Several Truths About Modal Competition in the United States
Source: www.transportation1.org
Truth #1: Truckers and railroaders do not get along. I sometimes like to pose provocative questions to groups of truckers or railroaders (but not both together) to watch the impassioned discussion that ensues.
Truth #2: Demand for transportation was rising steadily before the recent recession. Although much of the increase is attributed to rising GDP, growth in VMT must also be attributed to shifts in transportation use. Increasingly, GDP is made up of services that require fewer VMTs. Freight (and car) VMTs per capita have steadily increased indicating greater consumption of freight services.
Truth #3: The funds (user fees) collected by all forms of government in the U.S. are not enough to fund road infrastructure. The recent TRB Special Report 285 and the report by the National Surface Transportation Infrastructure Financing Commission highlight the loss of purchasing power of the all user taxes for road construction and maintenance.
Truth #4: The root cause of our road funding problems is not abuse of the Highway Trust Fund. Even evil “Mass Transit” may provide capacity by removing cars from highways at a cost cheaper than construction of new lanes. How many lanes of highway would have to be constructed to replace the Washington Metro? What would the city look like without it?
Truth #5: Some trucks do not pay the full cost for their highway use. The book “Road Work” by Small, Winston, and Evans (1989) pointed out that very heavy trucks do not pay the true marginal cost of their highway use. The primary culprit according to the authors is a user-charge based on fuel use rather than axle weight and miles traveled. Transportation Research Board Special Report 246 showed much the same thing by comparing several modes of transportation.
Truth #6: Lower cost is not equal to higher efficiency. For economists, efficiency means getting higher value outputs from a given value of inputs. While the lower total costs associated with heavier, six-axle trucks are difficult to argue with (with the possible exception of bridge costs), lowering the price of an already underpriced good could be a bad thing for all concerned. Economists know that price controls, cause shortages because suppliers will refuse to supply at the lower price. We are facing just such a situation with road infrastructure today. States are refusing to provide (or maintain) road infrastructure because the revenue received for its use is less the cost to provide it. In such a situation, lowering the cost still further by permitting slightly more efficient trucks could have the undesired (by some) effect of stimulating increased road use, therefore exacerbating problems with infrastructure financing.
In my opinion, loosening Federal weight restrictions will not occur until usage-based road financing is changed to some scheme that is both accurate and fair. Such a scheme should be based on the cost of road use. While many truckers have asked for increased fuel taxes to cover the cost of maintaining roads, few have advocated an approach like Oregon’s experimental VMT tax or Germany’s VMT tax. Should my colleague’s Mercedes Benz diesel pay the same fuel tax as an eighteen wheeler? Should a straight truck pay the same tax as a rocky mountain double?
Yes, railroads protest too much, but permitting heavier trucks is no panacea for the highway system either. Economic sustainability comes from having prices reflect true costs, not from cheaper prices. Any change that accomplished the later without the former will only make the situation worse.
It is now time for me to step out of the room.
Pete Swan is assistant professor of Logistics and Operations Management at the Penn State Harrisburg School of Business Administration. He is a regular contributor of research, commentaries and papers on freight transportation industry issues and has been a member of the Transportation Research Board (TRB) since 2002. He is currently chair of the TRB’s Freight Systems Group in addition to his academic responsibilities for Penn State.
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Pete shares a number of valid points in this post. I have a few comments in response.
1) Yes, truckers and railroads historically have not gotten along. But it really does not make sense as to why. Trucking companies put hundreds of thousands of trailers on the rails every year. Trucks are one of the railroads biggest revenue sources.
2) It also makes no sense to advocate for a large immediate shift of more truck freight to rail, a fixation of rail interests. Incremental, strategic shifts, yes, such as taking advantage of rail in more cases for longer cross-country movements. But a wholesale shift? Where’s the rail capacity? And how are rails supposed to be a viable option for more traffic when they only serve 20% of the America’s communities?
3) You cannot decouple economic growth and vitality from trucks. Trucks are the only resource for 80 percent of communities to participate in commerce. As vehicle miles traveled have increased so has the general output of the economy – a direct positive correlation that foreshadows the economic recovery.
4) When Highway Trust Fund revenues – taxes paid by truckers and trucking companies – are diverted to non-highway uses, the crisis facing our crumbling infrastructure is exacerbated. Today 25% of trust fund revenues are diverted to special interest projects. The trust fund was never intended to do that.
5) As vehicles become more efficient (and gas tax collections go down as a result) we should explore different methods for raising needed infrastructure funds. One idea would be indexing highway use taxes to fuel economy improvements AND through increasing gasoline and diesel taxes. But we need to ensure these funds are used without diversion for the primary purpose intended – improving our transportation infrastructure. If a special project is needed (such as a community Frisbee park) let those who benefit from and use the project pay the tax.
6) Yes, the trucking industry does support higher fees and taxes – as long as those monies are used to fix and improve our highways. We need to have a rational discussion to educate the driving public how proper capacity and maintenance of these facilities supports our economy – which translates into jobs.
7) Expanding use of high-efficiency longer-combination vehicles – under strict use controls, safety designations, driver credentialing and routing parameters – can provide an immediate benefit. This will help lower carbon emissions, reduce highway congestion, lessen the driver shortage and lower total supply-chain costs. And, if axle weights remain within current bridge design standards we shouldn’t have concerns about additional wear and tear. The time to change is now.
In conclusion, it takes all modes of transportation -- air, sea, inland waterways, rail and land (trucks and highways) to support a vibrant and efficient economy. At the end of the day businesses will make transportation choices that allow them to operate most efficiently and responsively for their customers. It’s a simple concept. If you can’t get your product to your customers, when and where they want it in a timely manner, you don’t have a business. There is no getting around the reality that the vast majority of material goods movement begins and ends on a truck. And I don’t expect that fact to change in my lifetime irrespective of how often the rails pummel one of their best customers.
David L. Miller
Senior Vice President, Global Policy and Economic Sustainability, Con-way Inc.
This professor has very boldly labeled each of his statements "truths" when they are simply one side of a very broad discussion. He harps on trucking and the funding challenges for roads but spends no time discussing rail and its challenges (e.g. timely and "last mile" distribution). He also seems to advocate a national weight mile tax (he uses the term VMT in his last "truth") as though that would be the most fair and efficient method of funding the highway infrastructure. What he doesn't give in his short statement of truth is the potential cost of building a new taxing infrastructure and the potential for abuse, where the current fuel tax collection system is extremely efficient and almost void of abuse.
So, this little missive needs to be followed up by the other side of the discussion with its own "truths" to give the public a better understanding of what is really happening in highway and rail transportation.
Gary Bennion
Supervisor of Operating Taxes, Con-way Inc.
Dave Miller makes several valid points. However, it is still my belief that adopting longer (and/or heavier) combination vehicles can only exacerbate our present situation. Further, arguing about marginal issues takes our energies away from solving basic problems with highway financing.
In my opinion, the crux of the problem is three fold:1) The highway trust fund was never set up for maintenance of existing highway and exists to create new infrastructure; 2) The money collected is increasingly inadequate on any level (state or Federal) for maintenance of the system, let alone expansion for greater traffic; 3) The fuel tax while cheap to administer is not efficient in allocating costs to users based on marginal cost of use. These three basic problems is where we should be concentrating our efforts at reform, rather than tweaking an broken system to keep it working w little while longer.