The Transportation Challenge MOVING THE U.S. ECONOMY Prepared for National Chamber Foundation Prepared by Cambridge Systematics, Inc. with Boston Logistics Group, Inc. Alan E. Pisarski Acknowledgment and Use This work was prepared by Cambridge Systematics, Inc. under contract to the National Chamber Foun- dation® of the U.S. Chamber of Commerce. This material is privileged and confidential and may not be used without the permission of the National Chamber Foundation. Disclaimer The opinions and conclusions expressed or implied in the report are those of the research agency. They are nor necessarily those of the National Chamber Foundation and the U.S. Chamber of Commerce. © Copyright 2008 T H E TransportationCHALLENGE MOVING THE U.S. ECONOMY SECTION TITLE PAGE NUMBER 1.0 Introduction ........................................................................ 4 Background ................................................................................................................... 4 Purpose and Structure of Report ........................................................................................................... 6 The Linkages Between Transportation Investment and Economic Growth .................................................... 7 2.0 The Economy and Transportation ......................................... 12 Changing U.S. Economy ........................................................................................................................ 12 Changing U.S. Freight and Logistics Systems .......................................................................................... 20 Changing Passenger Transportation Demand .......................................................................................... 23 3.0 Industries and Transportation .............................................. 25 Introduction ........................................................................................................................................ 25 Agriculture and Natural Resources Sector .............................................................................................. 26 Manufacturing Sector ............................................................................................................................ 33 Retail Sector ....................................................................................................................................... 40 Services Sector .................................................................................................................................... 45 Transportation and Logistics Services Sector .......................................................................................... 51 4.0 Transportation Systems and Services .................................. 57 Overall Demand for Transportation ......................................................................................................... 57 How Well Are the U.S. Transportation Systems Performing? ...................................................................... 58 Underinvestment Is Affecting Transportation System Performance ............................................................ 70 table of contents 5.0 Emerging Transportation Policies and Programs ................. 72 Surface Transportation Programs up Through SAFETEA-LU ........................................................................ 72 Beyond SAFETEA-LU: Public Policy Choices for the Future ........................................................................ 74 6.0 Conclusions and Next Steps ............................................... 80 Conclusions ........................................................................................................................................ 80 Next Steps .......................................................................................................................................... 82 A. Measuring Transportation’s Share of GDP, Including Household Transportation Expenditures ............... 83 Summary ............................................................................................................................................ 83 Transportation Components of GDP ....................................................................................................... 84 B. Review of the Literature Assessing the Benefits of Transportation Investment ................................................ 97 C. International Transportation Comparisons ......................... 103 Introduction ........................................................................................................................................ 103 International Comparisons of Transportation and Logistics Costs .............................................................. 104 Other Countries Are Catching Up Through Massive Infrastructure Investments ............................................ 107 Supporting Information for Transportation and Logistics Costs as a Percentage of GDP .............................. 110 T H E TransportationCHALLENGE MOVING THE U.S. ECONOMY List of Tables TABLE TITLE PAGE NUMBER 3.1 United States Gross Domestic Product in Agriculture and Natural Resources Industry .................................................................................. 26 3.2 Employment in Agriculture and Natural Resources Industry .................................. 27 3.3 Employment in Manufacturing Industry ................................................................. 34 TABLES 3.4 U.S. Gross Domestic Product in Manufacturing Industry ...................................... 35 3.5 Employment in Retail Industry .............................................................................. 40 3.6 U.S. Gross Domestic Product in Retail Industry .................................................... 41 3.7 Employment in Services Industry .......................................................................... 46 3.8 U.S. Gross Domestic Product in Services Industry ............................................... 47 3.9 Employment in Transportation Industry ................................................................. 53 3.10 U.S. Gross Domestic Product in Transportation and Logistics Industry ................. 53 4.1 ASCE, “Nation’s Infrastructure Report Card, 2005” .............................................. 59 A.1 Transportation Measures ................................................................................................................... 85 A.2 Transportation Industry GDP: 2003 to 2006 (Billions of 2000 Dollars) ................ 86 A.3 U.S. Gross Domestic Product Attributed to Transportation-Related Final Demand2002 to 2006 (In Chained 2000 Dollars [Billions]) ......................... 88 A.4 Spending in Average American Households Since 2000 ....................................... 91 A.5 Comparison of Spending for Urban, Suburban, and Rural Areas ........................... 95 B.1 Rough “First-Cut” Estimate of the Supply Chain Benefit from a 10% Transportation Improvement ................................................................................ 99 C.1 Top Access Nations ............................................................................................ 107 C.2 Top Infrastructure Projects: Millions of U.S. Dollars ............................................ 108 2 List of Figures FIGURE TITLE PAGE NUMBER FIGURES 1.1 Linkages Between Transportation Investment and Economic Development ..................7 2.1 GDP Growth Rates for Top 10 Global Economies ...................................................... 14 2.2 Value of U.S. Global Trade Compared to U.S. GDP .................................................... 14 2.3 Changing Structure of the U.S. Economy: 1950 to 2006 .......................................... 15 2.4 National Emerging Megaregions ............................................................................... 17 2.5 Total Logistics Cost: Percentage of Gross Domestic Product .................................... 22 3.1 United States Agricultural Trade Balance: 1975 to 2007 .......................................... 28 3.2 Regional Concentration in Agricultural Cultivation ..................................................... 29 3.3 Coal Flows by Water, Rail, and Truck: 2004 ............................................................... 29 3.4 Average Freight Railroad Rates: 1981 to 2006 ..............................................................................30 3.5 Share of World Manufacturing Output: 2006 ............................................................. 34 3.6 Manufacturing Employment in the United States ...................................................... 35 3.7 Retail Employment Concentrations in the United States ........................................... 41 3.8 Goods-Producing and Services-Producing Employment Share: 1940 to 2005 ........... 46 3.9 Labor Productivity of the For-Hire Transportation Industries: 1993 to 2003 .............. 52 3.10 Bureau of Transportation Statistics, Annual Index of Transportation Services: 1990 to 2006 ........................................................................................... 54 4.1 Congestion Growth Trends: 1982 to 2005 ................................................................ 60 4.2 Anticipated Truck Volumes: 2035 ............................................................................. 62 4.3 Change in Truck Volumes: 2005 to 2035.................................................................. 63