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Special Report 312 Transportation Investments in Response to Economic Downturns Committee on Economic and Employment Benefits of Transportation Investments in Response to Economic Downturns Transportation Research Board Washington, D.C. 20001 www.TRB.org 2014

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Transportation Research Board Special Report 312 Subscriber Categories: Administration and management, finance, economics Transportation Research Board publications are available by ordering individual publications directly from the TRB Business Office, through the Internet at www.TRB.org or nationalacademies.org/trb, or by annual subscription through organizational or individual affiliation with TRB. Affiliates and library subscribers are eligible for substantial discounts. For further information, contact the Transportation Research Board Business Office, 500 Fifth Street, NW, Washington, DC 20001 (telephone 202-334-3213; fax 202-334-2519; or e-mail TRBsales@nas.edu). Copyright 2013 by the National Academy of Sciences. All rights reserved. Printed in the United States of America. NOTICE: The project that is the subject of this report was approved by the Governing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The members of the committee responsible for the report were chosen for their special competencies and with regard for appropriate balance. This report has been reviewed by a group other than the authors according to the procedures approved by a Report Review Committee consisting of members of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. This report was sponsored by the National Cooperative Highway Research Program and the Transportation Research Board. Library of Congress Cataloging-in-Publication Data (to come) ISBN: 978-0-309-29492-8

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The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. On the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Ralph J. Cicerone is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. C. D. (Dan) Mote, Jr., is president of the National Academy of Engineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Institute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, on its own initiative, to identify issues of medical care, research, and education. Dr. Harvey V. Fineberg is president of the Institute of Medicine. The National Research Council was organized by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy’s purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both Academies and the Institute of Medicine. Dr. Ralph J. Cicerone and Dr. C. D. (Dan) Mote, Jr., are chair and vice chair, respectively, of the National Research Council. The Transportation Research Board is one of six major divisions of the National Research Council. The mission of the Transportation Research Board is to provide leadership in transportation innovation and progress through research and information exchange, conducted within a setting that is objective, interdisciplinary, and multimodal. The Board’s varied activities annually engage about 7,000 engineers, scientists, and other transportation researchers and practitioners from the public and private sectors and academia, all of whom contribute their expertise in the public interest. The program is supported by state transportation departments, federal agencies including the component administrations of the U.S. Department of Transportation, and other organizations and individuals interested in the development of transportation. www.TRB.org www.national-academies.org

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Committee on Economic and Employment Benefits of Transportation Investments in Response to Economic Downturns Therese J. McGuire, Northwestern University, Evanston, Illinois, Chair Jay Alexander, Washington State Department of Transportation William D. Dupor, Federal Reserve Bank of St. Louis Randall W. Eberts, W. E. Upjohn Institute for Employment Research Ronald L. Epstein, New York State Department of Transportation Andrew Haughwout, Federal Reserve Bank of New York Benjamin F. Jones, Northwestern University, Evanston, Illinois Nancy J. Richardson, Iowa Department of Transportation (retired) Jay C. Shambaugh, George Washington University, Washington, D.C. Transportation Research Board Staff Joseph R. Morris, Study Director

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Preface T he Transportation Research Board (TRB) formed the Committee on Economic and Employment Benefits of Transportation Investments in Response to Economic Downturns to conduct a study to aid state and federal officials who may be planning a transportation spending program intended as economic stimulus during a recession, by providing guidance on how to design an effective program and evaluate the results. The study was motivated by the experience of the states with the transportation component of the American Recovery and Reinvestment Act of 2009, which provides a valuable case study of the management and impact of a transportation stimulus spending program. The committee included present and former government officials with experience in planning and managing transportation programs and economists with expertise in fiscal policy and in economic development. The study was sponsored by the state departments of transportation through the National Cooperative Highway Research Program and by TRB. The committee received presentations at its meetings from Jack Wells, U.S. Department of Transportation; Karen White, U.S. Department of Transportation; Phillip Herr, U.S. Government Accountability Office; Heather MacLeod, U.S. Government Accountability Office; and Tracy Gordon, Brookings Institution. In addition, the committee commissioned two resource papers, one by Sylvain Leduc and Daniel Wilson and the other by Michael Meyer. The papers are available at http://www.trb.org/Main/Blurbs/170114.aspx. One committee member, William Dupor, does not concur with the conclusion of the other members with regard to the effectiveness of stimulus spending in aiding recovery from a recession. A statement by Dr. Dupor concerning this part of the study topic is included as an appendix to the report. The report has been reviewed in draft form by individuals chosen for their diverse perspectives and technical expertise, in accordance with procedures approved by the National Research Council’s (NRC’s) Report Review Committee. The purpose of this independent review is to provide candid and critical comments that assist the authors and NRC in making the published report as sound as possible and to ensure that the report meets institutional standards for objectivity, evidence, and responsiveness to the study charge. The contents of the review comments and draft manuscript remain confidential to protect the integrity of the deliberative process. The following individuals participated in the review of this report: Alan J. Auerbach, University of California, Berkeley; Tracy Gordon, Brookings Institution; Robert E. Hall, Stanford University; Will Kempton, Orange County Transportation Authority; Herbert S. Levinson, Independent Consultant; Adrian T. Moore, Reason Foundation; John R. Njord, Utah Department of Transportation; and Ricardo Reis, Columbia University. Although the reviewers listed above provided many constructive comments and suggestions, they were not asked to endorse the committee’s conclusions or recommendations, nor did they see the final draft of the report before its release. The review of this report was overseen by Charles F. Manski, Northwestern University, and by Susan Hanson, Clark University. Appointed by NRC, they were responsible for making certain that an independent examination of the report was carried out in accordance with institutional procedures and that all review comments were carefully considered. Responsibility for the final content of this report rests entirely with the authoring committee and the institution. vii

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viii Transportation Investments in Response to Economic Downturns Joseph R. Morris managed the study and drafted the report under the guidance of the committee and the supervision of Stephen R. Godwin, Director, Studies and Special Programs. Suzanne Schneider, Associate Executive Director of TRB, managed the report review process. Norman Solomon edited the report, and Jennifer J. Weeks, Editorial Services Specialist, prepared the prepublication manuscript and background papers for web posting, all under the supervision of Javy Awan, Director of Publications. Amelia Mathis assisted with meeting arrangements and communications with committee members.

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Contents Summary.........................................................................................................................................1 1 Introduction ..............................................................................................................................7 Study Origin and Objectives ......................................................................................................8 Use of Transportation Spending as Stimulus: ARRA and Past Recessions ............................10 Status of Federal and State Transportation Funding ................................................................18 Sources of Information ............................................................................................................20 2 Fiscal Policy in Recessions and the Role of Transportation Spending .............................23 Fiscal Policy in Response to Recessions .................................................................................23 Transportation Spending as Fiscal Stimulus ............................................................................35 3 Design, Management, and Outcomes of the American Recovery and Reinvestment Act Transportation Grants ..........................................................................................................43 ARRA Transportation Provisions ............................................................................................43 Administration of ARRA Transportation Grants .....................................................................46 Transportation Spending and Construction Employment During ARRA ...............................54 4 Conclusions and Recommendations .....................................................................................77 Conclusions ..............................................................................................................................77 Recommendations ....................................................................................................................85 Appendices A Commissioned Papers and Authors .........................................................................................93 B Statement of Committee Member William Dupor...................................................................95 Study Committee Biographical Information ...........................................................................111

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