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08/15/2011

Crumbling transportation infrastructure will exact huge economic costs, report warns

The nation’s deteriorating surface transportation infrastructure will cost the American economy more than 870,000 jobs, and suppress the growth of the country’s Gross Domestic Product by $3.1 trillion by 2020, according to a new report commissioned by the American Society of Civil Engineers.

The report, conducted by the Economic Development Research Group of Boston, showed that in 2010, deficiencies in America’s roads, bridges, and transit systems cost American households and businesses more than $129 billion, including approximately $97 billion in vehicle operating costs, $32 billion in delays in travel time, $1.2 billion in safety costs, and $590 million in environmental costs.
 
If investments in surface transportation infrastructure are not made soon, those costs are expected to grow exponentially. Within 10 years, U.S. businesses would pay an added $430 billion in transportation costs, household incomes would fall by more than $7,000, and U.S. exports will fall by $28 billion.

"Clearly, failing to invest in our roads, bridges and transit systems has a dramatic negative impact on America’s economy," said Kathy J. Caldwell, P.E., president of ASCE.

"The link between a nation’s infrastructure and its economic competitiveness has always been understood.  But today, for the first time, we have data showing how much failing to invest in our surface transportation system can negatively impact job growth and family budgets.

"This report is a wake-up call for policymakers because it shows that investing in infrastructure contributes to creating jobs, while failing to do so hurts main street America."

The report shows that failing infrastructure will drive the cost of doing business up by adding $430 billion to transportation costs in the next decade. It will cost firms more to ship goods, and the raw materials they buy will cost more due to increased transportation costs.

Productivity across the business sector will also tumble.  Those increased costs will cause businesses to underperform by $240 billion over the next decade, which will drive the prices of goods up.  As a result, U.S. exports will fall by $28 billion, including 79 of 93 tradable commodities. 

Ten sectors of the U.S. economy account for more than half of this unprecedented loss in export value – among them key technology sectors like machinery, medical devices, communications equipment, which produces much of this country’s innovations.

America would also lose jobs in high-value sectors as business income goes down.  Almost 877,000 jobs would be lost by 2020, primarily in the high-value, professional, business and medical sectors which are vital to America’s knowledge-based service economy.

Tom Donohue, president and CEO of the U.S. Chamber of Commerce, said the report "further reinforces that the U.S. is missing a huge opportunity to ignite economic growth, improve our global competitiveness, and create jobs.

"This is not just transportation for transportation’s sake. Without more robust economic growth, the U.S. will not create the 20 million jobs needed in the next decade to replace those lost during the recession and to keep up with a growing workforce, will not have the revenue to get the deficit under control, will not have the ability to keep pace with global competitors, and will not be able to provide our children and grandchildren with a better future," he said.

Ultimately, Americans will get paid less.  While the economy would lose jobs, those who are able to find work will find their paychecks cut by nearly 30 percent.

"The cost to businesses will reduce the productivity and competitiveness of American firms relative to global competitors significantly. By 2020, American families will take a pay cut of more than $7,000 because of the ripple effects that will occur throughout the economy," said Steve Landau of the EDR Group.

"Business will have to divert increasing portions of earned income to pay for transportation delays and vehicle repairs, draining money that would otherwise be invested in innovation and expansion."

A lack of investment in transportation infrastructure would inflict a double whammy on American families who would see their household incomes fall by $60 a month by 2020, while having to spend $30 per month more for goods. The total cost to families would exact about $10,600 per family between now and 2020, equal to $1,060 per year on household budgets.

The report estimates that in order to bring the nation’s surface transportation infrastructure up to tolerable levels, policymakers would need to invest approximately $1.7 trillion between now and 2020 in the nation’s highways and transit systems.  The U.S. is currently on track to spend a portion of that – $877 billion – during the same timeframe. The infrastructure funding gap equals $846 billion over 9 years or $94 billion per year.

This report is the first of four planned by ASCE.  Future reports will examine the state of the nation’s water and wastewater infrastructure, energy transmission, and airports and marine ports.

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