Dec. 17, 2014
IHS: Infrastructure Spending Spurs Entire Economy
Infrastructure investment is the most effective and stimulative use of tax dollars, economists agree. Beneficiaries of such spending are not just the suppliers of steel and concrete and the laborers working on the highway projects. Indeed, about two-thirds of the economic benefits and job creation through federal highway and transit investment occurs outside the construction sector, reports a new study from global analysis firm IHS Inc.
The report, Transportation Infrastructure Investment: Macroeconomic and Industry Contribution of Federal Highway and Mass Transit Program, reveals that 70 percent of the economic benefits of federal Highway Trust Fund investments in transportation improvements occur in non-construction sectors of the economy, such as business, education, health, and leisure and hospitality. Sixty-two percent of the jobs created from federal highway and mass transit investments are outside the construction industry. Additionally, every dollar invested through the Highway Trust Fund in state highway, bridge and public transit infrastructure programs returns 74 cents in tax revenue.
“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,” says Karen Campbell, a senior consultant at IHS, who produced the report with Bob Brodesky, a transportation expert and senior manager in the IHS Industry Consulting Group.
Current federal highway and public transit investment, which is about $50 billion annually, generates an average $31 billion in personal income tax receipts and $6 billion in federal corporate tax receipts each year due to increased economic activity, according to the analysis.
IHS notes that current levels of federal investment on highway and public transit spending contribute nearly 1 percent to the U.S GDP. For every $1 spent on federal highway and mass transit projects, GDP increases between $1.80 and $2.00. Current federal transportation spending contributes, on average, $410 to real income per household annually.
According to the study, a 5 percent annual increase in federal highway and transit spending from 2014-19 would result in: the creation of at least 78,000 new jobs; an annual increase of $40 in real household income; an additional $9.6 billion in real GDP; and an additional $4.9 billion in public revenues.
“This report echoes what civil engineers have been warning for years—if we fail to make the investment in our aging transportation infrastructure, our economy will suffer,” says Robert Stevens, president of the American Society of Civil Engineers. “Our transportation system is the backbone of the economy, and it drives growth in sectors beyond construction. This report should serve as further incentive for our congressional leaders to fix the trust fund.”