All Articles Finance Modern Money Investment in transportation infrastructure benefits all, reports IHS

Investment in transportation infrastructure benefits all, reports IHS

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Modern Money

“If we fail to make the investment in our aging transportation infrastructure, our economy will suffer. Our transportation system is the backbone of the economy, and it drives growth in sectors beyond construction.” — Robert Stevens,  president of the American Society of Civil Engineers

The amount of money the federal government currently invests each year in state highway, bridge and public transit infrastructure programs — about $50 billion — contributes to the country’s economy in ways that may not be obvious. Each dollar of federal investment in transportation infrastructure adds between $1.82 and $2.00 to the annual gross domestic product in the U.S., according to a report released by IHS Global  on Wednesday. It also contributes to about 614,000 jobs and increases household income by an average of $410.

The report was commissioned by the Transportation Construction Coalition – a group of 31 national associations and labor unions that is co-chaired by the Associated General Contractors of America and the American Road & Transportation Builders Association. And, the groups hope their members and the public will use highlights from the report to urge Congressional members to act on long-term transportation funding.

Of course, it makes sense that a group with a large stake in infrastructure investment is behind a report that touts the benefits of the government putting its money into the system.  And sure, the building sector is a large beneficiary. But, it’s not just the contractors and engineers. For every two construction jobs created from the investment, three more jobs in other sectors are created, including professional business services, hospitality, travel and leisure and health care, reports IHS.

In addition, each dollar invested from the Highway Trust Fund brings about $0.74 in personal income tax and corporate tax receipts.

This is all well and good, but we can’t leave funding level.  The country “carries a backlog of $3 trillion in unfunded surface transportation needs, including a $2.2 trillion backlog for highways and bridges and $86 billion in unfunded transit capital infrastructure needs,” according to the American Society of Civil Engineers.

So, to play catch-up and eventually, perhaps, even get ahead, we need to spend more.

According to IHS, the contribution to GDP would be increased by 0.1% if the government invested just 5% more per year in infrastructure over the next few years. It would also add about 59,400 more jobs per year; increase the nonfarm productivity index; and add another $4.9 billion to annual state and federal tax receipts.

The additional funding would benefit manufacturers, said Chad Moutray, chief economist with the National Association of Manufacturers, during a conference call. He said that the country’s physical infrastructure is the “sixth most important driver of manufacturing competitiveness.”  Nearly two-thirds of NAM members  said that American infrastructure wasn’t ready to respond to the demands of a growing industry, he added. (If you’re interested in what the number one driver of competitiveness is, here’s the answer, according to NAM President and CEO Jay Timmons: “The regulatory environment is the number one competitive threat for American businesses.”)

It would also aid the travel industry, said  Roger Dow, president & CEO, U.S. Travel Association during the call.  “When our  $2 trillion travel sector isn’t functioning well, it costs us in tax revenue, jobs,” he said.  And when  “the hassle of dealing with the highway system” causes travelers enough angst that they decide against traveling, this affects waiters, hotels and more.  “It’s critical to invest in infrastructure,” Down says. “It isn’t just about roads, it’s about how America does business – and we’re all in this together.”

AGC’s CEO, Stephen Sandherr who also co-chairs the coalition, summed it up: “What this report makes clear is that our entire economy benefits from federal investments in highway and transit projects.”