(The following story by C. Phillip Baumel appeared on the Des Moines Register website on April 9, 2009. He is a distinguished professor emeritus of economics at Iowa State University.)
DES MOINES, Iowa — The economic-stimulus package provides billions of dollars for transportation projects. Sustainable job growth requires that these projects increase the efficiency of the transportation system.
The rail network was built in the late 1800s, when overland transportation was by horse and buggy. By 1960, airlines and interstate highways had captured most interstate passenger traffic. Trucks had captured over half of the railroad freight traffic. The bankrupt railroads had deteriorated so much that rail cars literally fell off their tracks. Declining rail traffic and attempts to introduce low-cost unit train services made thousands of miles of rail lines obsolete.
The rail industry faced major resistance from shippers, communities, labor unions and state and federal politicians to eliminate obsolete lines and unprofitable services and to reduce costs. Against all odds, railroads persisted and succeeded in implementing these cost-saving measures.
Today’s profitable railroad system has only half of the miles of track it had in 1970. It hauls more ton miles of freight at lower costs, in real terms, than ever before. The return to profitability allowed railroads to create new jobs to rebuild the remaining rail lines, buy hundreds of thousands of new rail cars and also fuel-efficient locomotives, and computerize the entire system.
Railroads now pay billions in local, state and federal taxes. They continue to grow and modernize. A recent study identified $148 billion of needed rail investments to keep pace with traffic forecasts. The railroad industry has transformed itself from an inefficient, bankrupt industry to a major generator of jobs and economic growth.
The rural-road system faces similar problems today. Many local rural roads were built when the railroads were built. Farms were small, and access was needed to homes, schools, churches and markets. Farm numbers have declined, and farms are larger. The number of trips on these roads has declined because of fewer households and fewer but larger vehicles. Drivers tend to use paved roads to reduce travel costs. This suggests that the cost of upgrading some low-volume gravel roads is higher than the travel cost benefits from these investments.
The public debate about the local rural-road system has focused mainly on deteriorating roads and bridges. The implicit assumption is that the system should be maintained as it is. A 1976 editorial in The Des Moines Register stated: “County roads that served several dozen farms forty years ago may only be serving two or three farms today. Many roads that were once vital to a county’s well-being have become, in effect, private drives, although the county is responsible for their upkeep. Such roads do not belong in a county road system.”
An Iowa study found large cost savings from abandoning some gravel roads in rural areas with small populations and maintaining a core of paved roads to absorb the diverted traffic. The savings are higher for roads with high bridge-replacement costs. Large savings would come from converting dead-end roads to private drives. These dead-end roads are the equivalent of Alaska’s “bridge to nowhere” and should be returned to abutting landowners or abandoned.
The navigable inland waterway system faces similar problems. The Mississippi system is a major carrier of corn and coal. However, sulfur-emission restrictions are forcing some electrical generating plants to substitute rail-delivered, low-sulfur Western coal for barge-delivered, high-sulfur Appalachian coal. The ethanol industry is diverting millions of bushels of corn from navigable rivers. A 2008 Iowa State University study found that the Iowa country elevator percent of total corn sales to river terminals declined from 14 percent in 2001 to 4 percent in 2006/07. Many Mississippi River tributaries, like the Missouri River, are experiencing declining barge traffic. The efficiency of the inland waterway system would be improved by abandonment of barge navigation on these declining-volume Mississippi River tributaries.
The experience of the railroad industry suggests that stimulus funds should be allocated to transportation projects that have a high probability of increasing productivity and sustained job growth.
State and local governments must, against all odds, resist special-interest groups lobbying aggressively for stimulus funds for unproductive projects. The railroad experience suggests that less is more.