Dr. Richard Mudge, a Vice President with Delcan Corporation, specializes in the economics, finance, and evaluation of all modes of transportation with a concentration in new technology. Mudge has held a series of management positions as a transportation consultant, including co-founder, President, and Chairman of the Board for Apogee Research. He also served as Chief of the Transportation Unit for the Congressional Budget Office and Director of Economic Development Studies for the New York City branch of the RAND Corporation.
Mudge holds a Ph.D. in Regional Economics from the University of Pennsylvania and obtained.
The debate over the economic importance of VMT is interesting, but calls for statisticians and econometricians to help sort out the differences between correlation and causality. I worry, however, that this debate will divert us from the broader truth – that transportation investment and our national transportation network have a vital role to play in generating economic growth. History shows this. Indeed, the economic history of the US cannot be told without the history of transportation. Examples abound, from the Corps of Engineers opening up the Ohio and Mississippi Rivers at the start of the 19th Century, to the Transcontinental… Read more
This week’s question contains a contradictory mix of possible actions. These include market or price-based actions (congestion pricing, for example); regulatory actions (land use controls from smart growth); and some contradictory investment options (dedicated bus lanes, for example can be very practical, but adding simple carpool lanes have a minimal impact on mode choice). The use of the word travel efficiency appears misleading, since the real focus seems to be to decrease use of the automobile – and indeed decrease the use of transportation in general. It is not clear to me that such policies are good for our economy… Read more
Of course there is a direct and negative link between most efforts to reduce GHG and the financial condition of the current Highway Trust Fund (including the Mass Transit Account). This should not be seen as a problem, however, but merely a call for us to adjust the HTF to meet these new conditions. The ability to adapt the Trust Fund to new conditions is a concern, of course, since we have not been able to adjust the revenues received by the Trust Fund to keep pace with inflation and growing demand for transportation for some time. While higher taxes… Read more
I am glad to see a question about economic growth. With the recent burst of enthusiasm for goals such as greenhouse gas reduction, safety, livability, and sustainability the historical role of transportation as an engine of economic growth often seems to slip between the cracks. I find this a bit ironic given the current focus on economic stimulus, where transportation seems to be an important success story. The question has two parts: the body of the text asks about how best to make tradeoffs among a series of “equally important goals” while the headline focuses on transportation in the 21st… Read more
A focus on safety involves a one-dimensional analysis. This can be a useful exercise, but runs the risk of generating policies that harm other reasonable objectives of transportation – economic growth comes to mind. In this sense it is similar to other popular, one dimensional objectives such as the recent emphasis on reducing greenhouse gases or energy use. I am certainly not against saving lives, nor against reducing GHG or energy use. Such objectives have practical as well as political value. Such “what if” analysis can provide interesting and useful results. We just need to be aware of unintended consequences. For example, lower speed limits will… Read more
A focus on VMT reduction as a key performance measure for the nation’s surface transportation program seems odd both in terms of economics and policy. VMT and economic activity are closely linked. The causal linkages are real but not simple, however. It is hard to see how a 16 percent drop in per capita VMT can be accomplished without having a negative impact on economic activity. VMT appears to be a proxy for the goal of reducing greenhouse gasses. If so, it would be better to set goals that provide direct measures, rather than indirect – say CO2 emissions from… Read more
There are three dimensions to this issue. First, the size of the program; Second, how these funds are financed; and Third, how we reform the surface transportation program. The level of spending should increase beyond recent levels. There are clear reasons to improve the physical condition of the nation’s roads, bridges, and mass transit facilities. We also need to increase the effective capacity of our transport system in order to support (and perhaps stimulate) economic growth. Any effort that focuses solely on improving physical conditions represents a significant move away from meeting the demands of a 21st Century economy. There… Read more
Of course there is a direct and negative link between most efforts to reduce GHG and the financial condition of the current Highway Trust Fund (including the Mass Transit Account). This should not be seen as a problem, however, but merely a call for us to adjust the HTF to meet these new conditions. The ability to adapt the Trust Fund to new conditions is a concern, of course, since we have not been able to adjust the revenues received by the Trust Fund to keep pace with inflation and growing demand for transportation for some time. While higher taxes… Read more
I agree with Ken’s conclusion: the collapse of the Midway Airport deal reflects short-term financial conditions rather than a long-term signal regarding the future of PPP. This does not mean, however, that the future of PPP is assured. Based on the current gap between the demand and supply for transportation services, the future of PPP and other innovative approaches should be very positive. This assumes of course that we live in a transportation world that encourages common sense policies. I see several factors that could slow the attractiveness of PPP. First, Wall Street and financial entities in general are… Read more
This week’s question concerns choosing one mode versus another. Rather than selecting modal investments based on our personal beliefs or values, I would prefer to select investments based on analysis of their likely economic and social returns. Historically, transportation investments have had a profoundly positive impact on the nation’s economic productivity and thus on our ability to grow and prosper. The transcontinental railroads and the Interstate highway system offer good examples. Investment choices should be based on the effectiveness of transportation programs. This can be measured in terms of a rate of return on investment. Such calculations should… Read more
Mr. Lovaas interpreted my earlier comment as reflecting skepticism that cap and trade or carbon taxes would reduce GHG. That is certainly not what I tried to say. Any change that increases the cost of carbon-based fuels or that restricts their supply will reduce consumption of carbon-based fuels and thus the production of man-made GHG gases. I was trying to make the point that the impacts of these policies could very easily be non-linear. I also worry that supporting policies, such as land use controls, may have negative impacts on the economy as well as the quality of our daily… Read more
The answer to the modal impacts of a cap and trade system is “it depends.” A cap and trade system should act like a tax increase on carbon and thus on fuel use. My personal preference is for a carbon tax since this will be simpler to understand and, perhaps, less subject to special rules suggested by Congress. First, the impact depends on the ability of each mode to pass on higher costs to their customers. That is, how price elastic is each mode? This, in turn, varies by type of trip. Vacations and leisure trips will be affected more than business trips. In general… Read more
Our traditional source of funding for surface transportation is broken. I see two major reasons for this: one that reflects changes largely beyond our control and one that should be within the control of the transportation community. Motor fuel taxes and related truck fees are a form of user fee. While not as precise or elegant as proposals that exist for congestion pricing, there is a rough and ready link between fuel consumption and use of the highway system. During the 1960s, 1970s, and much of the 1980s it was common practice for states to increase their tax on motor… Read more
I am not a fan of cap and trade. One reason is that it is not clear how this will be applied to transportation given the large number of individual vehicles. The Western Climate Initiative plans to implement the transportation portion of its proposed cap and trade regulation by imposing limits on refineries. While this makes sense from an administrative point of view, it also means we will be passing the de facto authority to raise the price of transportation (aka a fuel tax) to a group of private entities. This seems awkward at best and not well thought out… Read more
The beneficiary pays principal as called for by Eric Britton implies we should consider using a broad-based economic resource. Work by Professor Ishaq Nadiri (NYU) shows that the economic benefits from the nation’s highway system provides significant productivity gains for virtually every economic sector (mining is one exception). Gains are not focused on those industries with a direct link to highways (trucking, for example) but rather cover services and agriculture as well as manufacturing. This line of reasoning opens the door to considering a portion of the corporate income tax as a beneficiary tax for transportation. This idea has been… Read more
I agree with Robin that our transportation policy should not focus on the needs of vehicles or infrastructure but rather on individuals and business. Indeed, while I think the phrase “crumbling infrastructure” is a bit strong, the only reason we should care about correcting this situation is if it provides tangible net benefits to the traveling public. Given that our economy operates on a national scale and that we are under pressures to change due to global competition, new technologies, new priorities (energy conservation and reduced GHG) and shifts in demand, investment funds should emphasize those parts of the system that support… Read more
One program that I would drop is the “Equity Bonus Program.” This is part of the federal highway program and guarantees that every state receives a minimum of 92 percent (up from 90.5 percent in TEA-21) of the highway funds collected in their state. The program has a few other minimum guarantee provisions. Funding for FY 2009 is about $9 billion. Note: because some expenditures are exempt from the minimum guarantee calculation, 92 percent is close to the maximum possible level. I see two problems with this program. Most importantly it encourages the donor-donee issue that has dominated Congressional… Read more
The House bill combines economics and politics. This should not surprise any of us. It does not appear , however, to have a consistent objective of creating short-term jobs. For example, a major portion of its costs concerns short-term tax breaks. These have a history of modest impacts on personal expenditures, witness last year’s tax refund, most of which went into savings. Many of the 150 or so specific programs reflect various policy interests as much as they do a simple focus on job creation. I suspect that if a good economist were given the task of developing a stimulus… Read more
After a quick look at the draft bill, a few things strike me as a bit odd. I will not get into the allocation of funds since this seems to reflect political decisions more than even-handed analysis. There is no mention of technology as part of transportation investment. This seems odd given the emphasis on investments for the 21st Century and given the technology emphasis in other parts of the program – for example; “We need to put scientists to work looking for the next great discovery, creating jobs in cutting-edge-technologies, and making smart investments.” Maybe this lack of… Read more
Basing policy on forecasts of the price of oil can be tricky. I was at CBO during the energy crisis of 1980. Our energy group forecast that the price of oil would continue to increase rapidly – I recall numbers of $80 a barrel or more: equivalent to $200 a barrel today. But in fact, prices dropped rapidly, reaching the teens from the mid 1980s through 2000. The most serious energy crisis faced by the US has not been based on price, but rather the shortages experienced in the 1970s. Efforts to move closer to energy independence would help reduce… Read more
The most important policy lesson to be learned from the dramatic drop in gasoline prices is that market forces beyond our control will have a significant impact on what policies we propose and the likely effectiveness of these policies. While fuel prices can be tracked on a daily basis, they are not the only market force that affect transportation policy. People change jobs, companies shift locations, and new markets appear as old ones age. We live in a global economy and transportation policies that are based on a specific set of economic circumstances are likely to fail. Much of… Read more
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