Why the U.S. can’t invest more in transportation infrastructure

By Chrissy Mancini Nichols

Jul 29, 2015

This post first appeared at metroplanning.org

Did you know: It's been six years since the Illinois General Assembly passed a capital infrastructure program. The last one, 2009's Illinois Jobs Now, expired in 2014.

This week the U.S. Senate used its credit card to pass and pay for a six-year transportation bill with only three years of funding. Though the bill runs through 2018, it relies on revenues generated through 2025 as payment, including selling off oil from the nation’s strategic reserves, lowering interest paid to banks to join the Federal Reserve and recouping TSA fees. The House won’t take up the bill (one reason given is because of the shaky funding) and instead will vote on a three-month extension of the current authorization, which the Senate is expected to approve.

Why can’t Congress pass a long-term federal transportation bill? Money—there is none.

Why pay attention to a figure as mind-numbingly abstract as gross domestic product? Because it’s one reason we don’t have money to fund the transportation projects everyone wants.

Gross domestic product (GDP) is the best indicator for economic growth, a trend that is important to follow because a growing economy produces more tax revenues without raising taxes, to help countries service debts and pay for and maintain infrastructure that in turn fuel the economy. While growth in U.S. GDP has been volatile over the past seven decades, overall it is trending down. Driven by robust industry and manufacturing, from the 1950s through the early ‘80s GDP regularly grew by 5 percent and more annually. The 1990s internet boom again bolstered the economy, though not as much as in previous decades. There were recessions in between—for example the 1973-1974 oil crisis and stock market crash—but generally the economy bounced back relatively well from those downturns.

Over the last 15 years, however, the U.S. economy has stalled. Gone are the days of 7 percent growth. Since 2000, GDP growth has barely reached above 3 percent. In fact, it topped 3 percent only three times in the past 15 years—the last time in 2005, (3.3 percent growth) a decade ago.

Why gross domestic product growth is on the decline

As a country ages and its economy changes over time, it’s normal to see a decline in its economic growth. For example, older European economies now grow at less than 2 percentannually (some even experiencing negative growth) while some Asian markets, filled with younger workers and a large manufacturing base, have grown at 10 percent a year, though those markets are slowing as well. For example, China experienced 10 percent growth over the past three decades but its economy is slowing, mostly attributed to an aging workforce and high debt levels.

Similarly, one reason for the decline in the U.S. economy is our aging population. Fifteen percent of Americans are 65 and older and as the Baby Boomers age and retire, that number is growing. The result: fewer people in the workforce, less revenue from income taxes and more people receiving costly government benefits like Social Security and Medicare.

What does GDP growth (or lack thereof) have to do with infrastructure investment?

The U.S. is faced with a situation where the population is aging, manufacturing has slowed and as a result the economy is stalled. The consequences are that as a nation we’re spending less and less on programs like roads, bridges and transit and more on Social Security and Medicare that won’t produce the economic returns manufacturing or infrastructure investments did in decades past.

Spending on infrastructure, for example, produces up to a four-to-one return on investment and 42,000 jobs for every $1 billion spent.

The chart below shows transportation investments as a percent of GDP, a trend line that directly correlates to the decline in overall GDP growth.

And looking at real dollars, this chart explains why we have potholes, congestion, transit slow zones—the list goes on—the resources are gone.

According to the Congressional Budget Office, over the next decade, spending on Social Security and Medicare alone will grow by 60 percent, while spending on programs like transportation, education and the environment—spending that fuels the economy—will only grow by 16 percent. In the 1950s and ‘60s the U.S. faced little competition from Asian markets. Essentially, the U.S. was the only economic game in town. That’s not the case anymore. The World Bank predicts that the U.S. dollar will lose its global dominance by 2025 due to competition from China. And though their GDP has slowed down in the past few years, it’s still growing faster than the U.S. Economists point out that as a result their economy will be double that of the U.S. by 2050.

It’s clear that these pressures on the U.S. economy will have ripple effects for decades. In Illinois, added pension pressures only make it worse. Consider that state and local leaders are faced with raising taxes to pay off years of pension disinvestment instead of investing in capital programs to build roads, schools and water systems that directly benefit residents and workers and produce economic gains.

Strategy for investment

How, then, do we begin making the infrastructure investments sorely needed? Well, the average person in Illinois only pays $8.25 a month in state gas taxes for the upkeep of our transportation network. Just this year, eight states raised their motor fuel tax. Legislators in those states voted to raise the gas tax because they know paying a little extra at the pump will make their constituents’ lives easier—with better roads that will improve traffic congestion, safer bridges and more reliable transit—and make their states more attractive to business.

Illinois’ motor fuel tax, which is a major source of our state's road and transit construction funding, has remained at 19 cents per gallon since 1991. Because it hasn't changed to keep up with inflation, the revenues from this tax are now worth about half what they once were. Even when taking into account other sources of transportation funding, such as highway tolls and transit fares, the share of our state budget that we've invested in transportation has fallen by 40 percent over the past 20 years.

Other states are leaving Illinois in the dust by investing in transportation improvements to be more attractive to businesses, improve their residents’ everyday lives and grow their economies. We know we can't rely on the feds and we know what to fix—we just need to do it.

Accelerate Illinois, led by the Metropolitan Planning Council with support from business and other stakeholders including PNC Bank, ComEd, AARP, Active Transportation Alliance, Transportation for Illinois Coalition and many others, is designed to address these issues that keep us from getting where we want to go by identifying new state funding for transportation. Add your name to the growing list of Illinois residents letting our leaders in Springfield know that we are committed to improving our transportation system to growth the economy. Join the Accelerate Illinois campaign today!