All Infrastructure Spending Is Not Created Equally

Randomly pouring billions of dollars into roads won't fix nation's gridlocked transportation system

The economy is officially a year into a recession, marking one of the longest periods of economic stagnation since World War II, and bolstering calls for yet another, even bigger federal stimulus package. On Tuesday, the nation’s governors met with President-elect Barack Obama and funding for infrastructure projects topped their wish-list.

“There is not a governor in this country that would turn down money for roads and bridges and infrastructure projects,” Gov. Michael F. Easley of North Carolina declared.

"Infrastructure investment is not only necessary for long-term economic growth and global competitiveness - but it will also create jobs when Americans, and Californians, need them the most," said California Gov. Arnold Schwarzenegger. "With an immediate commitment to national infrastructure investment, it's possible to put shovels in the dirt and start immediately on projects across the nation."

But, this begs an important question: Would all transportation infrastructure spending have an equal impact?

No.

Federal policymakers need to consider much more than dumping money into the transportation sector if they want to have a meaningful, positive impact on the economy. It takes more than digging ditches and laying asphalt to ensure that investments create improvements in mobility that spur job creation and increase productivity. To maximize the impact of any infrastructure spending, the transportation investments must be the right kind, in the right place, and at the right time. Those are no small obstacles.

On the surface, transportation seems like a “no brainer” if there is going to be a massive federal stimulus package. Our bridges, roads, and transit systems are crumbling. Depending on which interest group is compiling the numbers, the nation is under investing in transportation infrastructure by $70 to $100 billion per year.

According to Reason Foundation’s Annual Highway Report, 50.7 percent of America’s urban interstate highways were congested in 2006. And of the nearly 600,000 highway bridges in the country, 24.1 percent were deficient or functionally obsolete.

The National Governors Association suggests $57 billion in infrastructure projects could be started within 120 days of being funded. The American Association of State Highway and Transportation Officials claims that 3,109 transit and highway projects, accounting for $18 billion in new spending, are “ready to go” once state and local transportation agencies get a funding green light from the federal government. This spending would create 630,000 jobs according to their studies.

But not all of those projects will offer a return on taxpayers’ investment. A bridge to nowhere or a lightly-traveled light rail route that will long require heavy annul subsidies isn’t a good use of money just because it is infrastructure.

This isn’t the 1950s. It’s not just a matter of building the obvious routes needed for an Interstate highway system that will connect major metropolitan areas and create freight corridors. The country has reaped the economic rewards of the Interstate system. But, our rate of return has been falling on these investments since the 1970s. Now it is time to rethink transportation investments in the context of the modern economy.

The highway and road system must meet the needs of a globally competitive, dynamic, services-based economy. Today approximately 80 percent of all goods, by value, are shipped by truck in this country. Only 15 percent of travel on our nation’s roads is traditional commuting, and 97 percent of our total travel is by automobile. Americans don’t just get up and go to work. We combine and “chain” our trips to include errands, non-office business, personal appointments, and to meet friends for coffee or happy hour. Our demand for flexible and adaptable modes of transportation, primarily the car, has skyrocketed, placing unprecedented demands on the transportation system. At the same time our investment in the network has languished. Travel demand on our roads has outstripped additions to capacity by 3-to-1 over the last three decades.

The 21st century economy needs a transportation network that is fast, efficient, and flexible. Achieving this will require directing transportation investments to meet the following fundamental concepts:

  1. Think 3-D. We can eliminate chronic traffic congestion and increase travel speeds by adopting cutting edge engineering solutions and embracing innovative road design to provide multi-layered access to key destinations through tunnels, flyovers, queue jumpers (or duckers), and elevated expressways.
  2. Recognize the hidden costs of congestion. Congestion is a job killer because it limits our access to our most valuable resource: people. For the most part, people will live within a 30 minute commute of their workplace. Congestion shrinks this “opportunity circle” for workers and employers alike, preventing businesses from tapping into the most talented and productive workers available. Transportation projects should place a premium on reducing congestion.
  3. Adopt a “mobility first” transportation strategy. Transportation networks in a services-based economy need to emphasize connectivity with shorter travel times, lower overall travel costs for individuals and businesses, and expeditiously connecting people and businesses within metropolitan areas.
  4. Embrace market forces and the private sector. There’s a reason almost one-third of our new road infrastructure has been built as toll roads. Modern tolling marries the powerful economic force of “willingness to pay” with new public and private capital capable of delivering the infrastructure users want. In short, toll roads put the right roads in the right place at the right time.
  5. Embrace innovative highway design and materials. The private sector has repeatedly shown its ability to provide new designs, using new materials, to speed up the delivery of transportation infrastructure when they’ve been allowed. It’s time to give state and local governments more freedom to test the waters with private capital and incentivize innovations that meet real needs identified on the local and regional levels.

These concepts will be central to achieving a policy goal of improving the long-term viability and efficiency of our transportation network. And before the federal government gives governors billions for new infrastructure spending, someone should talk to Secretary of Transportation Mary Peters, who has said there is over $400 billion in private capital ready to be spent on infrastructure projects.

Public-private partnerships, like those Peters proposes, offer the best hope of prioritizing the long wish-lists of infrastructure projects. The private sector will gravitate to projects that offer steady revenue streams and the best chance for profit: new toll roads that relieve congestion in urban areas or highly traveled bridges in need of repair, for example. On the other hand, projects centered around pretty ribbon-cutting ceremonies or meant to deliver pork to congressional districts will be found wanting by investors.

Increasing private sector involvement can close the funding gap, reduce the ‘need’ for stimulus spending and make certain the most-needed transportation projects – the ones that will deliver the most bang for our bucks - rise to the top.

The way we fund our roads is failing and out of date. Simply pouring billions more into building roads the old fashioned way won’t fix it. A modern transportation network designed to meet today’s diverse travel needs would help the economy grow. Unfortunately for taxpayers simply handing a big stimulus check to governors won’t deliver that network.

Samuel Staley is Research Fellow

Adrian Moore is Vice President, Policy






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