for states to experiment with tolls for construction finance and demand management (FHWA 2001a; FHWA 2001c). States also may use federal-aid funds to construct or reconstruct toll roads or to loan funds for these purposes to private toll operators. Although the federal-aid pilot programs apparently have not been popular, several new toll operations have opened in recent years (FHWA 2001b).

No method holds greater promise for reducing the harm caused by congestion than does pricing. Greater reliance on tolls allows capacity to be more self-adjusting, as it is in the private sector: fees ration use in the short run, provide funds for expansion, and indicate where expansion should occur in the long run. Nonetheless, the institutional and political obstacles to road pricing are recognized as formidable (TRB 1994).

Future of User Fee Finance in State Transportation Programs

States have begun to question whether traditional sources of transportation funding, in particular fuel taxes, will continue to be adequate for perceived needs. In the future, increasing use may be made of general revenue funds, special sales taxes, and other sources, while increases in

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gasoline taxes will be more difficult to enact if the price of petroleum remains high.

Nationwide, the share of highway spending funded by sources other than user fees (i.e., fuel taxes, vehicle taxes, and tolls) has remained fairly constant in the range of 20 to 25 percent for the past 30 years (FHWA 1973–2000). However, some jurisdictions [e.g., California (Adams et al. 2001, i, 33)] are today experiencing an evolution away from reliance on charging users in favor of greater reliance on sales taxes.

Some trends in user fee finance have positive implications. In the most recent federal highway cost allocation study, which compares the user fee payments of various classes of highway users with the highway agency expenditures that may be attributed to each class, user fees paid by operators of combination trucks (the principal freight-carrying vehicles) are estimated to equal 80 percent of the highway agency expenditures attributed to this class of vehicle. This equals the ratio of fees to costs for all vehicles. When just federal user fee revenues are compared with the uses of federal-aid highway funds, combination trucks are estimated to pay 90 percent of the attributed expenditures, the same as the average ratio for all vehicles (DOT 1997, Table 13). The previous federal cost allocation study estimated that, in 1977, federal user fees paid by operators of combination trucks equaled 60 percent of federal-aid fund expenditures attributed to combination trucks (DOT 1982, Table I.7). In both years, heavier combinations were estimated to pay somewhat smaller shares of their costs than lighter combinations.

To the extent that the traditional user fee system has served as a relatively efficient and reliable means of managing state transportation finance, states would be taking a risk in de-emphasizing its role. If expanded revenue sources allow support of sound investments, there may be gains for freight transportation performance. However, user fee finance, with fees related to costs attributable to users, provides incentive for shippers and carriers to make logistics and operating decisions that reduce freight transportation costs. User fee finance also is a safeguard against wasteful investment.

Public Investment Choices

Government decisions about which transportation infrastructure projects to invest in are more difficult than in the private sector. Private-sector decisions are market driven: the investments selected are those expected to yield the highest returns, and investments are triggered by circumstances (i.e., rising prices and profits) that signal an opportunity for profit in a particular segment of the transportation firm’s market or the threat of loss of profitability to competitors. In the public sector, in contrast, users of facilities often do not pay market prices, so market signals

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are weak, and a variety of equity considerations influence decisions along with expectations of overall economic return. The three examples below illustrate how these factors affect public investment choices.

Future of the Inland Waterways System

Characteristics of the inland waterways system include aging infrastructure, great disparities in the ratios of operating and capital costs to traffic volume among the various waterways that make up the system, erratic federal funding for capital expenditures in recent decades, and growing traffic with occasional heavy congestion on certain segments. Although a towboat fuel tax contributes, historically federal general revenues have paid the majority of capital and operating costs (USACE 1997, ES-7– ES-23, 4-1–4-10, F-2–F-9). The Corps of Engineers is completing an economic and environmental analysis of proposed investments to replace old locks and expand lock capacity on the Upper Mississippi River, a heavily used portion of the waterways system with numerous locks. The study has been controversial because of questions about whether user benefits justify the cost of proposed improvements and about the magnitude of environmental costs (NRC 2001).

The choices are whether to continue present subsidies or increase reliance on user fees, and whether to replace facilities as they wear out over time on each of the segments of the system. If subsidies lack economic justification, their effect is to support an inefficient portion of the freight transportation system at the cost of retarding development of capacity on more efficient alternatives (NRC 2001, 15–18). However, fee increases or a decision not to continue to support the inland waterways over the long run would cause shifts in traffic to other modes, which might strain capacity for some period.

Public-Sector Technology Development

Spending for research and development is a form of capital investment. In all the modes, productivity and capacity have been affected by applications of information technology, equipment improvements, improvements in construction materials, and advances in the design of facilities. For many decades, government has been a leader in supporting and planning transportation research and in implementing new technology in the United States. The federal government’s Intelligent Transportation Systems initiative (FHWA 2000) is a high-profile activity, but basic civil engineering research remains vital also (TRB 2001, 3–8). So far, the federal government has not established its ability to foster development and implementation of basic new transportation systems and technologies. Effective forms of government leadership and involvement with the pri-

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vate sector for this purpose have not yet evolved (TRB 1998b, 11–13, 57–59; TRB 2001, 135–144).

The possibility exists of eventually obtaining large increases in the effective capacity of transportation systems through information technology applications and new vehicle designs that allow vehicles to operate at higher speeds and shorter headways. This concept is applicable to highway and rail right-of-way and to the air traffic control system. In the short run, information technology can improve the effectiveness of conventional traffic control systems (e.g., highway traffic signals) and improve safety. Reducing road accidents incidentally increases capacity, since accidents are a major source of congestion and delay. Developments in construction and materials technology can reduce the cost of expanding and maintaining infrastructure. Extending the life of structures would reduce the significant capacity losses that occur during construction and maintenance. Government decisions about research spending, management of research and development, public–private cooperation, standards setting, regulation, and technology transfer will influence the rate at which such developments are perfected and adopted.

Structure of Federal Highway Aid Programs

Congress has begun to debate successor legislation to the TEA-21 federal surface transportation program, which expires in 2003. The issues may include whether to continue the established federal role in transportation finance, project eligibility requirements for federal aid, the structure of user fees, and the role of local government in project selection. Proposals will be made for provisions to target more spending on projects important for freight transportation.

The level of funding of the federal surface transportation program and the structure of the program (i.e., the definitions of projects eligible for funding, the rules for allocating federal funds, and the sources of federal funds) are among the major instruments available to the federal government to impart national direction on transportation system development. Program rules will influence the priorities given to freight-related projects, the success with which funding is directed to projects with the highest payoff, whether activities other than highway and transit projects may be funded, and opportunities for input from the freight sector in the project selection process.

Of the $218 billion in transportation spending authorized in TEA-21, all but a few percent was dedicated exclusively to highways and mass transit (DOT 2001). It is likely that in the successor program as well, by far the most significant element for freight transportation will be the highway program. Highways are the largest U.S. freight transportation mode in terms of shipper expenditures. Therefore, the highway funding

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level and the degree to which program rules promote sound overall highway investment decisions will have greater effect on freight transportation system performance than narrowly conceived provisions intended to promote freight projects specifically or to allow funding of nonhighway freight projects. The structure of federal user fees will also be important for freight system performance because it will influence shipper and carrier decisions as well as funding availability.

Redefining Government Responsibilities

Public-sector investment choices include decisions within established government activities (for example, deciding whether to increase the capacity of a state highway) and decisions on expanding or contracting the sphere of government involvement. In all the transportation modes, changing conditions have led to reexamination of government roles. Two examples of this process are described below.

Air Traffic Control Reform

A TRB committee that reviewed the performance of the air transport industry in the first decade after deregulation concluded in 1991 that there were grounds for concern “about the ability of the FAA [Federal Aviation Administration] in its current form to meet future challenges posed by continued air traffic growth. This concern extends beyond the efficient provision of airspace capacity; the committee is not assured that the FAA in its current form, despite the best intentions of its managers and staff, will be able to continue to maintain the high level of safety in the aviation system that the American public enjoys and has come to expect” (TRB 1991, 16). The committee recommended that consideration be given to limited privatization of FAA. Privatization has since been proposed by others as a means of accelerating adoption of new technology and allowing pricing of air traffic control services. The president’s 2002 budget proposal stated that the administration planned to examine the experience of other countries, including Canada, with private-sector air traffic control operations (OMB 2001, 139).

Information technology applications can increase airspace capacity to accommodate expected growth of passenger and freight traffic. The number of passenger-miles flown on U.S. carriers is expected to grow at a rate 40 percent higher than the rate of growth of the overall economy in the next decade, and the number of U.S. carrier air freight ton-miles is expected to grow at nearly twice the rate of the economy (Rodgers 2002; FAA 2001). FAA historically has been slow in keeping up with technological opportunities. If a privatized air traffic control organization could improve on past performance, capacity constraints would be lessened. In

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addition, rational pricing of air traffic control would improve utilization of capacity and provide direction to investment decisions.

Government Grants to Freight Railroads

Freight railroads have received government grants through various programs, usually on a small scale in recent decades, including state rail assistance programs with and without federal support and ad hoc arrangements for single projects. TEA-21 (Section 7203) contained a program for federal rail assistance, the Railroad Rehabilitation and Improvement Financing program (RRIF), which was to provide loans and loan guarantees to public or private sponsors for development or improvement of rail or intermodal facilities or equipment. The act limited the total amount of loans provided or guaranteed to $3.5 billion, with at least $1 billion of this available to shortline railroads. This program and another provision of TEA-21, the Transportation Infrastructure Finance and Innovation Act (for which exclusively rail projects are not eligible), were seen as institutionalizing the kind of federal freight project credit assistance that Congress has previously provided specially to the Alameda Corridor port access project in Los Angeles (DOT 1998, 1–3).

Funding for the federal budgetary cost of the loan program was not provided, although TEA-21 authorized the government to accept payments from loan applicants for this purpose and left open the possibility of future funding. Proponents of the program criticized implementing regulations regarding loan eligibility and creditworthiness requirements, published in 2000, as excessively stringent. Because of the lack of appropriations and the stringent criteria, as of 2001 no loans under the program had been finalized (Committee on Transportation and Infrastructure 2001). Proposals have since been made for more liberal rail assistance on a larger scale. For example, the Railroad Infrastructure Development and Expansion Act for the 21st Century (RIDE-21), a bill introduced in the House of Representatives in 2001, called for expanding RRIF to $35 billion, including $7 billion for shortlines, and relaxing aid criteria (Subcommittee on Railroads 2001). The bill was supported by the Association of American Railroads (Hamberger 2001). Executives of major railroads recently have endorsed the principle of federal aid to freight railroads (Mottley 2001; Krebs 2001).

The justifications offered in support of proposals for rail freight grants are that it can be cheaper in some circumstances from the standpoint of the government to aid the railroads than to provide the same freight capacity by expanding highways, or that rail aid is needed to offset the effect of subsidies truck operators receive if they do not pay the full cost of providing highway service to them. An alternative policy to rail grants would be to adjust truck taxes to ensure that trucks covered

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their costs. Shippers would then select the best transportation options on the basis of true costs. The case study presented in Chapter 3 on the Virginia I-81 corridor examines the issue of government aid to freight railroads.

Summary

The performance of the freight transportation system is affected by diverse government programs housed in several federal agencies and in state governments. Imminent decisions on management, structure, and funding levels in these programs will have important consequences for the development of freight capacity. The issues range from technical program details to the basic question of the proper role of government in the freight sector. The relevant decisions are not confined to infrastructure spending; critical issues also involve operating practices, fee structures, and regulation. U.S. policy on international trade also affects freight capacity, since foreign carriers and infrastructure supplement and compete with U.S. capabilities. The international dimension will be of increasing importance as the volume of trade grows.

RECENT POLICY STATEMENTS

The committee took advantage of several recent statements from prominent sources that analyzed public policy problems related to provision of freight capacity and recommended changes in government policy. Noted were specific policy proposals of these groups as well as the evaluation criteria and principles concerning responsibilities of government in freight transportation that guided conclusions. Taken together, the recommendations and policy statements from these sources indicate the range of options that are open.

The statements reviewed by the committee include reports of three past TRB committees that considered freight policy issues in studies sponsored in part by DOT and the states. Their reports were Landside Access to U.S. Ports (TRB 1993), Paying Our Way: Estimating Marginal Social Costs of Freight Transportation (TRB 1996), and Policy Options for Intermodal Freight Transportation (TRB 1998a). The committees examined aspects of government freight transportation policy related to capacity, including port access, social costs of freight transportation, and intermodal policy. Their work provided a starting point for the present study.

The committee also reviewed the report of the National Commission on Intermodal Transportation, which was created by Congress and charged with recommending ways to improve the efficiency of the U.S. transportation system (NCIT 1994). To provide an international perspec-

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tive, the 1998 white paper of the U.K. government declaring its transportation policies, A New Deal For Transport, was examined (Department for Transport, Local Government, and the Regions 1998). The committee also reviewed proposals published by two independent private sources, the Brookings Institution (Winston 1999) and the Reason Foundation (Samuel and Poole 1999). This does not approach a comprehensive list of recent relevant studies and policy proposals. Many more detailed proposals have been made for mitigating specific capacity-related problems or problems of specific freight industry segments. However, these sources do provide a representative sample of current ideas on the basic policy issues. Each of the statements is summarized in the appendix.

All the statements reviewed agree that the social benefit derived from freight transportation could be increased through changes in government transportation programs. They tend to agree that government needs to improve the effectiveness of its transportation infrastructure investment decisions—that is, to make high-payoff investments that are now being missed and to avoid projects with low return—and that government needs to get more out of existing facilities through better management. The statements account for poor investment and management as results of certain institutional obstacles to improved performance. The obstacles cited relate to organizational complexity, opposition of parties who expect that their interests will be harmed by new developments, and the finance of infrastructure projects.

Although diagnoses are similar, the nature of policy recommendations varies greatly among the statements, reflecting some sharp differences of perspective. At the risk of caricaturing the views of the authors, the philosophies underlying their recommendations may be grouped into three categories:

  • Incrementalist: These proposals include more resources for existing programs, refinements in program structure or initiatives within the precedents of established policy, and more coordination and cooperation among the interested parties. Examples are programs to promote state and local freight planning and communication between government transportation officials and freight carriers and shippers, finance arrangements to improve investment decisions by favoring projects with lower subsidy requirements and private-sector acceptance of a share of risk, and reduction of environmental regulatory burdens by administrative streamlining.

  • Activist government: These proposals involve new government programs departing from established structures, expanded responsibilities for government, partnerships with the private sector, private-sector grants, increased regulatory oversight, and government promotion or advocacy of particular business practices or institutional structures.

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Examples are proposals for redesign of federal programs to allow financial aid for types of facilities and projects not eligible under present programs, including railroads, terminals, and landside port facilities; addition of federal restrictions or incentives affecting local programming of federal-aid funds to increase the share going to projects important to freight; and advocacy of national freight planning.

  • Limited government: These proposals call for deregulation, privatization, pricing, and devolution of government responsibilities to the local level. Examples are recommendations for supplementing or replacing federal grants with cost-based user fees that incorporate peak pricing, privatizing air traffic control and ports, reducing the environmental regulatory burden by using pollution taxes and tradable emissions quotas, and promoting competition by removing barriers to foreign carriers and facilities.

Incrementalists and activists argue that laissez-faire provision of freight infrastructure is impractical because government is already responsible for major infrastructure components and this institutional arrangement is not going to change soon. Activists can note that government has in the past intervened, often successfully, with unprecedented actions guided by long-range planning. Examples in the 20th century are the Interstate highway system and the federal-aid highway program, the air traffic control system, and new industry regulatory regimes (the Civil Aeronautics Board and motor carrier regulation). In the 19th century, canal development, railroad land grants, and creation of the Interstate Commerce Commission are examples. Proponents of limited government would argue that institutional obstacles, which all agree lie behind performance shortcomings, can be overcome only by changing the incentives of service providers, and that the correct incentives can best be provided via markets.

The divergence of prescriptions must be the result of not only philosophical differences but also lack of empirical information, the consequence of the failure of government transportation agencies to conduct adequate evaluations of many of their projects. Systematic evaluation and policy experimentation would provide a better factual basis for judging the alternatives.

REFERENCES

Abbreviations

AAPA American Association of Port Authorities

AAR Association of American Railroads

AASHTO American Association of State Highway and Transportation Officials

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CBO Congressional Budget Office

CURE Consumers United for Rail Equity

DOT U.S. Department of Transportation

FAA Federal Aviation Administration

FHWA Federal Highway Administration

GAO U.S. General Accounting Office

ICC International Chamber of Commerce

MARAD Maritime Administration

NCIT National Commission on Intermodal Transportation

NRC National Research Council

OMB Office of Management and Budget

TRB Transportation Research Board

USACE U.S. Army Corps of Engineers


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Suggested Citation:"2 Freight Capacity as a Government Policy Issue." Transportation Research Board. 2003. Freight Capacity for the 21st Century: Special Report 271. Washington, DC: The National Academies Press. doi: 10.17226/10568.
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Suggested Citation:"2 Freight Capacity as a Government Policy Issue." Transportation Research Board. 2003. Freight Capacity for the 21st Century: Special Report 271. Washington, DC: The National Academies Press. doi: 10.17226/10568.
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Suggested Citation:"2 Freight Capacity as a Government Policy Issue." Transportation Research Board. 2003. Freight Capacity for the 21st Century: Special Report 271. Washington, DC: The National Academies Press. doi: 10.17226/10568.
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Suggested Citation:"2 Freight Capacity as a Government Policy Issue." Transportation Research Board. 2003. Freight Capacity for the 21st Century: Special Report 271. Washington, DC: The National Academies Press. doi: 10.17226/10568.
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TRB Special Report 271 - Freight Capacity for the 21st Century recommends development of a national policy to promote better management and investment decisions in order to maintain and improve the capacity of the nation's freight system. Keeping up with growth in freight transportation requires better use of current facilities and the funding of projects with the biggest payoffs. To ensure adequate freight capacity, Congress and federal agencies must coordinate the activities of dozens of separately administered programs that affect the system.

This report recommends four principles to guide decisions about using, enlarging, funding, or regulating the freight transportation system:

Capital improvements, such as new roads - as well as operating practices for public facilities - should aim for the greatest usefulness considering all costs;

Local, state, or federal governments should be involved only when they can do the job better than any other entity;

Whenever the primary benefits of a project are lower costs for the facility's users, user fees - not government subsidies - should pay for the capital and operating costs; and

Appropriate choices about financing arrangements should be made at the start of a project.

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