SECTION C

EXISTING POLICIES AND ALTERNATIVE APPROACHES

A brief review of the policies (or lack of them) which shaped the present transportation system lends useful perspective to the alternative policy paths which might be followed in seeking good solutions to present problems.

The Form of Existing Policies

Much transportation policy already exists, 1/ some made consciously by

legislation, some by continuing interpretation and evolution, and this "existing policy" must be consciously made the point of departure when developing new policies. As a case in point, the Federal Government determined that it would provide operating subsidies to transportation carriers only under certain circumstances. Specifically, these circumstances concern cases of international/national security and regional needs for transportation service. Such subsidies--to the merchant marine and to local service air carriers--were made explicit in the 1936 Merchant Marine Act and the 1958 Federal Aviation Administration Act. But even with this specific statutory policy guidance, additional "policy" is needed. Just how much merchant marine capacity should be subsidized? And when is local air service "needed" and deserving of subsidization? It is important to remember that stated "policy" can be neither static, nor overly detailed. The Congress, through legislation, legislative oversight action, or the appropriation process, and the Executive Branch, through program development, execution, and review, should and do interpret and modify policy as circumstances change and new issues emerge.

Some policy exists which is less formally stated but just as real. For most of this century it has been Federal policy to provide capital investment

1/

See Appendix A for the text of existing codified transportation policy.

not voluntarily forthcoming from other private or government sources when necessary to enable transportation capacity to keep step with perceived demand. In this category are airport and airway development, the Army Corps of Engineer's Inland Waterways Program, and the Federal-Aid Highway Program. It is interesting to note that historically the pipelines have not required Federal investment to keep pace with demand; neither have the railroads beyond the land grants enjoyed in their early days. The recent Federal investment in a revitalization of intercity rail passenger service reflects a response to a demand for service not being adequately met by the private sector.

Other policy was consciously wrought at its inception but its evolutionary development has varied from its original intent. In the last century, for example, the prevailing opinion was that the railroads were potential monopolists and therefore needed to be closely controlled to protect both their users and their competitors, the truckers and barge lines. The result today is the total regulation of the railroads, as codified in the Interstate Commerce Act, although the "monopoly position" of railroads is clearly far less than it was in 1887. Similarly, in the field of certification of new carriers, a policy has developed establishing a criterion of potential injury to existing carriers despite the lack of an explicit statutory reference to such a criterion.

While there are many aspects of transportation that are covered by existing or evolving policy, either explicit or implicit, there are others where policy to all intents and purposes is absent or at best unclear. What, for example, is the national policy on Federal sources of funding support for transportation? In 1956, it was determined that the user should pay for highway development, and the same decision was made with respect to airport and airway development in 1970. Yet, users pay for only a portion of the airways system currently; users do not pay for waterways, and railroads probably "overpay" their way (relative to other transportation modes) since they receive no Federal support and in about half the states are subject to higher than average taxes. No coherent transportation policy can justify this uneven treatment. What has this failure to develop an even-handed and consistent policy done to the total transportation system? And what transitional costs are involved in correcting it?

Another matter of considerable significance is that only recently has national policy making begun to focus on the issues of the "process." "Good process" is presumed to produce "good answers," including full recognition of social and environmental concerns. But increasingly policy is acknowledging that the process by which it is developed should involve all the people directly affected, and that these people are increasingly and demonstrably interested in involving themselves in the process. A decade ago, the 1962 Highway Act made comprehensive planning a legal requirement, reflecting policy's emerging concern with process. Now, as with Section 4(f) of the Department of Transportation Act, various parts of the 1970 Highway Act and other governmental policy pronouncements, a larger and larger body of transportation policy is continuously being created, addressing matters not even considered a decade or two ago.

The Need For Reexamination

Clearly the old ways of doing things are inadequate and unresponsive to society. There is a need to rethink and reexamine the way this Nation should go about developing a transportation system. This would not be so if there were fewer people, if they were less affluent, if they had not increasingly clustered in large urban complexes, and if they were willing to put up with the noise and smoke of an earlier era. Were this the case, the existing transportation system, and the policies, or lack of them, which allowed it to evolve, would probably be sufficient. But for the next three decades, all indicators point to more people, more affluence, more urbanization and a rapidly escalating intolerance for poor system performance and for the generation of undesirable environmental side effects. In the face of this, the practices and policies of the past will almost certainly be inadequate for the future.

The Dichotomy in Approaches to Transportation Problem Solving

Illuminating the gaps and weaknesses in the existing transportation system is an unpleasant but necessary prerequisite to identifying the best approaches to their correction. Society and transportation planners can approach the solution of transportation's problem in essentially two ways-noncapital-intensive policy changes or major capital investments in plant, equipment, or technology--each of which involves very different policy implications. It will not be argued that one approach is superior or that the use of one precludes the other's use also. Indeed, "the solution" to the Nation's transportation problems almost certainly will involve a blend of the two, combining new and existing technologies with carefully chosen changes in transportation policy.

Investment and Technology. Investment in currently available technologies that expand capacity, reduce noise, or otherwise serve to meet or solve an existing transportation need or problem is one of the most obvious and valuable approaches to solving the transportation system deficiencies. Especially at the Federal level, more investment has long been a favored problem-solving approach. Unfortunately, conventional technologies have often been prohibitively expensive, and have frequently generated problems more severe than those they were designed to solve. For example, in urban areas new investments in conventional technology have often had profound and unhappy impacts on the quality of life. Solutions which depend on the use of conventional technologies should be approached cautiously since transportation's gaps and weaknesses persist today in spite of past large-scale investments in them. Thus, in terms of real problem solving, an emphasis on the introduction of new technology looks increasingly promising.

When transportation's unpleasant side effects, e.g., noise, air pollution, congestion, accidents, etc., are not included in its market price, the private sector is given little or no incentive to develop and invest in remedial technologies; this fact constitutes a major challenge to public policy.

Until recently, the environmental costs of conventional transportation systems, even if appreciated, could be safely ignored by both private and public decision makers. The failure of the market to recognize and reflect these costs is the major justification for government intervention and public investment in the development of new transportation technologies. In recent years, the Federal government's expenditures for this purpose have grown substantially both in absolute and in relative terms. (Figure 10)

Most of the rise in this spending has gone to the air mode, which accounted for 65 percent of all Federal government transportation R&D in 1970. Highways followed with 17 percent of the total. In terms of past priorities, air transport and highways have traditionally been accorded primacy. Urban mass transit, which received 6.4 percent of Federal R&D outlays in 1970, has climbed to this level from virtually nothing in 1965. Rail R&D outlays in 1970 were 3.5 percent of the total.

In both the public and private sectors, interest and willingness to invest in new transportation technology contends with certain economic, social and institutional obstacles. Most transportation experts agree that there are few technical barriers to the development of the new system concepts, but there are likely to be many important barriers to their implementation as operating systems. The fact that the private sector will not generally invest in a new transportation system until it is perceived to be economically viable and profitable compared with alternative investment opportunities helps explain why the private sector's interest in investing in railroads and public transit has been so low. Paradoxically, railroads and public transit systems, the two modes whose pricing policies most fully cover at least those social costs registered in private markets, are the modes subject to the most rigorous regulation. Under investment in these modes by the private sector is therefore not surprising.

If the private sector is unable or unwilling to risk investing in the development of new transportation technology, under what conditions should the public sector assume the task? Given the experience of the defense, atomic energy, and space programs, there can be little doubt that government could perform at least the technical R&D tasks and could probably also implement and even operate the systems. Whether or not it should do so depends in part on the social rate of return that can be expected relative to other public sector projects. Normally, public programs should not be attempted unless their social benefits exceed social costs. Moreover, even if benefits clearly exceed costs, given practical budget constraints, a question remains whether the benefit-cost ratio for governmentally funded research and development in transportation is high enough to warrant preferential consideration. Intuitively, the benefits derived from reduced air pollution, reduced surface and air congestion, increased public safety, and increased mobility of the economically and socially disadvantaged would seem to warrant substantial public support. Still, much needs to be learned about the true costs of perfecting and implementing untried transportation technologies, and the public's willingness to use and pay for them. It is doubtful that good answers

to these questions can be obtained without much experimentation and a greater willingness by government to accept the substantial risks of failure.

New transportation technologies, particularly as parts of larger systems, must be accepted not only by their users, but also by the legislative and administrative bodies who must adapt them to the established framework of regulatory rules and ordinances. Moreover, experience has proved that operating companies or labor unions whose real or supposed interests appear to be endangered by technological change may resist, delay, and even thwart it. Fortunately, a new sense of urgency and purpose seems to be emerging, largely because the disastrous consequences of continuing inaction are becoming more obvious.

Policy Changes. Conventional investment analysis seeks to solve a problem or fill a deficiency in the transportation system through provision of capital facilities. In general, solutions are sought wherein benefits exceed the investment costs. Investment in new technology seeks to provide better "technical" solutions. "Policy changes," by contrast, seek to reorder the transportation system's performance by changing or rearranging the rules under which it operates, including those governing investment. The "policy" approach holds appeal because it stresses the efficient use of existing technologies and promises early improvements and may also facilitate the development of new technologies for the future.

The Federal government's policy options in most transportation areas are very broad, although in practical application very complex; many have been briefly discussed earlier, but three are worthy of some further elab

oration.

User charges such as those presently collected for the use of publicly provided roads, airports and airways ensure that at least where the user benefits he pays something. User charges, thus, can promote economic efficiency because they allow the true costs of road and air operations to be recognized in the prices charged to consumers. User charges can also be made. even more specialized. For example, congestion tolls or differential prices for peak time usage could ration scarce capacity or make the extra-capacity user pay his fair economic share. If user charges are to fully accomplish the task of prices in rationing scarce resources, however, they should be designed to cover capital costs and imputed taxes as fully as would private market prices.

The institution of user charges, especially new charges, usually increases the amount of funds available for additional investment or operation of transportation facilities. User charges may cause a shift in the distribution of transportation resources, or in the use of transportation, and statutory restrictions placed on the expenditure of user charges can affect investor decisions. The Federal government's action in this area constitutes policy determination of the first magnitude.