Racing Ahead or Falling Behind? Six Economic Facts About Transportation Infrastructure in the United States

Source: Melissa S. Kearney, Brad Hershbein, & Greg Nantz, Brookings Institution, Hamilton Project, Policy Memo, May 2015

From the blog:
…The economy of the United States depends on our nation’s transportation infrastructure. Every day, tens of millions of people commute to work in the United States using public roads and transportation systems. Billions of dollars’ worth of freight is transported using the nation’s highways, railroads, ports, and inland waterways (Fact 3). Significant public investment—at all levels of government—is required to maintain this system, conduct periodic repairs, and expand our nation’s transportation systems to safely handle movement of greater numbers of goods and people. A well-functioning system of mass transportation is both a substitute for and a complement to our nation’s highway system (Fact 4), but funding for these systems is also stretched thin.

The facts make it clear that the state of public financing for transportation infrastructure warrants serious attention. Federal spending as a share of GDP has fallen (Fact 1) and the federal Highway Trust Fund (HTF)—the designated source of revenue for spending on our nation’s highways—is about to run out of money (Fact 2). The primary source of funding for the HTF is the federal gas tax, but that tax has not been raised since 1993. Of course, state and local governments also play an active role in both the funding and building of infrastructure projects. Interestingly, there is large variation across states in both their reliance on state-level gas taxes (Fact 5) and the amount of federal funding states receive for the construction and maintenance of roads (Fact 6).

An efficient and reliable transportation infrastructure facilitates the transactions that enable the economy to grow and to create private sector jobs. Many observers agree on the need for increased investment in America’s aging infrastructure, including roads, bridges, and airports. However, determining how to fund and finance infrastructure investment presents important policy and political challenges. The purpose of this document is to provide objective background facts to help guide those necessary policy and political discussions.

Fact 1. As a share of GDP, public infrastructure spending has been stagnant between 1979 and 2014.
Fact 2. The Highway Trust Fund is at its lowest balance since 1969, and is set to run out of money by summer of 2015.
Fact 3. Truck and rail together accounted for 90 percent of the total freight moved in 2011, up from 70 percent in 1980.
Fact 4. In every metro rail system, passenger fares do not cover operating costs.
Fact 5. Taxes and fees levied on gasoline vary widely across states, ranging from 11.3 cents to 50.5 cents per gallon.
Fact 6. Controlling for miles driven, total spending on highways in some states is three times as much as in others.
How Much Money U.S. Transit Systems Lose Per Trip, in 1 Chart
Shocker: dense, compact cities tend to do better than others.
Source: Eric Jaffe, The Atlantic, Citylab, June 8, 2015

….Transit subsidies spark endless debate in cities, with locals often opposed to the idea of spending a great deal of public money to benefit a relatively small share of travelers. That’s a very narrow view of transit’s benefits. On a macro scale, agglomeration—or the ability to pack lots of people into a small place—can be worth billions of dollars in economic growth. At a micro level, even in small urban areas, good transit helps companies attract a strong employee pool.

Beyond those benefits, it’s important to keep in mind that all transportation modes earn a subsidy to some degree. Drivers don’t pay enough in gas taxes to cover the cost of road maintenance and expansion, nor do they pay any fees at all for the massive annual social costs they impose through congestion, pollution, and safety. Squabbling over which mode gets more taxpayer money misses the larger point: both are essential for a high-functioning metro area, and both need help.

It’s also critical to keep in mind that cities fully expect to lose money on public transportation. Every agency faces a trade-off: either cover a wide service area, which often means sending empty buses into remote areas, or focus on ridership and revenue, which means restricting service to high-density corridors near the city center. The subsidy backlash often arises with the flawed belief that you can have things both ways…..