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Revealing Study Details Downstream Economic Benefit of Transportation Funding

A first-of-its-kind study conducted by forecasting company IHS Inc. outlines the economic benefits of federal highway and transit investment programs on every sector of the U.S. economy. The report was released during a transportation-media conference call on Dec. 10.

The IHS report, which was commissioned by the Transportation Construction Coalition (TCC), focuses exclusively on federal investment and examines outcomes on non-construction jobs, household incomes and state and local tax revenues.

Federal transportation spending expands the capital stock of the U.S. economy, drives the production and delivery of goods and services and positively affects business and household incomes.

It also enhances the transportation system’s operational capacity by reducing travel times and costs. This results in greater accessibility for individuals, households and businesses, more efficient delivery of goods and services, improved life styles and standards of living, and safer roadways, according to the study.

Representatives from manufacturing and travel organizations participated in the conference call, including Karen Campbell, senior consultant, IHS; Chad Moutray, chief economist, National Association of Manufacturers; Roger Dow, president and CEO, U.S. Travel Association; Pete Ruane, president and CEO, American Road & Transportation Builders Association and Steve Sandherr, chief executive officer, Associated General Contractors of America.

"The study shows that investment in transportation infrastructure has a positive impact on every major sector of the U.S. economy. These far reaching economic benefits contribute to economic growth by improving the nation’s capital stock, which enables increased economic activity,” said  Campbell, who produced the report with Bob Brodesky, a transportation expert and senior manager in the IHS Industry Consulting Group.

IHS used two models to evaluate the macro and micro economic effects of Highway Trust Fund spending. Both showed the availability of funds delivered to state and local governments have far-reaching indirect effects – for every $1 of federal transportation investment returns between $1.80 - $2.00 of additional real goods and services produced in the economy.

Macroeconomic results revealed that current levels of federal spending on highway and mass transit contributes nearly 1 percent to the U.S. production of goods and services. The current level of funding contributes on average 614,000 jobs per year over the 2014-2019 time period and adds an average of $410 to each US household’s real income each year.

In summary, over the 2014 to 2019 time frame:

  • Infrastructure spending has an amplified impact on the economy. It leads to overall productivity enhancements and creates jobs.
  • Every $1 in federal highway and mass transit investment returns between $1.80 – $2.00 in goods and services produced.
  • Current federal transportation spending contributes on average $410 to real income per households each year (which is comparable to a month’s worth of groceries).
  • Current federal transportation spending supports an average of 614,000 employees each year in all sectors of the economy. It catalyzes dynamic effects of greater productivity, more efficient delivery of goods and services, and higher wages and salaries.
  • For every 3 construction job created, 5 jobs are created in other sectors of the economy.
  • Current federal transportation spending generates $31 billion in federal personal tax receipts per year and $6 billion in federal corporate tax receipts per year on average. Current federal spending also generates higher revenue for state and local budgets, which are, on average, $21.7 billion higher each year than they would be without the Federal Highway Program.
  • Five percent annual increases in federal spending would create between 78,000 and 122,000 new jobs by 2019.