Transportation Investments in Response to Economic Downturns (2014)

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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 OF THE NATIONAL ACADEMIES Transportation Research Board Washington, D.C. 2014 www.TRB.org 

Transportation Research Board Special Report 312 Subscriber Categories: Administration and management, finance, economics Transportation Research Board publications are available by ordering individual publi- cations directly from the TRB Business Office, through the Internet at www.TRB.org or nationalacademies.org/trb, or by annual subscription through organizational or indi- vidual 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 2014 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 Insti- tute 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 pro- cedures 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. Cover photo by Rhonda Pees, Public Information Officer, Ohio Department of Transporta- tion, District 1. Used with permission. Library of Congress Cataloging-in-Publication Data Transportation investments in response to economic downturns / Committee on Economic and Employment Benefits of Transportation Investments in Response to Economic Downturns, Transportation Research Board of the National Academies. pages cm — (Transportation Research Board special report ; 312) ISBN 978-0-309-29492-8 1. Federal aid to transportation—United States—Evaluation. 2. United States. American Recovery and Reinvestment Act of 2009. I. National Research Council (U.S.). Committee on Economic and Employment Benefits of Transportation Investments in Response to Economic Downturns. II. Series: Special report (National Research Council (U.S.). Transportation Research Board) ; 312. HE308.T737 2014 388'.049—dc23 2014001568 

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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 



Preface The 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 pro- gram 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 trans- portation 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 develop- ment. The study was sponsored by the state departments of transporta- tion 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 commis- sioned 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 D. Dupor, does not concur with the conclusion of the other members with regard to the effectiveness of transportation stimulus spending in aiding recovery from a recession. vii 

viii Transportation Investments in Response to Economic Downturns A statement by Dr. Dupor concerning this part of the study topic is included as an appendix to the report. The report was 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 Com- mittee. 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 confi- dential to protect the integrity of the deliberative process. NRC thanks the following individuals for their review of this report: Alan J. Auerbach, Uni- versity 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 com- ments 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 National Academy of Sciences members Charles F. Manski, Northwestern University, and Susan Hanson, Clark University. Appointed by NRC, they were respon- sible 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. 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, Janet M. McNaughton handled the edito- rial production, Juanita L. Green managed the typesetting and print- ing, Jennifer J. Weeks prepared the prepublication manuscript and background papers for web posting, and Jennifer Correro proofread the typeset pages, all under the supervision of Javy Awan, Director of Publications. Amelia Mathis assisted with meeting arrangements and communications with committee members. 

Contents Summary 1 1 Introduction 9 Study Origin and Objectives 10 Use of Transportation Spending as Stimulus: ARRA and Past Recessions 14 Status of Federal and State Transportation Funding 25 Sources of Information 29 2 Fiscal Policy in Recessions and the Role of Transportation Spending 33 Fiscal Policy in Response to Recessions 33 Transportation Spending as Fiscal Stimulus 53 3 Design, Management, and Outcomes of the American Recovery and Reinvestment Act Transportation Grants 63 ARRA Transportation Provisions 63 Administration of ARRA Transportation Grants 68 Transportation Spending and Construction Employment During ARRA 80 4 Conclusions and Recommendations 108 Conclusions 108 Recommendations 120 

Appendixes 130 A Commissioned Papers and Authors 130 B Statement of Committee Member William D. Dupor 131 Study Committee Biographical Information 153