Economists quantify federal transportation dollars’ downstream multiplier effect

Federal highway and transit investment programs impart economic benefits across the U.S. economy, according to an IHS Inc. study commissioned by the American Road & Transportation Builders– and Associated General Contractors-led Transportation Construction Coalition.

Federal transportation spending drives production and delivery of goods and services and positively affects business and household incomes, IHS contends. It also enhances the transportation system’s operational capacity by reducing travel times and costs, resulting in greater accessibility for individuals, households and businesses; more efficient delivery of freight; improved life styles and standards of living; and, safer roadways.

“The study shows that investment in transportation infrastructure has a positive impact on every major sector of the economy. Far-reaching economic benefits contribute to economic growth by improving the nation’s capital stock, which enables increased economic activity,” says IHS Senior Consultant Karen Campbell, who produced the document with Bob Brodesky, IHS Industry Consulting Group transportation expert and senior manager.

IHS used two models to evaluate Highway Trust Funding spending macro and micro economic effects. Both showed funds delivered to state and local governments have extended and very favorable indirect effects: 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 highway and mass transit spending contributes nearly 1 percent to the U.S. production of goods and services. Over the 2014–2019 period, IHS projects:

  • Infrastructure spending will have an amplified impact on the economy, leading to overall productivity enhancements and employment gains; for every three construction jobs created, five jobs are created in other sectors of the economy.
  • Current federal transportation spending will a) contribute on average $410 to real income per households each year, comparable to a month’s worth of groceries; and, b) support an average of 614,000 employees each year in all sectors of the economy. Investment from Washington, D.C., will catalyze dynamic effects of greater productivity, more efficient delivery of goods and services, and higher wages and salaries.
  • Federal transportation and transit investments will generate $31 billion in federal personal tax receipts per year and $6 billion in federal corporate tax receipts per year on average. Current federal spending will also generate 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 could create between 78,000 and 122,000 new jobs by 2019.

The IHS study was announced in December during a conference call hosted by IHS staff; American Road & Transportation Builders Association CEO Pete Ruane; Associated General Contractors of America CEO Steve Sandherr; National Association of Manufacturers Chief Economist Chad Moutray; and, U.S. Travel Association CEO Roger Dow. The study is the latest initiative for the Transportation Construction Coalition, which leads national groups representing construction materials, contractor, engineering and labor interests with key stakes in federal program funding. In addition to ARTBA and AGC, Coalition members include the American Concrete Pipe Association, National Ready Mixed Concrete Association, Portland Cement Association and Precast/Prestressed Concrete Institute.