Volume 11 | Issue 1 | Year 2008

Last March, the National Assoc-iation of Manufacturers’ Board of Directors charged the organization to raise awareness of the sad condition of our nation’s deteriorating transportation infrastructure and rally support for an active agenda for broad-based investment in improvements. The tragic loss of life that attended the collapse of the I35 bridge in Minnesota served to underscore the gravity of the challenge and remind all of us that there is more at stake than congestion and delays – in many instances it is literally a matter of life and death.
Certainly, there are few Americans who are not aware of the basic problems. Traffic jams are becoming all too common throughout the country. Millions of commuters are spending hours a day going to and from work or on personal errands inching along scarcely faster than they could bike or walk. Our nation’s overworked highway grid is not just an inconvenience for consumers, it is also a major impediment to our ability to compete in the global marketplace. Inadequate transportation means factories can’t get the raw materials or product components they need in a timely manner or move products to their customers when they are due.

In its most recent survey, the American Society of Civil Engineers (ASCE) gave the nation’s transportation infrastructure a grade of D. The ASCE cited a need to invest $1.6 trillion in upgrades over the next 20 years and also recommended key changes in transportation behavior, city planning and business practices – such as flexible schedules and telecommuting – to address the problem.

There is no great mystery why this is happening. The Reason Foundation reported that between 1980 and 2000, vehicle miles increased 82 percent while highway lane-miles increased only 4 percent. More vehicles and fewer miles of paved road mean congestion and more congestion.

Not only are we not building to keep pace with traffic, we’re not even taking care of what’s already in place. Repairs and operating costs associated with poor roads cost American drivers $54 billion a year. We now spend 3.5 billion hours a year stuck in traffic at a cost to the economy of $63.2 billion. Trucks carry 90 percent (by value) of all freight moved in America, so expanding key trucking routes is essential, yet the states lack the money needed to keep up. In 2004, there were 243 million hours of truck delays due to congestion. A study conducted by Cambridge Systematics for the Federal Highway Administration put a price tag for these delays at $32.15 per hour.

Meanwhile, according to the Society of Civil Engineers, more than 27 percent of the nation’s 590,750 bridges are structurally deficient. But the current federal budget for highways and public transit is $9 billion below what’s needed to maintain the status quo – much less the additional $36 billion needed to make significant improvements.

And the problem is not just with our highways and bridges. Limited railroad capacity is creating chokepoints and delays for the first time since World War II. This can only get worse because freight rail tonnage is expected to increase by at least 50 percent by 2020. The ASCE says the freight railroad industry will need to spend $175-195 billion over the next 20 years to maintain the existing infrastructure and expand for growth. Increased demand for energy, especially corn-derived ethanol and coal, will further strain existing railroad capacity.

We face challenges also on the water. We move a major portion of our commerce on water. Our inland navigation system – nearly 12,000 miles of commercial navigable inland and coastal waterways – plays a vital role in moving 630 million tons of freight each year. One barge can carry a load equal to 58 semis at a lower cost. But almost half of the 257 locks on our rivers are functionally obsolete, and by 2020, that will grow to 80 percent. The cost to replace the present system of locks is more than $125 billion. Also, key seaports lack sufficient road and rail connections to move goods out of the ports as fast as they come in.

While we need to invest substantial revenue into our infrastructure, it must be understood that this represents an investment in the future and offers immediate benefits to the economy. The U.S. Department of Transportation estimates that for every $1 billion in new transportation funding, nearly 47,000 jobs are created and an estimated $5 billion in economic activity is generated.

Alliance rallies to the cause
The NAM has formed the Alliance to Improve America’s Infrastructure to rally support for broad-based investments in upgrades, expansion and investment in our infrastructure. One of our first acts was to offer support for “Build America Bonds,” an initiative introduced by Sen. Ron Wyden (D-OR) and Sen. John Thune (R-SD), and co-sponsored by Sen. Normal Coleman (R-MN), Sen. Amy Klobuchar (D-MN) and Sen. Elizabeth Dole (R-NC) that will create a one-time $50 billion bonding program for infrastructure. This is exactly the kind of creative private/public sector collaboration we need to take on the massive challenge upgrading our infrastructure. The bonds would be available to corporate and individual investors for purchase in different denominations, so that ordinary citizens could participate. Build America Bonds have the potential to create nearly 1.5 million jobs, generate $171 billion in economic activity and save thousands of lives by improving transportation safety

Our national commitment to improving our infrastructure must of course be long term and embrace a variety of different funding mechanisms. Certainly, government agencies at all levels can and must play a major role, but the private sector must take an active role also. The manufacturing community has a compelling interest in this campaign and must make its support clear at every opportunity.

Our airports are if anything even more congested. A quarter century of deregulation of air travel has made it available to a larger segment of the population, but aviation infrastructure is not keeping up with consumer demand. The Department of Transportation reports that commercial aviation delays cost airlines $3 billion a year. “Passengers are directly affected by missed flight connections, missed meetings and loss of personal time,” the DOT study said. “There are at least 20 seriously congested airports each averaging more than 20,000 hours of flight delays each year.” Already, access to Chicago O’Hare is being rationed and the same prospect awaits other airports absent massive new investment.

Just about everyone who flies (including me) has horror stories of protracted delays, misplaced luggage and surly service. Large carriers and regional/commuter airlines are projected by the Federal Aviation Administration to grow on average 4.3 percent a year through 2015, which equates to a 52 percent increase above passenger demand in 2005. As passenger travel demand continues to grow, we must expand our air traffic infrastructure or the congestion will only get worse.

The air traffic control system presents yet another challenge to our aviation industry. At the very time when it will need to replace two-thirds of its aging controller workforce, and invest tens of billions of dollars in a next generation technology system to triple is capacity, its principal funding source is producing less and less money. The 7.5 percent tax on airline tickets is a victim of the success of low-cost airlines whose impact now sets fare levels in most markets. As fares continue to decline, the tax revenue lags behind the level of air traffic – and hence air traffic control costs.

John Engler is President and Chief Executive Officer of the National Association of Manufacturers. For information visit www.nam.org.

Previous articleFair Price
Next articleMarket Securities