Industry Market Trends

Transportation Infrastructure May Be Hurting the U.S. Economy

Nov 04, 2010

The deteriorating quality of the U.S. transportation system may be hurting business activity and having a broader negative impact on the country's overall economy, highlighting the need to revitalize national infrastructure, according to new research.

America's transportation infrastructure has experienced a significant five-year decline and has been unable to keep pace with the demands of domestic commerce, international trade and the overall economy, according to the U.S. Chamber of Commerce's recent Transportation Performance Index (TPI) report.

Unless there is a renewed focus on maintaining and improving transportation systems, the deterioration is likely to worsen and become a costlier burden on business activity.

The TPI — which combines indicators of supply, service quality and utilization across the transportation sector — stood at 51.24 in 2008 (the latest year for which nationwide data is available), up from 50.74 in 2007. However, the latest findings show a longer-term decline from 2003, when the reading stood at 52.99. The five-year moving average, which smoothes annual variations, fell from 51.94 in 2003 to 50.94 in 2008.

The report's national results indicate that between 1990 and 2008, the TPI increased by about 6 percent, while the U.S. population grew by 22 percent, passenger travel rose 39 percent and freight traffic increased 27 percent. This disparity shows that the national transportation infrastructure is not keeping pace with the demands being made on it.

"Given these facts, it is a testimony to business ingenuity that the national results are not worse. Businesses work around transportation challenges by scheduling deliveries in off-peak hours, implementing flexible employee work policies, and substituting information technology for transportation services," the report explains. "There are also countless stories of transportation infrastructure owners using the engineering equivalent of duct tape to hold infrastructure together and crafting creative operational strategies to enhance throughput."

According to state-by-state results, North Dakota had the highest index rank of 85.12 in 2007 (the latest year for which state results were calculated), while the District of Columbia came in lowest with 35.08. The average state result in 2007 was 59.98, higher than the national result, which is based on a sample of the U.S. rather than the sum of state levels. However, "[i]f the United States was a state, it would rank near the bottom."

"The bottom line is this: our nation's deteriorating infrastructure is placing a major drag on our economic growth," Thomas J. Donohue, the president and CEO of the U.S. Chamber of Commerce, said in an announcement of the findings. "We must focus on improving the way transportation delivers for business, removing barriers to maintaining, modernizing and expanding our nation's transportation infrastructure, and driving increased public and private investment."

The transportation infrastructure's inadequacy for meeting the needs of commerce is having a major impact on the U.S. economy. The Chamber of Commerce estimates that every single point of improvement in the transportation index would translate into 0.3 percent growth in the U.S. gross domestic product (GDP). The gap between the average infrastructure ranking for the top five states (73.95) and the overall U.S. average (50.74) in 2007 constituted a GDP loss of $979 billion.

"The gap between the national index and the best-performing states is twenty points wide," Donohue added. "We're leaving $1 trillion on the table in GDP by not getting the most bang for the buck out of our transportation system. If we don't head off that decline, we're taking money out of every American's pocket."

In a call to action, the Chamber of Commerce recommends that the federal government take a stronger role in supporting investments in the national transportation infrastructure. This includes policy measures such as reauthorizing the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU), and supporting the Water Resources Development Act and the Freight Rail Infrastructure Capacity Expansion Act.

"There must be a framework for state and local government and private sector decision making that supports economic growth through better system performance. And there has to be enough funding and financing to get the job done; this, of course, means taking on the difficult task of finding revenue, even in tough times, and finding new ways to encourage private investment," the Chamber of Commerce explains. "The benefits are clear: Investment not only supports jobs in the near term, but improved transportation performance boosts economic growth and U.S. competitiveness over the long term."


Rethinking Our Approach to Infrastructure

Proposed Solutions to Improving Infrastructure


Transportation Performance Index: Key Findings

The U.S. Chamber of Commerce, Sept. 23, 2010

Transportation Performance Index: National Results

The U.S. Chamber of Commerce, Sept. 23, 2010

Transportation Performance Index: State-by-State Results

The U.S. Chamber of Commerce, Sept. 23, 2010

...Indexes Showing How Health of Nation's Transportation Infrastructure Impacts Economic Growth

The U.S. Chamber of Commerce, Sept. 23, 2010

Transportation Performance and the U.S. Economy

The U.S. Chamber of Commerce, Sept. 23, 2010

Call to Action

The U.S. Chamber of Commerce, Sept. 23, 2010