President-elect Barack Obama announced a massive public works program this weekend to rebuild America’s infrastructure, with investments in transportation, energy efficiency, and schools planned.

Obama could further his fiscal stimulus and infrastructure program by leveling the playing field between road and mass transit investments. When the Interstate highway system was created, the federal government provided 90% of the financing, requiring states to pitch in the remaining 10%. In contrast, most transit projects in the US received little or no federal funding until the 70’s, and currently receive 60-80% in federal financing. In addition, transit projects have to meet steep qualification requirements before being funded, while states are provided lump sum funding for road projects which can be used with much greater discretion.

Why not level the playing field by allowing states to use federal transportation funding as they see fit, without explicitly allocating it for roads or mass transit? States with large urban areas could then focus on large-scale transit projects, while rural states could focus on traditional road construction. This blog has consistently advocated against subsidies of all kinds, but since most major transportation projects are funded via the DOT, it makes sense to enable states to spend the money according to their needs.

In the current economic environment, fiscal stimulus is advisable, and fully funding mass transit projects will help advance the new administration’s energy policy as well. Providing equal funding for both mass transit and roads should be an easy win for the Obama administration, and I hope that the new President takes this step.