Transportation subsidies, economic efficiency, equity, and public policy

According to many environmentalists, the U.S. transportation sector is being subsidized by federal, state, and local governments. Whether or not road users are, in fact, paying the cost of using roads is a critical issue in supporting sustainable transportation. Subsidies increase road consumption above levels that would otherwise be dictated by the market. This paper compares different estimates of transportation subsidies, noting their strengths and weaknesses. Following this discussion, the issue of transportation as a public good is covered. How economic efficiency and equity are considered depends in large part on the role of transportation in society. If transportation is deemed a public good, then alternative evaluation criteria must be applied. If not, then economic efficiency would need to be considered. Both efficiency and equity could be enhanced by a pollution tax. Such a measure would improve equity by charging users for the pollution they generate. In addition, economic efficiency could be enhanced by internalizing the environmental externalities associated with transportation. This study, compares different estimates of transportation subsidies as a prelude to discussing economic efficiency and equity issues. The study does not develop a definitive answer to the problem of transportation subsidies, but rather highlights the important public policy issues that exist within this arena.