By Steve Landau, EDR Group for American Society of Civil Engineers

The nation’s surface transportation infrastructure includes the critical highways, bridges, railroads, and transit systems that enable people and goods to access the markets, services, and inputs of production essential to America’s economic vitality. For many years, the nation’s surface transportation infrastructure has been deteriorating. Yet because this deterioration has been diffused throughout the nation, and has occurred gradually over time, its true costs and economic impacts are not always immediately apparent. In practice, the transportation funding at the federal, state and local level that is appropriated is spent on a mixture of system expansion and preservation projects. Although these allocations have often been sufficient to avoid the imminent failure of key facilities, the continued deterioration leaves a significant and mounting burden on the U.S. economy.

Deteriorating conditions and performance impose costs on American households and businesses in a number of ways. Facilities in poor condition lead to increases in operating costs for trucks, cars, and rail vehicles. Additional costs include damage to vehicles from deteriorated roadway surfaces, imposition of both additional miles traveled, time expended to avoid unusable or heavily congested roadways or due to the breakdown of transit vehicles, and the added cost of repairing facilities after they have deteriorated as opposed to preserving them in good condition.

In addition, increased congestion decreases the reliability of transportation facilities, meaning that travelers are forced to allot more time for trips to assure on-time arrivals (and for freight vehicles, on-time delivery). Moreover, it increases environmental and safety costs by exposing more travelers to substandard travel conditions and requiring vehicles to operate at less efficient levels. As conditions continue to deteriorate over time, they will increasingly detract from the ability of American households and businesses to be productive and prosperous at work and at home.
For the purpose of this article, the term “deficiency” is defined as the extent to which roads, bridges, and transit services fall below standards defined by the U.S. Department of Transportation as “minimum tolerable conditions” (for roads and bridges) and “state of good repair” for transit.1 These standards are substantially lower than ideal conditions, such as “free-flow2” that are used by some researchers as the basis for highway analysis.

Infrastructure Deficiencies
In 2010, it was estimated that deficiencies in America’s surface transportation systems cost households and businesses nearly $130 billion. This included approximately $97 billion in vehicle operating costs, $32 billion in travel time delays, $1.2 billion in safety costs and $590 million in environmental costs.

If present trends continue, by 2020 the annual costs imposed on the U.S. economy by deteriorating infrastructure will increase by 82% to $210 billion, and by 2040 the costs will have increased by 351% to $520 billion (with cumulative costs mounting to $912 billion and $2.9 trillion by 2020 and 2040, respectively).

Across the U.S., regions are affected differently by deficient and deteriorating infrastructure. The most affected regions are those with the largest concentrations of urban areas, because urban highways, bridges and transit systems are in worse condition today than rural facilities. Peak commuting patterns also place larger burdens on urban capacities. However, because the nation is so dependent on the Interstate Highway System, impacts on interstate performance in some regions or area types are felt throughout the nation. Nationally, for highways and transit, 630 million vehicle hours traveled were lost due to congestion in 2010. This total is expected to triple to 1.8 billion hours by 2020 and further increase to 6.2 billion hours in 2040.3 These vehicle hours understate person hours and underscore the severity of the loss in productivity.

Jobs and GDP
By 2040, America’s projected infrastructure deficiencies in a trends extended scenario are expected to cost the national economy more than 400,000 jobs. Approximately 1.3 million more jobs could exist in key knowledge-based and technology-related economic sectors if sufficient transportation infrastructure were maintained. These losses are balanced against almost 900,000 additional jobs projected in traditionally lower-paying service sectors of the economy that would benefit by deficient transportation (such as auto repair services) or by declining productivity in domestic service related sectors (such as truck driving and retail trade).

The avoidable transportation costs that hinder the nation’s economy are imposed primarily by pavement and bridge conditions, highway congestion, and transit and train vehicle conditions that are operating well below minimum tolerable levels for the level of traffic they carry. If the nation’s infrastructure were free of deficient conditions in pavement, bridges, transit vehicles, and track and transit facilities, Americans would earn more personal income and industry would be more productive, as demonstrated by the gross domestic product (value added) that will be lost if surface transportation infrastructure is not brought up to a standard of “minimum tolerable conditions.” As of 2010, the loss of GDP approached $125 billion due to deficient surface transportation infrastructure.

Overall Economic Impact
The specific economic implications of the further deterioration of the U.S. national surface transportation system are as follows:

• Deficient surface transportation infrastructure will cost Americans nearly $3 trillion by 2040,  which represents more than $1.1 trillion in added business expenses and nearly $1.9 trillion from household budgets.
• This cost to business could reduce the productivity and competitiveness of American firms relative to global competitors. Increased cumulative cost to businesses will reach $430 billion by 2020. Businesses may 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.
• Households could be forced to forgo discretionary purchases such as vacations, cultural events, educational opportunities, and restaurant meals, reduce health related purchases along with other expenditures that affect quality of life, in order to pay transportation costs that could be avoided if infrastructure were built to sufficient levels. Increased cumulative costs to households will be $482 billion in 2020.
• The U.S. could lose jobs in high value, high-paying services and manufacturing industries. Overall, the result may be a loss in employee income in 2040 that is $252 billion less than would be the case in a transportation-sufficient economy.

In general three distinct forces are projected to affect employment:

1. First, a negative impact is possible due to higher costs of transportation services in terms of time expended and vehicle costs. These costs absorb money from businesses and households that would otherwise be directed to investment, innovation and “quality of life purchases.” Thus, not only might business and personal income be lower, but more of that income will need to be diverted to transportation related costs. This dynamic could create lower demand in key economic sectors associated with business investments for expansion and research and development, and in consumer sectors.
2. Second, the impact of declining business productivity, due to inefficient surface transportation, tends to push up employment, even if income is declining. Productivity deteriorates with infrastructure degradation, so more resources are wasted in each sector. In other words, it may take two jobs to complete the tasks that one job could handle without delays due to worsening surface transportation infrastructure.
3. Third, related to productivity effects, degrading surface transportation conditions might generate jobs to address problems created by worsening conditions in sectors such as transportation services and automobile repair services.

Overall job losses are mitigated by more people working for less money and less productively due to the diminished effectiveness of the U.S. surface transportation system.  §

Citations
1 State of Good Repair for Transit is defined by the Federal Transit Administration as “Asset meets certain performance levels at a certain percentage of time (e.g., safety incidents, service reliability, and current industry standards).”

2 Free Flow Conditions are related to highway conditions, and is defined as: “Traffic flows at or above the posted speed limit and all motorists have complete mobility between lanes. The average spacing between vehicles is about 550 feet (167m) or 27 car lengths. Motorists have a high level of physical and psychological comfort. The effects of incidents or point breakdowns are easily absorbed.” —American Association of State of Highway Transportation Officials Green Book      

3 Analysis by EDR Group using TREDIS (Transportation Economic Development Impact System), and includes both on-the-job travel and personal travel.