Highway and transit plan could help cure ailing economy

News ARTBA May 15, 2003
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A proposal in the U.S. House of Representatives to increase federal highway and public transportation investment would provide a major boost to the U.S. economy by adding $290 billion to the Gross Domestic Product (GDP) over the next six years, according to an analysis released May 13 by the world's leading econometric forecasting firm.

The bipartisan leadership of the House Transportation and Infrastructure Committee has proposed a $375 billion highway and transit investment plan for fiscal years 2004-09 as part of the reauthorization of the Transportation Equity Act for the 21st Century (TEA-21). The $375 billion is the funding level derived from the U.S. Department of Transportation 2002 "Conditions & Performance Report" as necessary to maintain and begin to improve the nation's surface transportation network.

Global Insight Inc., formerly DRI-WEFA, the leading economic forecasting company used by over 3,000 industry, finance and government clients, ran the T&I plan through its national model. The findings of this first-ever analysis of a public infrastructure investment plan found the combined effect of the spending and user fee increases would generate over the next six years:

* A $290 billion increase in GDP--about $48 billion annually. This means every federal dollar invested in highway and transit capital outlays would generate over $2.50 in additional U.S. economic activity;

* A $129 billion increase in consumer disposable income. To the average American household that means an average $45 annual increase in federal gas tax payments will generate an additional $150 in annual disposal household income--a net $3 to $1 return on investment;

* It would spur a $98 billion increase in consumer spending which would benefit small American businesses;

* It would add $21 billion to equipment investment by the nation's businesses, thus generating higher productivity and making the U.S. more competitive; and

* Federal tax receipts--from the gas tax and additional income, Social Security and Medicare revenues generated by increased economic activity--would increase $102 billion--helping reduce the federal deficit.

"This analysis clearly demonstrates that the Transportation and Infrastructure Committee's needs-based transportation investment plan is critical to improving business productivity and strengthening the American economy," Transportation Construction Coalition co-chairman Pete Ruane said.

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