Ryan Avent plugs the idea of a National Infrastructure Bank as a more practical alternative than abolishing the DOT. My understanding is the Bank would function like the military base closing commission: it would make recommendations to Congress which Congress could override with a majority or supermajority (depending on the variation). This would de-politicize transportation funding, curb the redistribution of money from cities to rural areas and preserve the feds' ability to coordinate large, interstate projects (like rail). And Ryan's of course right that the DOT is not going anywhere, so there's no sense in planning for its demise. But if I stuck only to the politically feasible, . . .
Speaking of the politically impossible, I've been thinking of ways to kick TxDOT out of our cities. TxDOT does more damage than the feds (think TxDOT's proposed Highway in the Sky through Oak Hill), and it's the agency most directly responsible for pushing an inefficient allocation of transportation dollars. Cities ought to keep their state money as well as their federal money. Give metropolitan organizations like CAMPO unfettered control over transportation projects within their boundaries.
This is a thornier problem, practically, because we will still need TxDOT to maintain the highways and bridges outside the metropolitan areas. And we'll still need its engineering expertise. So it's a matter of cutting it down to size rather than eliminating it altogether.
Here's the best idea I've come up with so far: (1) Remove TxDOT's jurisdiction over metropolitan areas; and (2) rename it the "Rural Texas Public Works and Electrification Authority." I figure cities would be able to grab their fair share in no time.
