This is the Cato Daily Podcast for Thursday, July 14th, 2011. I'm Caleb Brown.

Prices at the pump are squeezing many consumers, but a few small changes to federal

transportation policy would reduce federal spending and may even lower prices at the pump.

Cato Institute Senior Fellow Randall O'Toole comments.

Federal transportation funds mostly come out of gas taxes for surface transportation.

That includes money for highways, but also includes

money for transit and bike paths and railroad museums and a whole variety of other transportation

related activities.

And the first problem is that federal gas taxes are woefully misspent because Congress doesn't

have an incentive to make sure they're spent on the right thing.

So you can have all this money coming in, about $40 billion a year, and they just throw it at whatever

park barrel projects they like. And the second problem is that the gas taxes are not a good way of collecting money for roads in the first place.

They were used back in the 50s because toll collections were so expensive. It was so

expensive to have toll booths and toll collectors and so on. About half your money went

into the collection cost, whereas only about 5% of the money went into the collection costs,

whereas only about 5% of the money from gas taxes

going to the collection costs.

Today we have electronic tolling,

and it's so cheap that less than 10% of the money goes into collection costs a little more than gas taxes but not a lot

And so a lot of states are thinking of transitioning from gas taxes to tolls, not just for major highways, but for all roads because

it connects the users with the transportation providers a lot better.

Today when you fill up your gas tank at the pump you pay a

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