Howard: Uncertainty drives people together

The seasoned lawyer reckons “something new” needs to get invented to make long-term funding of infrastructure politically feasible in the US.

 

Infrastructure Investor recently had the opportunity to speak with Philip K. Howard, a respected lawyer, writer, and chair of Common Good, a nonpartisan legal reform coalition which is proposing to “restore common sense to America”. His latest book, The Rule of Nobody, delves into the inefficiencies that are plaguing the infrastructure approvals process in the United States. In the first of a four-part series, he dwells upon the overcodification of government. To hear more, you can find him on Tuesday, May 12, at the Bipartisan Policy Center, where he will be participating in a discussion entitled, “Rethinking Infrastructure Approvals”, as part of Infrastructure Week.

Infrastructure Investor: Let's start at the beginning, so to speak. What led you to focus on overregulation issues and infrastructure approvals?

Philip K. Howard: As a young lawyer I became a civic leader in New York. I was the chair of the equivalent of the zoning board for Midtown Manhattan when I was in my twenties, and then for ten or 15 years I was active in local civic affairs – zoning, landmarks, and public policy – in a municipal context. I had friends who were in government and as we got older they had significant positions in city government. But I found that they were frustrated by their inability to use their common sense in different settings, and of course I had found the same thing doing civic work; I didn’t know if it was because the government officials were idiots or because of some other reason. But often it was very difficult to get to the right answer—even what most people would agree was the right answer in some land use or other city dispute. And I just started asking myself, why is it that government officials don’t act sensibly?

I didn’t set out to write books or be on a crusade about the organisation of government. I was just curious as to why people didn’t act sensibly. That ended up leading me to read things I should’ve read in college but didn’t, and I ended up concluding that we had a defective structure of government – defective in one core respect particularly, which is that we did not allow humans to make choices at the point of implementation. Nothing gets done if a human can’t use their judgement to make choices. Nothing is fair. In the history of humanity, nothing has gotten accomplished because someone followed a rule. Rules protect against bad things but they don’t actually make a teacher be an effective teacher, for instance; that requires a teacher to use her [or his] skill and personality and emotions to capture the attention of the students.

Infrastructure doesn’t happen if all you do is follow the thousands of requirements to fulfill all the accumulated regulatory requirements. It happens because responsible officials look at the available evidence and make decisions. As it stands, we’ve effectively barred officials from making the decisions so it’s not surprising that nothing gets rebuilt.

II: Is there anything that could be done to make it easier for government officials to react to infrastructure needs in real time?

PKH: I’ve been focusing on the approval process, not the financing, but obviously both are needed. The approval process should be able to be dramatically shortened. We need categories of projects which are basically rebuilding projects within existing rights-of-way where there should be very minimal approvals. Maybe if you’re expanding a highway from four lanes to eight lanes there’s some environmental impact that needs to be taken into account and it’s legitimate to figure that out. But if you’re rebuilding a bridge or only making minor changes in a right-of-way, the approval process should only be a matter of months, not years. Change number one is to identify projects that have insignificant impact and create a streamline mechanism for approving them so we don’t waste years and money doing it.

Another issue is that financing has gotten kind of bollixed up into this partisan debate over raising taxes. If you look at transportation funding, the gasoline tax effectively in real terms is not nearly as high as it used to be, and with gasoline prices so low because of the drop of the price of oil, you’d think it would be a good time to raise the gasoline tax, but the powers that be are afraid of being criticised as being tax raisers. We need realistic leadership from the political class to do what I think is obvious, which is to have the Highway Trust Fund (HTF) be replenished with a modest raise that keeps up with inflation.

II: One of the main issues holding back infrastructure development is that partisan divides are splitting the brain power, in a sense, with both sides agreeing that projects need to get going, but neither agreeing on how to pay for the work. This is especially highlighted by the lack of long-term funding for the HTF. In your opinion, can anything be done to increase the chances of politically feasible long-term infrastructure funding?

PKH: Yes, I think something new needs to get invented. The people who know best how it works are the people on either side of the contract—the investors and the construction companies that are asked to do the job and the state highway department, or whoever is on the other side. There needs to be a more market-based way of doing these contracts where there’s a little more risk on both sides. Something tends to drive people together when there’s uncertainty.

Going back to the gas tax for a second, there’s a law from 100 years ago called the Jones Act that requires that goods being shipped from a US port to a US port be shipped on a US flag carrier along with a variety of other requirements. Much of the material shipped under the Jones Act happens to be gasoline. Studies have suggested that because it can only be done with a US flag carrier, the costs are higher. If you did not have the Jones Act, gasoline would be 15 cents per gallon cheaper in America, so it’s a very big number. If you eliminated the Jones Act, you could raise the gasoline tax by 15 cents and have virtually no impact on the price of gas.

Here you have a system of government where we have programs that have accreted for a century, all of which have unintended consequences and many of which are obsolete entirely or substantially, like the Jones Act. So we have these arguments over things like raising the gas tax to replenish the HTF, when we ought to expand the argument to say why don’t we make government more effective and less inefficient – and by the way we’ll be able to save a lot of money and free up funds to do the things that we need today, such as rebuild our infrastructure. That’s just one trade, but we could come up with a thousand trades like that.

II: Aside from the Jones Act, are there any particular laws that have stuck out as a rock in your shoe?

PKH: Sure, there are a whole bunch, but some of them have very strong political constituencies. Ninety-eight percent of the public would probably agree that these laws don’t make any sense but if they have a very strong special interest around them, it’s hard to change them. Farm subsidies from the New Deal cost $15 billion per year. Well, it’s been 75 years since the last farmer was in danger of starving so why do we need farm subsidies?

In infrastructure, procurement laws are in general very rigid as we just discussed. In addition, for federally-funded infrastructure, the Davis-Bacon Act sets wages as a matter of law at an artificially high level. Probably in the order of raising labor costs by 20-25 percent because of this New Deal law enacted in 1931. It was originally enacted to exclude minorities from government contracts and it uses these euphemisms like “highest prevailing wage” but it essentially means setting wages for a Federally-funded contract as a matter of law in each of scores of construction categories. The idea was at the beginning that you would take away the incentive to use cheap southern labor for contracts by fixing the wages at the highest level as a matter of law. They would go with the good old boys who were members of the union.

There’s a separate list for terrazzo setters than there is for terrazzo finishers, and it’s an absurd example of overregulation because they set these wages in each of 3,000 counties, so think about it. There are people whose job it is to decide how much terrazzo setters should get paid in Monmouth County, New Jersey, which will be different than what they get paid in Fairfax County, Virginia. Literally they’re setting those wages as a matter of law. Why would you do that? It’s like a parody of bad government. Even central planners wouldn’t do that.

The law is a joke. It wastes taxpayers a huge amount of money and raises infrastructure costs dollar for dollar for the waste. There’s only one group that favors it, and that’s organised labor because it’s a freebie to them. it’s rent-seeking. And they’re strong enough to keep it in place.