December 26, 2010 Road to Economic Health

Volume 13 | Issue 4

Economic benefits of transportation investments are profound. That’s why passage of the new highway and transit bill is urgent. That’s the m

On Labor Day, President Obama called for Congress to act soon on a front-loaded, six-year reauthorization of the federal highway and transit improvement programs. He repeated his message during a Columbus Day news conference in the White House Rose Garden. Obama’s insistence is understandable. A recent study underscores how critical the programs are to the U.S. economy.
The report, from the ARTBA (American Road and Transport Builders Association) Transportation Development Foundation, finds money invested this year in transportation construction industry employment and purchases will generate more than $380 billion in U.S. economic activity. That’s nearly three percent of the nation’s Gross Domestic Product (GDP), and it’s larger than the annual GDP of 160 nations ranked by the International Monetary Fund, including oil-rich Saudi Arabia ($370 billion) and Kuwait ($111 billion).

BIGGER THAN AUTO REPAIR
The study, “The U.S. Transportation Construction Industry Profile,” shows the annual value of domestic transportation construction will surpass $120 billion in 2010. This ranks it larger than industry sectors like auto repair and maintenance ($116.8 billion), farming ($97.5 billion) and coal mining ($29.8 billion), to name a few.

Transportation construction also supports 3.4 million American jobs – 1.7 million directly involved in construction and related activities and 1.7 million jobs sustained by transportation construction industry employee, firm and agency spending throughout the U.S. economy.

JOBS IN JEOPARDY
However, thousands of these jobs could be in jeopardy if the amount of transportation construction work performed declines in the coming year. This is a very real possibility if state and local governments continue to delay projects while waiting to see if Congress and the president can complete action on a new, multi-year surface transportation bill. The current law, SAFETEA-LU, expired a year ago October 1. Federal highway and transit aid to the states has been sustained over the past year by four short-term extensions and economic stimulus funding.

Utilizing U.S. Census Bureau “County Business Patterns” data and the U.S. Commerce Department’s Regional Input-Output Modeling System (RIMS II), the ARTBA report shows the transportation construction industry’s largest economic impact is in California. The state generates or sustains more than 354,000 jobs. New York follows California with 286,449 jobs. Behind those two states are Florida (196,087), Pennsylvania (148,669), Illinois (129,014), Georgia (106,658), Ohio (104,310), Washington (100,384) and New Jersey (97,036).

SIGNIFICANT ECONOMIC ASSET
Transportation construction activity is one of America’s most valuable capital assets. It generates $159.3 billion annually in direct and induced U.S. wages. Workers will contribute an estimated $13.1 billion in federal and state payroll taxes this year.

But that is not the end of the story. Often overlooked is the fact that the work the transportation construction industry performs results in the nation’s longestlived capital assets. In 2008, the nation’s transportation infrastructure was worth $2.97 trillion, or 32 percent of the value of all government fixed assets in the United States. Federal, state and local governments own approximately 92 percent of the nation’s transportation infrastructure.

Also, federal, state and local governments invest public dollars to finance more than 90 percent of the annual cost of designing, building, managing and maintaining the transportation infrastructure. Private dollars finance the remaining 10 percent, largely for the construction and maintenance of commercial railroads, driveways, private parking facilities, and streets for new housing and commercial buildings. Federal investment is very important to the transportation construction market, accounting for nearly half of capital outlays in highway and bridge construction alone.

Investments in transportation infrastructure create long-lived, tangible capital assets. That’s one of their most attractive benefits. In addition to creating jobs and generating tax revenues throughout the economy during the construction cycle, these investments provide infrastructure improvements that foster and facilitate continuing economic growth over many years beyond the initial investment.

Transportation infrastructure also makes all kinds of other economic activity possible. Tourism, manufacturing, transportation and warehousing, agriculture, forestry, general construction, mining, retailing and wholesaling are all wholly dependent on the work done by the U.S. transportation construction industry. These “transportation dependent industries” employ nearly 80 million Americans, who collectively earn more than $2.8 trillion each year and pay more than $233 billion in state and federal payroll taxes.

THE ROAD AHEAD
Enormous challenges face the U.S. transportation infrastructure network. These will have a direct impact on U.S. productivity and economic competitiveness in years to come.

From 1980 to 2006, the vehicle miles traveled (VMT) in the United States by automobiles increased 97 percent. During the same period, VMT by trucks increased 106 percent. Traffic congestion is now costing the nation’s economy more than $87 billion annually, according to the Texas Transportation Institute. Meanwhile, road capacity, as measured by the number of highway lane miles added to the system, grew just 4.4 percent.

Without changes to current policy, the revenues raised by all levels of government for capital investment will only be about one-third ($66.6 billion) of the $200 billion that the U.S. Department of Transportation believes necessary to maintain and improve the nation’s highways and transit systems. The estimated cumulative gap between federal revenues for transportation and investment needs of the system are $400 billion from 2010 to 2015. The federal gas tax, which finances highway and transit capital investments (and is not adjusted annually for inflation), has lost 33 percent of its purchasing power since last raised in 1993.

More than half of the miles on the federal-aid highway system are in less than good condition and nearly 17 percent need major reconstruction, repair or rehabilitation. Nearly 25 percent of the nation’s bridges are structurally deficient or functionally obsolete.

CALL FOR ACTION
The passage of a robust multi-year federal surface transportation bill is absolutely crucial to the future of the transportation construction industry and the millions of American jobs directly and indirectly supported by this economic activity.

Not only is this investment important for transportation construction, but also the ripple effect of that activity can be felt throughout the U.S. economy and all business sectors. If the immediate economic impact is not enough, consider the long-term benefits: When people and goods are able to move more efficiently across the country, more economic activity is generated. In turn, this stimulates new growth and improves our quality of life for the next generation.

Alison Black is an ARTBA senior economist and vice president of policy. The ARTBA report, which also contains fact sheets for all 50 states, can be found in the “economics and research” section of www.artba.org. Black can be reached at ablack@artba.org.

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