DALLAS — The benefits of stimulus spending on transportation infrastructure during economic downturns can outweigh the initial cost, the Transportation Research Board said in a
Federal stimulus spending during a recession is effective in the short term, the TRB report said, because it leads to an increase in gross domestic product and employment in the first two years after the spending.
"During recessions that strongly affect the construction industry, stimulus spending on infrastructure may be well-targeted," it said.
The stimulus benefits of infrastructure spending weaken as the economy strengthens and the overall employment picture improves, the report said.
Transportation spending as part of a diversified stimulus package is appropriate especially if the economic downturn is expected to be prolonged, said Therese McGuire, a professor of management and strategy at Northwestern University and chair of the TRB committee that developed the report.
"Improving infrastructure adds to the productive capacity of the economy, which could raise consumers' and investors' expectations for economic growth," McGuire said. "If projects are selected with proper consideration of the value of the transportation services they will provide, the long-term benefits will offset the initial cost."
The American Recovery and Reinvestment Act signed into law Feb. 17, 2009 by President Barack Obama totaled $831 billion in new spending and tax relief, including $48.1 billion earmarked for roads, transit, airports, and passenger rail.
Transportation funding in the ARRA included $27.5 billion for highway infrastructure, $8.4 billion for transit capital assistance, $8 billion for high-speed rail, $1.5 billion for a competitive grant program for surface transportation, and $1.3 billion for Amtrak.
The ARRA also funded other state and local government infrastructure and supported public infrastructure projects through the Build America Bonds subsidy program.
The value of boosting spending on transportation infrastructure during an economy downturn can pay off for decades, the report noted.
"Separately from stimulus effects, infrastructure investment during a recession as during normal times can produce benefits over many years in the form of improved public services and increased productivity," the stimulus report said.
Construction prices are likely to be lower during a recession, the report said, allowing transportation agencies to buy more with the funds available.
The TRB report recommends that states maintain a reservoir of shovel-ready projects with completed designs and environmental reviews so they can take early advantage of lower construction costs whenever the next stimulus program is implemented.
On the federal side, the report said Congress should speed up delivery schedules for federally funded transportation projects and the Department of Transportation must put a process for evaluating infrastructure stimulus projects.
"Most decisions in transportation stimulus programs rely on balancing immediate and long-term benefits provided by the transportation construction," the TRB said.
The stimulus report was sponsored by state transportation departments and conducted by the Transportation Research Board, which is a unit of the National Research Council. The NRC is the principal operating agency of the independent, non-profit National Academy of Sciences and National Academy of Engineering.
In a posting Tuesday on the U.S. DOT's Fast Lane blog, Transportation Secretary Anthony Foxx said all $48 billion of the ARRA stimulus funds had been allocated by the end of fiscal 2010 to more than 14,600 highway, transit, and airport projects.
"We were able to stretch our portion of the Recovery Act funding to include additional projects because earlier projects were bid below previous estimates," Foxx said.
