Transportation Investments in Response to Economic Downturns (2014) / Chapter Skim
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Congress enacted spending programs and tax relief, and the Federal Reserve acted to sustain financial markets and reduce interest rates. Among these measures, the American Recovery and Reinvestment Act of 2009 (ARRA)
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Recommendations propose changes in established transportation programs, design features for any future transportation stimulus program, and methods for evaluating projects in a transportation stimulus program. CONCLUSIONS Effectiveness of Stimulus Spending The correct share of transportation spending within a stimulus program like ARRA depends on the overall effectiveness of stimulus spending in aiding recovery from a recession, because allocating the available funds within a stimulus package will involve trade-offs between short-term (stimulus)
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Research based on experience since 2008 tends to support values of the multiplier above 1 as applicable when unemployment is severe and interest rates are being held near zero. Value of Transportation Spending in a Fiscal Stimulus Program The following considerations provide strong support for including transportation capital expenditures as a component of a federal fiscal stimulus program, once the decision has been made to undertake such a program: • If projects are selected with proper consideration of the value of the transportation services they will provide, the long-term benefits will offset the initial cost, so the expenditure is justified regardless of the magnitude of the stimulus benefit.
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Although the evidence is incomplete, fiscal substitution probably was constrained by the ARRA requirement that transportation grant recipients certify that they were maintaining planned rates of spending and because most state transportation spending depends on dedicated tax revenue that is not readily diverted to other purposes. (Moreover, if some diversion occurred, the extra funds available to the states may have reduced spending cuts or tax increases that would have negative impacts during a recession.)
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Design of a Transportation Stimulus Program Once a decision has been made to include transportation, the planners of the program must determine the share of the total stimulus package to be devoted to transportation, the allocation of funding among recipients, and details of eligibility rules and administration. • Transportation share of the overall program: Practical limits exist on the amount of funding for transportation that can be used effectively in a stimulus program.
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. Such actions could include the following: • Providing stability in the established federal transportation funding programs; • Maintaining a larger backlog of projects with completed designs and environmental reviews; • Building balances in the transportation trust funds to sustain spend ing during recessions or, alternatively, borrowing from future user tax revenue to maintain spending when revenue slows; • Implementing reforms to speed project delivery in the regular federal aid transportation programs; and • Providing standby authority to the executive to increase federal trans portation aid through the established programs when specified eco nomic conditions occur.
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2. Rationalize Design of Future Transportation Stimulus Spending Programs Advance Rulemaking Rules needed for the U.S. DOT to administer the ARRA transportation program were not in place at the time of enactment.
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In any future transportation stimulus program, consideration should be given to alternative means of ensuring timeliness: providing multiple deadlines -- for example, a short deadline applicable to a portion of the funding and deadlines equivalent to those in the regular federal-aid programs for the remainder -- and allowing accelerated review and approval processes to speed construction. Record-Keeping and Reporting Requirements Data collecting and reporting requirements in the ARRA transportation programs that did not have demonstrated usefulness in managing or evaluating the programs should not be imposed in future programs.
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