- 1787: Article 1, Section 8 of the Constitution gives Congress the power "to establish Post Offices and post Roads." Over time, Congress greatly expands this limited role in transportation to include funding highways, urban transit, intercity rail, airports, and many other activities.
- 1790s: Private toll roads start spreading across the states. There are about 2,500 companies that construct toll roads in America in the 18th and 19th centuries.1 The toll roads build on the success of private toll roads in Britain and private toll bridges in America. In a few states, some toll roads were subsidized by the government, but most roads were financed solely by private investors.
- 1806: Congress approves federal land sales in order to fund construction of the National Road from Cumberland, Maryland to Wheeling, West Virginia, and further West.2 The cost of construction ends up being almost double the initial estimate and about twice as much per mile as similar private roads.3
- 1817: President James Madison vetoes as unconstitutional a bill that would have provided federal funding for "internal improvements" such as roads and canals.4
- 1822: President James Monroe vetoes legislation funding maintenance on the National Road because of constitutional concerns about federal overreach. The National Road is eventually handed over to the states in the 1830s.
- 1830: President Andrew Jackson vetoes a bill providing aid for a road project in Kentucky. He argues that the road is of "purely local character" and that funding would be a "subversion of the federal system."5
- 1847: A boom in "plank roads" spreads across the states with more than 1,000 companies launching projects.6 However, the boom is short-lived as these inexpensive roads are not as durable as originally thought.
- 1850: Early railroads in the eastern states are built almost entirely with private funding and without federal subsidies.7
- 1862: The Pacific Railroad Act provides land grants and low-interest loans to companies building railroads connecting the eastern states with the West Coast.
- 1872: The New York Sun exposes the Credit Mobilier scandal, perhaps the largest business subsidy scandal of the 19th century.8 Credit Mobilier is a construction company financially controlled by the leaders of the Union Pacific Railroad that makes huge profits at taxpayer expense. Congressman Oakes Ames (R-MA), who is an agent of Credit Mobilier and part-owner, distributes shares of the firm's stock to members of Congress at a discounted value. In return, those members treat Credit Mobilier favorably in a variety of ways, such as by voting to appropriate funds for the firm. The scandal illustrates the corruption that usually results when the government intervenes in the economy and subsidizes businesses.
- 1887: President Grover Cleveland signs legislation creating the Interstate Commerce Commission to oversee the railroad industry. The ICC is the first independent regulatory agency created by the federal government. Over time the ICC's powers are expanded to include regulation of trucking, buses, barges, and other transportation providers. The ICC essentially creates cartels in the regulated industries, which raises prices, limits consumer choices, and reduces efficiency. After deregulation of most transportation industries beginning in the 1970s, Congress abolishes the ICC in 1995.9
- 1888: Urban transit is revolutionized by the first electric streetcars, which eventually spread to 850 American towns and cities. The streetcar revolution is privately financed and unsubsidized.10 The first electric streetcar system goes into operation in Richmond, Virginia in 1888.
- 1893: Unlike most Western railroads, the Great Northern Railway is built from St. Paul to Seattle by James J. Hill without any land grants or other government subsidies. Note that East Coast railroads are also generally unsubsidized, and thus the great majority of U.S. rail miles are built without federal subsidies.11
- 1893: Congress creates the Office of Road Inquiry in the Department of Agriculture to investigate road conditions.12
- 1902: The new American Road and Transportation Builders Association begins lobbying for federal road subsidies.13 The organization helps to pass the first federal highway aid bill in 1916, and has been pushing for increased highway spending ever since. The organization's membership includes groups such as highway contractors and engineering firms.
- 1914: State highway officials form a national organization with an office in Washington to press for federal subsidies. They help draft the bill that will become the 1916 Federal Aid Road Act.14
- 1916: After lobbying by road builders and state highway interests, the Federal Aid Road Act is passed to provide regular funding to the states for highway building.15 With the new subsidies comes top-down control from Washington. The 1916 Act requires states to create highway departments, to draft detailed highway plans, to file regular reports, and to be subject to federal inspections. A contemporary observer noted that the Act required the states to send a "vast amount of detailed information" to Washington. Under the Act "federal funds would be distributed with strings attached, to compel the states to adopt federal social policies."17
- 1921: The Federal Aid Highway Act extends federal subsidies while bringing further pressure on the states to expand their highway departments and increase control over local road-building.18
- 1926: The Air Commerce Act tasks the Department of Commerce with issuing and enforcing air traffic rules, licensing pilots, certifying aircraft, establishing airways, and operating aids for air navigation.19
- 1932: After numerous legislative efforts over two decades, a federal gasoline tax is enacted in 1932 at 1 cent per gallon. The tax is supposed to be a temporary source of funds to help close the federal budget deficit. A 1933 Senate Finance Committee report stated: "It would be entirely appropriate, therefore, for this committee, which originated the federal gasoline tax as a temporary expedient, to recommend its repeal."20 However, the gas tax becomes permanent and the rate rises substantially over time.
- 1936: The federal Bureau of Air Commerce starts establishing air traffic control centers for en route tracking, which complements the operation of local control towers by municipal authorities. In the years following World War II, all aspects of air traffic control including local towers are taken over by the federal government.
- 1939: A major federal report argues against an American highway system based on state government toll highways and in favor of a nationwide 27,000-mile Interregional Highway System.21
- 1946: Federal financial aid to airports begins with work relief programs in the 1930s, and is followed by the Federal Airport Act of 1946, which provides $500 million in airport grants to state and local governments over seven years.
- 1949: Federal transportation activities are consolidated within the Department of Commerce.
- 1954: The Wiley-Dondero Act creates the government-owned Saint Lawrence Seaway Development Corporation to construct and operate the American portion of the Saint Lawrence Seaway, which opens in 1959.
- 1956: The Federal Aid Highway Act authorizes $25 billion of spending over a decade on the interstate highway system, but the system ends up costing far more than planned.22 State highway building is already booming, thus the Act federalizes some activities that would have taken place anyway. Indeed, the Act imposes regulations on state highway construction that raises highway costs, such as Davis-Bacon rules on wages.
- 1956: The Federal Aid Highway Act forbids the use of federal funds on new toll roads, which ends a state boom in toll highway building. The decision creates long-term damage because tolling is an efficient funding solution for new highways.23
- 1963: As Britain and France begin developing the Concorde, President John Kennedy commits the United States to building its own supersonic passenger aircraft. Boeing is awarded the contract to develop the supersonic transport (SST). But the project faces growing opposition due to concerns about the environment, sonic booms, and taxpayer costs. Anti-waste crusader Senator William Proxmire (D-WI) vigorously opposes the SST, and he succeeds in getting Congress to kill it in 1971 after the government spends more than $700 million.24
- 1964: Until the 1960s, urban mass transit is mainly provided by private bus companies. That changes with the Urban Mass Transit Act of 1964, which provides federal subsidies to public transit agencies but not private ones.25 Within a decade, private transit firms virtually disappear in the United States.
- 1966: After decades of lobbying by transportation interests, Congress passes legislation creating a Department of Transportation. The department begins operations in 1967.
- 1969: About 500 members of the militant Professional Air Traffic Controllers Organization stay home "sick" causing major air service interruptions.
- 1970: About 3,000 members of the Professional Air Traffic Controllers Organization take part in another "sickout" or illegal strike, causing chaos for the nation's air traffic. PATCO union troubles continue through the 1970s.
- 1970: Congress creates the Airport Trust Fund with revenues from an airline ticket tax and aviation fuel taxes. The funds are to be used for airport development and air navigation facilities.
- 1970: The Urban Mass Transportation Assistance Act builds on the Urban Mass Transportation Act of 1964 with more spending and new regulations on local governments for environmental impact analyses, public hearings, and other items.
- 1971: Congress creates Amtrak, giving the government a monopoly on interurban passenger rail. Prior to Amtrak, passenger rail companies had faced financial difficulties due to the rise of automobiles, unionized workforces, high property taxes, and costly federal regulations on their rates, routes, and other aspects of business. Federal taxpayers have aided Amtrak with almost $40 billion in subsidies over the years.26
- 1974: Congress imposes a national speed limit of 55 miles per hour by threatening to cut highway aid to those states not complying. It makes no sense to impose such a one-size-fits-all regulation on the entire nation, and the speed limit is repealed in 1995.
- 1974: The National Mass Transportation Assistance Act authorizes subsidies for both capital and operating expenses of government urban transit systems.27
- 1976: Conrail begins operation as a government-created freight railroad, taking over seven major railroads in the Northeast and Midwest, which had gone bankrupt. Competition from trucking in combination with very heavy federal regulation had put the railroads in a downward spiral. With industry deregulation, Conrail begins earning profits in the 1980s. The system is privatized in 1987 and the company is broken in two and sold to other railroads in 1998.28
- 1978: President Jimmy Carter signs into law the Airline Deregulation Act, which removes government controls over airline fares, routes, entry, and mergers. The Civil Aeronautics Board is phased out. Under deregulation, prices fall and the volume of air travel dramatically increases. Airlines reconfigure their routes and equipment, they improve their capacity utilization, and new airlines compete for business.29
- 1980: President Jimmy Carter signs into law the Motor Carrier Regulatory Reform and Modernization Act, which allows trucking companies greater freedom over rates and other business decisions, while allowing for open entry of new trucking firms.
- 1980: President Jimmy Carter signs into law the Railroad Regulatory Act, known as the "Staggers Act." It removes many federal restraints on the railroad industry, allowing it to reduce costs and increase flexibility. Rates and services can now be tailored to market conditions without central planning from Washington. Since deregulation, the rail industry's share of U.S. freight shipments has increased, the industry's financial health has improved, shipping costs have fallen, and rail safety has improved.30
- 1981: The Professional Air Traffic Controllers Organization declares an illegal strike, which prompts President Ronald Reagan to order controllers back to work within 48 hours else face termination. More than 11,000 controllers refuse to return to work and they are fired by Reagan and initially banned from federal service.
- 1981: The Maritime Administration is moved from the Department of Commerce to the Department of Transportation.
- 1982: President Ronald Reagan proposes "turnback" legislation to end federal highway funding and the federal gasoline tax that supports it. Unfortunately, the proposal draws little support in Congress.
- 1982: The Federal Aid Highway Act includes 10 special interest earmarks for transportation projects in certain congressional districts. Since 1916, Congress had passed dozens of highway laws without any earmarks. But after 1982, the number of transportation earmarks explodes, and transportation bills have included thousands of earmarks in recent years.31
- 1983: Britain privatizes 19 ports to form Associated British Ports. The private ports earn profits, pay taxes, and return dividends to shareholders.32 Two-thirds of British cargo goes through privatized ports, which are highly efficient. By contrast, nearly all U.S. ports are still government-owned and less efficient than the best private ports in the world.
- 1984: The Highway Improvement Act threatens to cut aid to states that don't raise their alcohol drinking ages to 21. South Dakota challenged the regulation, but a 1987 Supreme Court decision sided with the federal government and approved the law—even though the 21st Amendment to the Constitution gave the states the power to regulate alcohol.33
- 1984: The Shipping Act modestly deregulates the ocean shipping industry.34 Further reforms were made in the Ocean Shipping Reform Act of 1998, although the shipping industry still receives various federal subsidies and protections.
- 1987: The British government privatizes London's Heathrow and other airports with the creation of the British Airports Authority. Today, airports have been privatized in dozens of major cities around the world, but in the United States virtually all airports are still owned by governments.
- 1991: The Intermodal Surface Transportation Efficiency Act (ISTEA) imposes new planning and regulatory requirements on states and cities while increasing the diversion of highway gas tax money to nonhighway uses.35
- 1992: The Interstate Highway System is completed with the opening of the I-70 near Denver. The system ends up costing three times what was originally estimated, when measured in inflation-adjusted dollars.36
- 1994: The Federal Aviation Administration launches the Advanced Automation System project in the early 1980s to modernize air traffic control. It is originally expected to cost $2.5 billion and be completed by 1996. But by 1994, estimated project costs have soared to $7.6 billion and the project is seven years behind schedule.37 The FAA terminates some parts of the AAS program and restructures others, but $1.5 billion of spending ends up being completely wasted.
- 1995: Denver's new international airport opens after delays and huge cost overruns. The project was supposed to cost $1.7 billion but ends up costing almost three times as much at $4.9 billion, with $685 million coming from federal taxpayers.38
- 1995: The Dulles Greenway in Northern Virginia is opened. It is a 14-mile private highway fully financed by investors through bond and equity issues. The Greenway uses an electronic toll system to maximize efficiency for drivers. In recent years, many privately financed highways have been launched in the United States and around the world.
- 1996: Canada privatizes its air traffic control system. A private non-profit corporation, NavCanada, is set up as a self-supporting organization that imposes fees on aviation users. The Canadian system has received very favorable reviews for its safety record, investing in technology, and reducing air congestion.39 Other nations have also moved in the privatization direction for air traffic control with successful results.40
- 1998: Congress passes the Transportation Equity Act for the 21st Century (TEA-21). The Act spends a huge amount of money on highway and transit activities that should instead be funded by state governments and the private sector. The Act includes 1,850 earmarks for local pork projects. It also expands federal regulatory controls over local affairs, such as environmental, safety, and urban planning activities.
- 1998: The Washington Post runs a series of stories revealing the corrupt manner in which federal highway spending is doled out.41 House Transportation Committee Chairman Bud Shuster (R-Pa.) dishes out highway funding in exchange for millions of dollars in campaign donations. Shuster lives a jet-setting lifestyle, frequently winging around the country to hand out highway projects in exchange for campaign cash. Shuster dramatically illustrates how federalizing highway finances leads to waste and misallocation, not efficient decisions based on sound economics.
- 2002: After the 9/11 terrorist attacks, a new Transportation Security Administration with 60,000 employees is created within the Department of Transportation and then moved to the new Department of Homeland Security. TSA nationalized formerly private airport screeners across the nation, and its first few years were scandal-plagued. The Coast Guard is also moved from the Department of Transportation to the new department.
- 2003: The Government Accountability Office finds that half of the federally funded highway projects it examines have cost overruns of more than 25 percent.42
- 2005: President George W. Bush signs into law the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU). This legislation, which funds highway, transit, and other projects, continues the unwarranted expansion of federal control over properly state, local, and private transportation and urban planning activities.
- 2005: Federal highway spending becomes increasingly earmarked, or doled out as pork projects by important members of Congress. The 1982 transportation bill includes 10 earmarks. In 1987, President Reagan vetoes a highway bill partly because it contains 121 earmarks. The 1991 highway bill includes 538 earmarks, while the 1998 highway bill includes 1,850 earmarks. The 2005 highway bill includes 5,634 earmarks costing $22 billion.43
- 2005: An official review of Federal Aviation Administration projects to upgrade air traffic control finds that the combined costs of 16 projects has risen from $8.9 billion to $14.5 billion.44 The cost of the Standard Terminal Automation Replacement System (STARS) project has jumped 194 percent to $2.7 billion and is seven years behind schedule. The Department of Transportation's Office of Inspector General says that the STARS project is "facing obsolescence" even before it is completed.45
- 2005: Proposed federal funding for the Gravina Island Bridge in Alaska, dubbed the "Bridge to Nowhere," becomes a national symbol of wasteful pork-barrel spending. The bridge to an island with 50 inhabitants is projected to cost $398 million. It is strongly supported by Senator Ted Stevens (R-AK) and Rep. Don Young (R-AK).
- 2006: The State of Indiana successfully leases the 157-mile Indiana Toll Road for 75 years to a consortium of investors.
- 2007: An expensive Springfield, Virginia highway interchange project called the "Mixing Bowl" is opened. When initiated, Virginia officials claimed that the project would cost $241 million, but it ends up costing $676 million, almost three times more than promised.46
- 2007: Boston's "Big Dig" or Central Artery project is finally finished. In 1985, officials claimed that the Big Dig would cost $2.6 billion and be completed by 1998, but the project ultimately balloons to $14.6 billion, or five times as much. The project, which is mainly funded by federal taxpayers, is grossly mismanaged.47 The Big Dig was, not coincidentally, in the home state of the former Speaker of the House, Tip O'Neill.
- 2007: Virginia strikes a deal with Fluor-Transurban to build and provide most of the funding for new highway lanes on a 14-mile stretch of the Capital Beltway. Drivers will pay to use the lanes with electronic tolling, which will recoup the company's roughly $1 billion investment. Similar public-private highway projects have been planned or completed around the country.
- 2009: Congress includes $8 billion for high-speed trains in the American Recovery and Reinvestment Act, or "stimulus" bill. Unfortunately, high-speed trains are an uneconomic boondoggle.
- 2009: An entirely private commercial airport opens in Branson, Missouri. Private investors put $140 million into creating a small airport, control tower, and terminal building. Branson Airport LLC will service the entertainment destination with service from discount airlines.
1 Daniel B. Klein, "Private Highways in America, 1792-1916," The Freeman: Ideas on Liberty, February 1994, www.fee.org. See also Daniel B. Klein, "Turnpikes and Toll Roads in Nineteenth-Century America," undated, www.eh.net.
2 For articles on the history of federal road funding, see Federal Highway Administration, "Highway History," www.fhwa.dot.gov/infrastructure/history.htm.
3 Daniel B. Klein, "Turnpikes and Toll Roads in Nineteenth-Century America," undated, www.eh.net. See also Randal O'Toole, Gridlock: Why We're Stuck in Traffic and What to Do about It (Washington: Cato Institute, 2009), p. 132.
4 James Madison, veto message for the Bonus Bill, March 13, 1817. Available at www.constitution.org/jm/18170303_veto.htm.
5 Andrew Jackson, veto message for the Maysville Road Bill, May 27, 1830. Available at www.gutenberg.org/files/10858/10858-h/10858-h.htm.
6 Daniel B. Klein, "Turnpikes and Toll Roads in Nineteenth-Century America," undated, www.eh.net. See also John Majewski, Christopher Baer, and Daniel Klein. "Responding to the Relative Decline: The Plank Road Boom of Antebellum New York," Journal of Economic History, vol. 53, no. 1, March 1993, pp.106-122.
7 Randal O'Toole, Gridlock: Why We're Stuck in Traffic and What to Do about It (Washington: Cato Institute, 2009), p. 133.
8 Edward Winslow Martin, "A Complete and Graphic Account of the Crédit Mobilier Investigation," Continental Publishing Company and National Publishing Company, 1873. Available at http://cprr.org/Museum/Credit_Mobilier_1873.html.
9 Adam Thierer, "How to Keep the Promise to Reinvent Government: Abolish the ICC," Heritage Foundation, June 14, 1994.
10 Randal O'Toole, Gridlock: Why We're Stuck in Traffic and What to Do about It (Washington: Cato Institute, 2009), p. 136.
11 Randal O'Toole, Gridlock: Why We're Stuck in Traffic and What to Do about It (Washington: Cato Institute, 2009), p. 134.
12 Tom Kuennen, "ARTBA's Founder Charts Early Interstate System, Grant Program," American Road and Transportation Builders Association, January 2001.
13 Tom Kuennen, "ARTBA's Founder Charts Early Interstate System, Grant Program," American Road and Transportation Builders Association, January 2001. The group was previously called the American Road Builders Association.
14 Richard F. Weingroff, "For the Common Good: The 85th Anniversary of a Historic Partnership," Public Roads, vol. 64, no. 5, Federal Highway Administration, March/April 2001.
15 Austin F. MacDonald, Federal Aid: A Study of the American Subsidy System (New York: Thomas Y. Crowell, 1928), p. 90.
16 Austin F. MacDonald, Federal Aid: A Study of the American Subsidy System (New York: Thomas Y. Crowell, 1928), p. 94.
17 Tom Kuennen, "ARTBA's Founder Charts Early Interstate System, Grant Program," American Road and Transportation Builders Association, January 2001.
18 B. Putney, "Federal-State Relations Under Grants-In-Aid," Congressional Quarterly, July 30, 1940.
19 For an official history of the FAA, see The Federal Aviation Administration: A Historical Perspective, 1903-2008 (Washington: Department of Transportation, 2008). Available at www.faa.gov/about/history/historical_perspective.
20 Brian Francis, "Gasoline Excise Taxes: 1933-2000," Statistics of Income Bulletin, Internal Revenue Service, Winter 2000-2001.
21 Randal O'Toole, Gridlock: Why We're Stuck in Traffic and What to Do about It (Washington: Cato Institute, 2009), p. 142.
22 Randal O'Toole, Gridlock: Why We're Stuck in Traffic and What to Do about It (Washington: Cato Institute, 2009), p. 144.
23 Randal O'Toole, Gridlock: Why We're Stuck in Traffic and What to Do about It (Washington: Cato Institute, 2009), p. 141.
24 Time, "William Proxmire, The Giant Killer," March 29, 1971. See also Time, "SST: Boon or Boom-Doggie," June 1, 1970.
25 Randal O'Toole, Gridlock: Why We're Stuck in Traffic and What to Do about It (Washington: Cato Institute, 2009), p. 138.
26 Annual funding listed in Federal Railroad Administration, "Amtrak," www.fra.dot.gov/pages/274.shtml.
27 Edwards Weiner, "Urban Transportation Planning in the United States: An Historical Overview," Department of Transportation, November 1992, p. 113.
28 History available at http://thecrhs.org.
29 Fred L. Smith, Jr. and Braden Cox, "Airline Deregulation," Competitive Enterprise Institute, August 18, 2008.
30 "Impact of the Staggers Rail Act of 1980," Federal Railroad Administration, undated. Available at www.fra.dot.gov.
31 Randal O'Toole, Gridlock: Why We're Stuck in Traffic and What to Do about It (Washington: Cato Institute, 2009), p. 148.
32 See www.abports.co.uk and www.ukdredging.co.uk.
33 South Dakota v. Dole, 483 U.S. 203 (1987).
34 Ira Lewis and David Vellenga, "The Ocean Shipping Reform Act of 1998," Transportation Journal 39, 27-34 (Summer 2000). Reprinted at www.entrepreneur.com.
35 Randal O'Toole, Gridlock: Why We're Stuck in Traffic and What to Do about It (Washington: Cato Institute, 2009), p. 149.
36 Randal O'Toole, Gridlock: Why We're Stuck in Traffic and What to Do about It (Washington: Cato Institute, 2009), pp. 144-146.
37 Government Accountability Office, "Air Traffic Control: Evolution and Status of FAA's Automation Program," GAO/T-RCED/AIMD-98-85, March 5, 1998. And see Martin Tolchin, "FAA is Threatening to Cancel New Air Traffic System," New York Times, April 14, 1994.
38 Government Accountability Office, "New Denver Airport," GAO/RCED-05-35BR, October 1994, p. 10..
39 Joel Bagnole, "How Canada Gets Jets Across the Sea," Wall Street Journal, May 9, 2002, p. A12.
40 Glen McDougall and Alasdair Roberts, "Commercializing Air Traffic Control: Have the Reforms Worked?" Suffolk University Law School, February 17, 2009.
41 Eric Pianin and Charles Babcock, "Easy Street: The Shuster Interchange," Washington Post Magazine, April 5, 1998.
42 Government Accountability Office, "Cost and Oversight of Major Highway and Bridge Projects: Issues and Options," GAO-03-764T, May 8, 2003, p. 6.
44 National Surface Transportation Policy and Revenue Study Commission, "Transportation for Tomorrow," December 2007, p. 6-5, http://transportationfortomorrow.org.
45 Reuters, "Cost Increases, Delays Cited in FAA Programs," Washington Post, June 1, 2005, P. A17.
45 Quoted in Sara Kehaulani Goo, "DOT Says Air Traffic Overhaul Is Flawed," Washington Post, November 20, 2004.
46 Eric Weiss, "In Mixing Bowl, Va. Sees Recipe for Success," Washington Post, July 19, 2007.
47 See the Boston Globe's "Easy Pass" series of reports by Raphael Lewis and Sean Murphy, www.boston.com/globe/metro/packages/bechtel.
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