Tuesday, August 07, 2007

Bridge Collapse, Political Failure

On Wednesday the Interstate Highway 35W bridge across the Mississippi River collapsed, dumping 88 cars and their occupants into the river. The accident, which occurred just 2 miles from my home in Minneapolis, was one of the greatest structural failures in U.S. history. Naturally, then, it has been the focus of national news media for several days now, and politicians have been rushing to the scene to exhibit their concern and promise to make more money available to rebuild the structure. Governor Pawlenty, who previously was against any increase in the gas tax, now said a tax hike may be needed. And the federal government has hurriedly promised to contribute $250 million.

The accident has spawned concern about the safety of other bridges throughout the U.S. The concern is well founded. Nearly 148,000 U.S. highway bridges—almost 1 in 4—were “structurally deficient” in 2005, according to the U.S. Department of Transportation. Minnesota was fifth best among the 50 states, with only 13 % deficient. Thirty-six states had a deficiency rate of 20 % or higher. Bridges have been systematically shortchanged nationwide for a long time. Inspectors had warned for nearly a decade that the I-35W bridge had “severe” and “extensive” corrosion of its beams and trusses, “widespread cracking” in spans, missing or broken bolts, and certain components of the superstructure were “beyond tolerable limits.”

The collapse Wednesday of a bridge deck nearly seven football fields long was not due to a shortage of funds; it was due to the mis-allocation of funds. The taxpayers have not been stingy. They accepted highway costs of $151 billion in 1991, $217 billion in 1997, and $286 billion in 2005. But those funds were increasingly allocated according to political advantage, not transportation needs. For example, the $286 billion appropriation included $233 million for an Alaskan bridge greater than San Francisco's Golden Gate Bridge. It will connect Ketchikan (population 8,000) with an island having a population of 50. Meanwhile, no funds were appropriated for the “structurally deficient” Interstate 35W bridge that carried 140,000 vehicles per day.

The Alaskan bridge was earmarked as a special project, which meant the money could not be spent for any other purpose. In 1981 there were only 10 of these earmarks. In 2005 there were 6,371. Thus over the last quarter century, politicians have increasingly channeled funds to political purposes—which means projects most likely to benefit their reelection. Could you expect politicians to make decisions on a basis other than politics? Is it any wonder that the money is not well spent? Incidentally, Congressman Don Young of Alaska was chairman of the House Transportation Committee.

While governments everywhere have done a poor job of managing transportation infrastructure, private investors have been doing a far better job where they are allowed. The U.S. Dept. of Transportation estimates there have been more than 1,100 public-private deals in transportation worldwide in the last 20 years, with a value of $360 billion. Since France began licensing private investors to construct and operate toll roads in 1955, more than 3,400 miles of them have been built there. In Britain, Margaret Thatcher aggressively sold public assets and spurred private investment in public construction projects. In 2006 Gov. Mitch Daniels auctioned off the rights to operate Indiana toll roads for a whopping $3.85 billion, more than double the value placed upon the system by traditional bond valuations. Chicago Mayor Richard Daley auctioned the City's Skyway and is now trying to sell Midway Airport. Texas has entered a build-and-operate agreement for a 320-mile toll road. California has a similar agreement for an $800 million extension of Route 125 south of San Diego, according to Steven Malanga of the Manhattan Institute. These deals will not allow the private owners to skimp on maintenance and repairs, because their contracts “allow governments to cancel deals, take back the roads and bridges and keep the cash if operators don't live up to the terms,” says Malanga. It is doubtful that the Interstate 35W bridge would have collapsed had it been privately owned and operated under such terms. And instead of the “need” for always upping the ante for the taxpayers, the government would make profits from the sales to private investors. Everyone would benefit.

In the same way that government has been squandering transportation funds on projects of lesser usefulness, it has done the same thing with funds for other purposes altogether. It has spent so much money for purposes that are not even Constitutional that, according to Congressman Ron Paul, federal obligations now total $50 trillion—about $175,000 for each American. Nowhere does the Constitution even mention such items as education, health care, agriculture, “diversity,” and insurance, much less grant the federal government the power to fund them. $50 trillion is roughly the worth of all the assets of the American people. So the net worth of the American people is now zero. Actually, it's even less than that, because Congressman Paul's numbers don't include state and local borrowing against our assets.

How is it that private corporations make record profits—and pay taxes—while government endeavors—which don't pay taxes—are constantly losing money and driving us deeper and deeper into debt? It's because in economic matters, government is always acting against the market. That is precisely why such actions are undertaken, to do things that the marketplace has already indicated are uneconomic; if they were economic, they would already have attracted private investors and the expertise of those who know most about the subjects (about which the politicians invariably know very little.) Acting against the market is like trying to act against the law of gravity or the laws of mathematics. The laws of Congress cannot repeal the laws of economics. Increasing the number of laws, the level of taxation, or the types of things on which government spends money will not make anything economic. Such increases merely increase the size of the losses and reduce the freedom with which people can make profits and progress in the marketplace. Our Founding Fathers were most wise to have chosen not to use the Constitution to empower the federal government in so many areas where it has been steadily—and unconstitutionally—expanding ever since the days of Franklin Roosevelt. Unless the current trend is reversed, it will ultimately result in an economic collapse that will be a far greater tragedy for the entire country than the collapse of the Interstate 35W bridge.

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