Improving Funding and Management of Surface Transportation Infrastructure

Although spending on infrastructure does not, in itself, stimulate the economy, infrastructure investments can contribute to economic growth, since infrastructure is part of the economy’s capital stock. Investments in infrastructure can also benefit the economy by alleviating the problems that poor infrastructure causes. The extent to which infrastructure investment contributes to growth, however, depends on the net benefits of the projects chosen. This paper focuses on how to manage and pay for investment in, and maintenance of, transportation infrastructure in a way that maximizes the net benefits from its use and contributes to economic growth. In this regard, we conclude that federal spending is not the best approach. Instead, a better path to making needed infrastructure improvements is to reduce the role of the federal government (including the funding and management of projects) and to increase reliance on state and local governments, user fees, and private firms.