Fix-It-First vs. Fix-It-First
The Obama administration has been touting its “Fix-It-First” agenda for upgrading U.S. infrastructure. In 2011, two economists, Matthew Kahn and David Levinson, issued a Brookings-sponsored proposal with a similar title (“Fix It First, Expand It Second, Reward It Third“) that I’ve praised in this space. I asked Levinson to contrast the two proposals, and he kindly agreed to do so. The most politically salient difference is that while the president has called for new funds, Kahn and Levinson do not — and so Kahn and Levinson are more in tune with the fiscal constraints of the moment:
Obama wanted $50B in new funds. Kahn and I proposed redirecting existing Gas Taxes to the problem. We identified the problem as preserving the National Highway System network. There are gas taxes already spent to some extent on this problem, but gas taxes (highway road user fees) are also spent on new projects, and for transit projects, neither of which seemed to us to rise to same level of national justification. (Identifying the amount spent on transit is easy. Disentangling capacity expansion from preservation is tricky, since many reconstruction projects wisely bundle both to achieve efficiencies).
Further new projects generally have lower Benefit/Cost ratios (if even above 1.0) than existing projects, since (a) we already picked the low-hanging fruit, and (b) we have built our lives and land use around the existing network. In contrast, transit capital projects are seldom of an interstate nature, and federal funding currently distorts transit decision-making by making it very capital intensive. Further transit projects are currently funded by road users rather than by transit users (or the general population).