Larry Summers: Fixing America’s roads would essentially pay for itself

Potholes as big as Texas. (Daniel Lobo/Flickr)

Lawrence H. Summers, the Charles W. Eliot university professor at Harvard, is a former treasury secretary and director of the National Economic Council in the White House. He is writing occasional posts, to be featured on Wonkblog, about issues of national and international economics and policymaking.

There are many compelling arguments for increasing American infrastructure investment. Capital costs are exceptionally low. Construction labor is highly available. Materials costs are low as commodity prices have fallen. Investment is low by historic standards. Investing today relieves the burden of deferred maintenance for future generations.

Lawrence Summers

Here is another one. Maintaining our infrastructure directly benefits American families and businesses because with fewer potholes they have to spend less maintaining their vehicles. This effect turns out to be surprisingly large. TRIP, a transportation research group, estimates that the cost to motorists of driving on roads in need of repair in 2013 was $109 billion. This includes only extra vehicle repair and operating costs, and not the delays caused by driving on poor roads, so it is almost certainly an underestimate. On the other hand, even with proper polices, some potholes would remain. To be very conservative, assume that proper infrastructure investment policies would save motorists half the total, or $54 billion a year.

How large is this figure? It is comparable to total consumer spending of $49 billion on air transportation or $53 billion on personal computers. As another way of seeing its magnitude, it works out to 40 cents per gallon of gasoline consumed in the United States.

So if we were able to raise the gas tax by 40 cents and repair our highways and roads, we would create no new net burden on consumers: The benefit in reduced vehicle operating costs would at the very least offset their higher gas bills. In fact, since our cost estimate is conservative, the net effect on consumers would most likely be positive. And as is fair, those who drive the most would both pay the most and benefit the most from reduced repair costs.

Even after a 40-cent increase in the gasoline tax, gas would still be only 82 percent as expensive as a year ago and 79 percent as expensive as two years ago. A gas tax to finance road repair is about as close to a free lunch as we can ever get in economics.