RAND Review News for Winter 2011-2012

U.S. Should Drive Highway Funding Toward Projects — and Benefits — of “National Significance,” Says Study

In restructuring U.S. transportation policy, Congress should steer funding toward projects of “national significance,” RAND researchers suggest. In other words, federal transportation aid should go to those projects promising large positive aggregate benefits, either nationwide or across a multi-state region, and for which sufficient funding and coordination from smaller jurisdictions might not be forthcoming.

Better targeting of federal highway investments could lead to better economic outcomes.

Currently, federal highway spending goes to a large variety of projects, including those that may have only local or even net negative effects. Federal policy has become more fragmented over time, with a proliferation of programs that are often considered to act as “stovepipes,” each focusing on one set of issues, preventing rational, integrated, comprehensive planning and stymieing innovation. A secondary problem has been the increasing number of earmarks — from only 8 in the 1978 transportation bill to 6,371 in the latest, 2005 bill, which originally expired in October 2009 before being extended.

“Changing highway-investment priorities could involve many difficult decisions,” said Howard Shatz, a RAND senior economist who led the study. “These might include redrafting federal programs, changing the congressional committees through which transportation authorizations pass, or severely limiting earmarks, which undermine efforts to develop national networks that optimize investments.”

Previous research reviewed by RAND found positive effects of highway-infrastructure spending on economic productivity and output. The RAND researchers point to investments in the U.S. interstate highway system as examples of federal transportation spending that brought widespread productivity gains to the U.S. economy.

Traffic crosses the Brent Spence Bridge linking Cincinnati, Ohio, and Covington, Kentucky.
AP IMAGES/THE ENQUIRER, CARRIE COCHRAN
Traffic crosses the Brent Spence Bridge linking Cincinnati, Ohio, and Covington, Kentucky. The outdated bridge has become an example of infrastructure overdue for improvement.

But highway infrastructure varies greatly in its economic effects, depending on a wide variety of local and regional factors. Better targeting of federal highway investments could lead to better economic outcomes, the researchers suggest.

“With the United States facing fiscal constraints, federal highway spending can continue to provide economic benefits to the nation by focusing on those projects that have positive net benefits dispersed over large geographic areas,” said Shatz. square

For more information:

Highway Infrastructure and the Economy: Implications for Federal Policy, RAND/MG-1049-RC, ISBN 978-0-8330-5213-1, 2011.

Discuss This Story on Facebook