Eisenhower's roads to prosperity

Eisenhower's roads to prosperity - Los Angeles Times.

Tom Lewis describes some of the history of Eisenhower's huge infrastructure initiative, the Interstate Highway system, in the context of Barack Obama's plans to use infrastructure as a job-creation tool.

What most people don't seem to realize is that investments in infrastructure do more than create jobs in the process of the development of the infrastructure and in its maintenance: they also create something else of much larger importance, which we as a society have chosen to pretend is of little or no significance, to our detriment.  (How's that for understatement?)

What is it?  Every worthwhile infrastructure project creates more land value than the project costs.

I'll repeat that.  Every worthwhile infrastructure project creates more land value than the project costs!    Therein lies one of the most important keys to solving many of our most serious problems.

(It also provides a valid tool for evaluating whether a project is likely to be worthwhile!)

Think of it.  The federal taxpayer funds a bridge.  (Think of the Tappan Zee Bridge, the Verrazano Narrows Bridge, or the Golden Gate Bridge.)  What was the effect of creating that bridge?  Short term, jobs.  Longer term, tremendous increases in land value, at both ends of each bridge.  Not just in a 2- or 3- mile radius, but for 20, 30, 40 and more miles. 

Who benefited?  The landholders!   Big time!  Had we been smart enough to collect that increase in value, in the form of an annual tax on land value, we would have had plenty of revenue to fund the next project, without taxing anyone's wages.

Lewis refers to a Mobius strip of financing:

The 1956 highway bill levied a tax of 3 cents on each gallon of fuel -- equal to 24 cents today. The revenue went into a dedicated highway trust fund. Though it wasn't enough to support the entire program, it was a start. And the tax proved to be a Mobius strip of money. Each gallon of fuel pumped helped to create more highways, which enabled more cars to drive more miles -- and use more gas, which generated yet more money for the trust fund.

 

I think this one -- land value taxation -- is even better: a virtuous circle instead of a vicious one.  (I'm not opposed to gas taxes, either -- but landholders are permitted to reap a benefit they didn't sow, and it forces us to collect from other sources taxes we ought not to impose.)

The Bridge to Nowhere would only have needed to increase the value of the land on the island it was to connect to the mainland by about 50% (if the land were all privately owned, which is not the case) to have been worthwhile, without taking into account the increase in value it would create on the mainland end.

Our common investment in infrastructure can create prosperity for all, or for the few ... the landholders.  Which should it be?