09/19/2012 05:42 pm ET | Updated Nov 19, 2012

A Grand Bargain for Roads

Few indignities infuriate people so much as stop-and-go traffic. Although twice-daily choked with horrific congestion, our vast expensive roads sit empty much of the time even in large cities. But this preventable problem is our own fault. Having decoupled the real cost of driving from the price consumers pay to drive, we prompt commuters to cruise much more than they otherwise would. But we can save our bulging boulevards from being swamped by subsidized drivers, without taking any additional money out of consumers' pockets.

Experts have long known that congestion pricing makes road use much more efficient. When people pay the full cost of driving, they drive less. Costs rise substantially during rush hour -- traffic snarls cost the economy $130 billion per year. So, the price for peak-hour driving should be much higher. This will prompt people to pick their driving times more carefully, diverting them from rush hour and dramatically increasing the capacity of our system without building a single road. The Federal Highway Administration estimates this would save between $40 billion to $50 billion per year in highway building and maintenance.

Opponents raise legitimate concerns about increased taxes, justice for the poor, privacy and other matters. But a well-designed system can address these and pave the way for a grand bargain that will make us all better off.

Congress should enact a fully offsetting tax credit alongside congestion pricing. The total annual tolls collected should be equal to highway spending (currently $160 billion). The same sum should be granted to taxpayers, divided equally among them. Any money the government collects from tolls gets taken out of taxes.

Progressives rightly worry that congestion pricing schemes hurt the poor, since tolls represent a large percentage of a poor person's income. But the tax credit would prevent this, especially if offered before the road charges begin. This system would cost an average taxpayer $800 per year; each taxpayer would receive an $800 credit. She can then use the money as she sees fit -- whether for driving or something else. No longer subsidized, she will drive only when the benefits exceed the costs and society will be far better off.

Privacy advocates oppose governmental car-tracking, but carefully crafted laws can address their underlying concerns. Fee collectors could limit the time horizon of driving records -- smart meters might tally prices during travel without keeping a running record of where cars traveled in the past. In any case, Congress must erect a protective firewall between the toll takers and all other entities, including the police. A recent Supreme Court decision suggests the constitution requires this. Congress could even make toll evidence inadmissible. For those concerned that congestion pricing expands the police state -- the police can already put GPS on our cars with a warrant; well-designed rules and toll technology would hardly be more invasive.

Still, other concerns remain. Those that fancy the role of states in transportation planning may object to centralization. But the status quo is a mess; requiring congestion pricing will hardly hamper local freedoms. The federal government should require that states adopt congestion pricing, through preemption or conditional funding. Congress could then give states leeway to adjust their fee models (based on congestion, car weight or size, etc.). This would allow for local experimentation and should satisfy all but the most ardent of federalists. Some may object that the tax cut for those who already avoid driving is a waste of resources, since these people won't be changing their habits. But why should nondrivers subsidize drivers? If the subsidies are wasteful, it is hardly an injustice that ending the subsidies benefits those who shouldn't be paying them to begin with. Moreover, nondrivers purchase goods transported on roads. The tax credit will compensate them for higher priced goods.

What about the gas tax? Fuel levies work well for covering the cost of pollution from collecting and burning petroleum, but they fit somewhat awkwardly with highway funding. A Prius still wears ruts into roads, increases surrounding cars' chance of a crash, takes up space, slows commuters and gums up commerce; gas taxes take little account of these. Also, the fuel tax poorly accounts for the increased societal costs of travel during peak times. Although gas taxes are marginally higher during commuter snarls because idling cars burn more fuel, they fail to capture the much more costly reality of traffic jams.

Traffic policy is, admittedly, especially unsexy. But the potential for saving so many billions of dollars and thousands of lives demands serious attention and action. Congestion pricing would save between $40 billion to $50 billion per year. $40 billion could pay for 100,000 teachers, an aircraft carrier, a 5% corporate tax cut, a $10,000 check to the million poorest Americans and food for over 3 million starving kids in poor countries for a year. All at once. This savings estimate excludes the economic waste from stop and go traffic. If staggered commute times lowered the economic cost of traffic jams from $130 billion per year by just one-third, the combined savings over a decade would be over $800 billion.

Unsexy, perhaps, but profoundly important.

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