Skip to main content

Transportation Policy

Last Updated: 2017

The American transportation system plays a central role in the nation’s economy. It connects the country spatially through a network of over 6.6 million miles of public roads, railroads, waterways, and oil and gas pipelines, and 19,536 public and private airports. More than 263 million vehicles, railcars, aircraft, ships, and recreational boats use the network. It supports over 5.1 trillion miles of passenger travel and 5.3 trillion ton-miles of goods movement annually. In addition, consumer and government transportation-related expenditures (over $1.6 trillion annually) account for over 11 percent of the nation’s gross domestic product, ranking it the fourth highest activity in the economy, behind only housing, health care, and food. More than 4.8 million people are employed directly by transportation industries, and nearly 13 million more are employed in transportation-related industries. Overall, transportation accounts for approximately 13 percent of all jobs in the United States.

Because of the transportation system’s importance to interstate commerce, the federal (national) government has used its regulatory powers and fiscal resources to influence the scope and nature of the transportation system. For example, between 2000 and 2016 the federal government more than doubled its spending on transportation projects, increasing its transportation-related expenditures from $46 billion in 2000 to $93 billion in 2016. Although state and local governments, combined, continue to spend more on transportation projects than the federal government (spending approximately $160 billion in 2016), the federal government uses its regulatory powers and conditions attached to its spending programs to achieve the leading role in determining the scope and nature of nearly every facet of the transportation system, whether on land, on water, or in the air. In recent years, there have been several efforts to enhance the role of states and localities in American transportation policy making, especially in surface transportation policy. Yet, overall, the federal government continues to play the primary role in defining the American transportation system. That has not always been the case.


Intergovernmental relationships in American transportation policy have changed dramatically over the nation’s history. From the nation’s formation in 1789 through the early 1800’s, the federal government’s role in transportation policy was minimal. State and local governments, on the other hand, were fairly active, providing financial subsidies to private companies to build and maintain a somewhat haphazard system of wagon roads, canals, and ferries to move people and goods from place to place.

At first, the federal government did not offer financial assistance for transportation projects, other than postal roads, because transportation was considered either a private endeavor or a state and local government responsibility. However, postal roads were mentioned in the U.S. Constitution as a federal government responsibility. As a result, in 1796, the federal government provided Colonel Ebenezer Zane land warrants along the Muskingum, Hackhocking, and Scioto Rivers in exchange for his building a postal road from Wheeling, Virginia (now West Virginia), to the river port at Limestone (now Maysville), Kentucky. The road, known as Zane’s Trace, was the federal government’s first road subsidy. In 1802, the Ohio Statehood Enabling Act set aside 5 percent of the proceeds from the sale of federally owned land in that state for road construction. Similar laws were later adopted for Louisiana, Indiana, Mississippi, Illinois, Alabama, and Missouri. In 1803, President Thomas Jefferson (1801–9) ordered improvements to the Natchez Trace, an Indian trail through the Allegheny Mountains, to promote interstate commerce. In 1806, the federal government financed the construction of the Cumberland Road from Cumberland, Maryland, to Wheeling. The road was completed in 1817 and became known as the National Road.

There were congressional efforts during the early 1800’s to provide direct cash assistance for transportation projects, but the expenditures were relatively modest and very little was provided for governmentally owned projects. Moreover, most bills authorizing expenditures for transportation projects were vetoed by presidents convinced that the bills were unconstitutional infringements on states’ rights.

Although it did not spend a lot on transportation projects, the federal government did donate over 3 million acres of nationally owned land to states that were subsequently auctioned to raise revenue for wagon road construction. It also gave states another 4.5 million acres for canal construction, 2.25 million acres for river navigation, and 64 million acres for flood control. Despite this, prior to 1850, the federal government’s involvement in transportation policy is best characterized as indirect and limited.

State governments were more active. They financed canal construction and routinely purchased stock in private companies, or provided them tax exemptions, to build turnpikes. Originally, a “turnpike” was a long pole or pike that barred the traveler’s way at each toll gate. After paying the required fee, the pike was turned or swung out, allowing the traveler to pass.

Local government officials, especially city government officials, constructed roads and bridges, but there was little or no coordinated road building by government entities over long distances. As a result, there were few publicly owned thoroughfares in the United States during this period. Nearly all long-distance land travel was done on privately held turnpikes.

During the mid- and late 1880’s, railroads surpassed turnpikes and water transportation as the primary means to move goods and people over long distances. The federal government subsidized railroad expansion across the continent, primarily because railroads were seen as a means to promote interstate commerce. Given constitutional constraints, the federal government did not fund railroads directly. Instead, in 1838 it designated them all postal routes, providing them a steady flow of revenue, and, increasingly, it donated nationally owned land to the states, which in turn sold the land and gave the proceeds to railroads. By the end of the century, the federal government had provided 130.3 million acres for railroad improvements, and states had contributed another 48.9 million acres of state-owned land.

During the early 1900’s, several events led to a dramatic change in the federal government’s role in American transportation policy. First, the federal government’s land grant programs were ended as it shifted its emphasis from selling land to preserving it through the establishment of national parks and forests. Second, Henry Ford’s relatively affordable Model T automobile, selling for $300 in 1917, made automobile ownership possible for much of the middle class. By 1915, over 2 million motor vehicles were on U.S. roads. As automobile and truck ownership increased, the public, often finding themselves stuck in mud, began to demand better roads. Third, in 1913, the Sixteenth Amendment, establishing the federal income tax, was ratified. The income tax provided the federal government with an elastic revenue generator that gave it an unprecedented opportunity to expand its role in domestic policy. One of the first things it did with the added revenue was to fund highway construction projects.

The Federal Road Act of 1916 created the federal government’s most significant intergovernmental grant program prior to the New Deal era. It authorized the expenditure of $75 million over five years to improve rural postal roads. The funds were provided to states on a fifty-fifty matching basis. States did not object to this intrusion into one of their domestic policy areas because funds were directed to rural areas. At that time, state apportionment rules allocated most of the seats in state Houses and Senates to representatives and senators from rural districts. In addition, rural roads were the primary means for farmers to get their produce to market. It would have been politically foolish for state politicians to turn down a subsidy for agriculture when most constituents at the time were farmers.

The Federal Road Act of 1916 had administrative requirements that foreshadowed conditions routinely attached to many contemporary grant-in-aid programs. For example, expenditures were prohibited in communities with populations exceeding 2,500, and states had to establish a highway department or commission to oversee program operations and set priorities and detailed plans. At that time, 39 of the 48 states had a state road department. Advanced examination of projects, detailed progress reports, audits of expenditures, and examination of finished work were also required.

By 1917, all 48 states had a state road agency. This marked the beginning of the centralization and professionalization of highway policy in the United States. Previously, most road construction planning was done by local government officials who often let political and economic considerations influence where roads and bridges were located and how they were designed. By the mid-1920’s, federal and state road engineers communicated with each other regularly and devised strategies to centralize their authority over the construction of highways and bridges. By 1925, the federal government’s Bureau of Public Roads had worked out arrangements with all of the state road agencies for uniform route markings, with roads running east-west having even numbers and roads running north-south having odd numbers. The collaboration between federal and state road engineers was systematic of a fundamental shift in power from local government officials to state and federal government officials. By the mid- 1930’s, federal and state engineers increasingly wrote project specifications, supervised the work of local transportation officials, and limited their transportation initiatives. State road engineers, for example, developed sophisticated rationales for maintaining or extending highway systems and routinely imposed those standards on local government officials. These standards were typically based on the premise that highways were financed by users and, consequently, should serve traffic, not bolster local property values.

State and local governments continued to outspend the federal government on highway projects during the 1930’s, 1940’s, and early 1950’s. However, the nation’s economic expansion following World War II led to a virtual explosion in both car and truck ownership. Motor vehicle registration jumped from 31 million vehicles in 1945 to 49 million in 1950. The phenomenal growth in automobile and truck ownership led to increased traffic congestion throughout the nation. As traffic congestion became a salient political issue for local, state, and federal government officials alike, it became increasingly clear that the federal government was going to have to play an increasingly important role in what had traditionally been primarily a state and local government responsibility.


The federal government’s Federal Aid to Highway Act of 1956 was a defining moment in the development of U.S. surface transportation policy. It funded the creation of a 41,000-mile National System of Interstate and Defense Highways with a target completion date of 1972 and a Highway Trust Fund to help finance the federal government’s share of the cost ($23.6 billion of an anticipated $27 billion). The Highway Trust Fund generated revenue from a 3 cents per gallon excise tax on gasoline, diesel, and special motor fuels and assorted excise taxes and fees on inner tubes, tire retreads, trucks, buses, and truck trailers.

For the next thirty-five years, the federal government focused most of its surface transportation resources on the construction of interstate highways. Moreover, the Federal Aid to Highway Act of 1956 centralized highway policy-making authority in the United States by elevating the role of federal and state highway department officials in determining the scope and nature of the nation’s highway system. Local government officials and urban planners still played a role, but the overall design and location of the interstate system and, increasingly, primary and secondary highways as well were decided by federal and state government officials. In addition, federal and state highway engineers imposed professional, uniform road construction and design standards throughout the nation. Local government officials resented the imposition of these standards because they increased construction costs and impinged on their autonomy.

By the late 1980’s, several policy makers began to question the federal government’s focus on highway construction in surface transportation policy. They argued that despite the expenditure of hundreds of billions of dollars, U.S. highways and bridges were in relatively poor condition; traffic congestion, especially in the nation’s largest cities, was getting worse, not better; pollution from automotive exhaust was getting worse, not better; and sprawl was rampant. Led by Senator Patrick Moynihan (D-NY), the federal government altered its surface transportation policy in 1991 to encourage the use of intermodal transportation solutions and to provide states greater flexibility in the use of federal highway dollars for mass transit and other non-highway construction–related activities, including bicycle paths and pedestrian walkways, parking facilities, traffic management and monitoring, and planning.

The Intermodal Surface Transportation Efficiency Act of 1991 and its successor, the Transportation Equity Act for the Twenty-first Century, decentralized surface transportation policy making somewhat by elevating the role of metropolitan planning organizations in project design and selection. They also created an opportunity for states to make major, dramatic change in the distribution of highway and mass transit funding by providing them greater discretion in the use of these funds. However, an analysis of state and local government funding decisions made during the 1990’s, representing more than 360,000 individual highway and mass transit projects, revealed that most state and local governments chose not to make radical changes in their funding decisions. They continued to focus most of their funding on highway construction and repair.

At the same time that the federal government emerged as the leading authority in American surface transportation policy, it was also increasing its role in water and, especially, in air transportation policy. For example, since passage of the Air Commerce Act of 1926, the federal government has issued and enforced air traffic rules, licensed pilots, certified aircraft, established airways, and maintained and operated aids to air navigation. It has also assumed primary responsibility for building and operating the nation’s airports. The Federal Aviation Administration’s annual budget currently exceeds $16 billion annually.


In recent years, disagreements over funding have dominated transportation policy making. Most agree that existing funding has not kept pace with the nation’s transportation needs. However, there is disagreement on how to proceed. Some advocate increased transportation-related taxes and fees and additional federal general revenue funding to help fill the gap, others advocate a mix of increased taxes and fees, bonds, public-private partnerships, and tolling, and still others reject any tax and fee increases in favor of increased use of bonds, public-private partnerships, tolling, and an increased reliance on state and local governments.

Another continuing controversy is the federal government’s use of crossover sanctions in its surface transportation programs. Crossover sanctions impose a penalty on a recipient of a particular program, typically a reduction in assistance, for failing to comply with requirements of another, independent program. There are more than a dozen crossover sanctions attached to federal highway assistance, including federal mandates to limit maximum speeds on nationally financed highways, set blood alcohol concentration levels for determining when motorists are driving under the influence, and establish the drinking age. Although several of these crossover sanctions have goals that are politically popular, state and local government officials object to the means used to achieve these goals. In their view, crossover sanctions infringe on states’ rights and are an inappropriate use of federal government power that borders on blackmail.

Another continuing controversy in American transportation policy is the emphasis by all three levels of government on funding highway-related projects, especially new construction. More than 70 percent of public spending on transportation is for highway-related projects. Some analysts suggest that the United States should emulate what is known as the European model. Many European nations place a much greater emphasis than the United States on funding mass transit and rail transportation. They also purposively adopt zoning ordinances and other measures to encourage people to locate closer to their places of employment and further discourage automobile usage by imposing relatively high gasoline taxes and engaging in a practice called “congestion pricing” (increasing or imposing tolls and parking fees in congested areas). Instead of trying to meet increasing demand for highways by constructing new and repairing existing highways, these strategies encourage people to prioritize their travel and use mass transit and other alternatives to the automobile. Opponents of the European model argue that it is an inappropriate form of “social engineering” that runs counter to American traditions and ideals, and counter to the public’s preference to use automobiles and trucks for most of their travel needs.

Finally, a continuing criticism of current federal transportation policy is that it lacks a cohesive, comprehensive approach that identifies how the various transportation modes are to be integrated into a single national transportation system. Primarily due to Congress’s decentralized committee system, the federal government addresses highway and bridge programs separately from mass transit programs, Amtrak, water transportation, and air transportation programs. As a result, there is rarely any consideration concerning how to best integrate the nation’s various transportation modes into a cohesive whole. Instead, the emphasis is on building capacity in each mode. This approach appeases influential transportation interest groups, but creates a policy-making process that often precludes the consideration of innovative means to address traffic congestion.

SEE ALSO: Crossover SanctionsFixing America’s Surface Transportation Act 2015Intermodal Surface Transportation Efficiency ActMetropolitan Planning OrganizationsTransportation Equity Act for the Twenty-first Century


American Society of Civil Engineers, Failure to Act: Closing the Infrastructure Investment Gap for America’s Economic Future (Washington, DC: American Society of Civil Engineers, 2016); Robert Jay Dilger, American Transportation Policy (Westport, CT: Praeger, 2003); Bruce D. McDowell and Sheldon Edner, eds., Federalism and Surface Transportation, Publius: The Journal of Federalism, special edition, 32, no. 1 (Winter 2002); John B. Rae, The Road and Car in American Life (Cambridge, MA: MIT Press, 1971); Mark H. Rose, Interstate: Express Highway Politics, 1939–1989, rev. ed. (Knoxville: University of Tennessee Press, 1990); and U.S. Department of Transportation, Federal Highway Administration, America’s Highways, 1776/1976(Washington, DC: U.S. Government Printing Office, 1976).