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Date:  Jan. 14, 2014

 

FOR IMMEDIATE RELEASE

 

New Report Recommends Methods for Investing in Transportation During Economic Downturns

 

WASHINGTON -- A new report from the National Research Council's Transportation Research Board provides guidance for federal and state officials on the best ways to use stimulus funds for transportation in the future and methods for evaluating such investments.  The report examines lessons learned and impacts from the states' management of the transportation component of the American Recovery and Reinvestment Act (ARRA) of 2009, which provided $48.1 billion for U.S. Department of Transportation (USDOT) programs. 

 

Although there is uncertainty regarding the magnitude of stimulus impacts, federal stimulus spending during a recession can be effective in the short term, as it leads to an increase in gross domestic product and employment within one to two years after the spending.  The committee that wrote the report focused on the role and management of transportation spending within a stimulus program, and found it appropriate to include transportation spending as one component of a diversified spending package, especially if the economic downturn is expected to be prolonged.

 

"Improving infrastructure adds to the productive capacity of the economy, which could raise consumers' and investors' expectations for economic growth," said committee chair Therese McGuire, professor of management and strategy at the Kellogg School of Management and director of the Guthrie Center for Real Estate Research and the Real Estate Program at Northwestern University.  "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."

 

In addition, the committee noted, construction prices are likely to be lower during a recession, allowing transportation agencies to buy more with the funds available.  During recessions that strongly affect the construction industry, stimulus spending on infrastructure may be well-targeted.

 

In order to avoid disruption of construction schedules and take advantage of lower costs, Congress and the states should adopt financial and administrative practices that would enable transportation agencies and the construction industry to manage surges in public spending, the report says.  This could be done through several actions, such as implementing reforms to speed project delivery for federally funded transportation programs and maintaining a larger reserve of projects with completed designs and environmental reviews.

 

To understand the effect that ARRA transportation grants had on spending priorities, USDOT should conduct research on how changes in program rules and in the level of federal aid affect the spending decisions of state and local grant recipients.  In addition, because most decisions in transportation stimulus programs rely on balancing immediate and long-term benefits provided by the transportation construction, USDOT should define a unified method for evaluating these benefits.

 

One committee member dissented with regard to the effectiveness of stimulus spending as a tool to recover from a recession.  A statement by this member is included as an appendix to the report.

 

The Research Council study was sponsored by the state departments of transportation through the National Cooperative Highway Research Program and by the Transportation Research Board.  The National Academy of Sciences, National Academy of Engineering, Institute of Medicine, and National Research Council make up the National Academies.  They are private, independent nonprofit institutions that provide science, technology, and health policy advice under a congressional charter granted to NAS in 1863.  The Research Council is the principal operating agency of the National Academy of Sciences and the National Academy of Engineering.  For more information, visit http://national-academies.org.  A committee roster follows.

 

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NATIONAL RESEARCH COUNCIL

Transportation Research Board

 

Committee on Economic and Employment Benefits of Transportation Investments in Response to Economic Downturns


Therese J. McGuire
(chair)
Professor of Management and Strategy
Kellogg School of Management, and
Director, Guthrie Center for Real Estate Research and Real Estate Program
Northwestern University
Evanston, Ill.

Jay Alexander
Director of Capital Program Development and Management
Washington State Department of Transportation
Olympia

William D. Dupor
Assistant Vice President of Research
Federal Reserve Bank of St. Louis
St. Louis

Randall W. Eberts
President
W.E. Upjohn Institute for Employment Research
Kalamazoo, Mich.

Ronald L. Epstein
Director of the Office of Finance and Chief Financial Officer
New York State Department of Transportation
Albany

Andrew Haughwout
Vice President and Function Head
Research Services Function and Microeconomics Studies Function
Federal Reserve Bank of New York
New York City

Benjamin F. Jones
Associate Professor
Kellogg School of Management
Northwestern University; and
Faculty Research Fellow
National Bureau of Economic Research
Evanston, Ill.

Nancy J. Richardson
Director
Iowa Department of Transportation (retired)
Ames

Jay C. Shambaugh
Professor of Economics and International Affairs
Elliott School of International Affairs
George Washington University; and
Faculty Research Fellow
National Bureau of Economic Research
Washington, D.C.

 

STAFF

 

Joseph R. Morris

Study Director