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LP Forum: The ‘hidden tax’ of inefficient transportation

Insufficient funding to relieve the US’ congested roads is costing the country’s economy $120bn every year, according to a senior official at the Federal Highway Administration.

The persistent lack of sufficient transportation funding is acting as a hidden levy on the US economy, according to Gregory Nadeau, head of the Federal Highway Administration.

The “freight economy”, underpinned by the 55 million tons of goods worth $49 billion moving throughout the country every day, is being bogged down by inefficient roads and bridges, Nadeau said in a presentation at Infrastructure Investor’s LP Summit in New York.

For trucks alone, congestion costs American companies more than $27 billion each year, Nadeau said, adding that this also raised prices for consumers. He noted that the average American spends 40 hours each year stuck in traffic, costing the economy $120 billion.

“It’s a costly hidden tax,” he said. “Much of the success of our economy is linked to the ability to move freight safely and efficiently.”

Inefficiency and congestion were largely caused by the scarcity of funding, according to Nadeau. Per capita US highway spending is 25 percent lower today than it was in 1970, he said.

The Department of Transportation, which recently zoomed in on future infrastructure needs in its Beyond Traffic report, believes the US will need to move 70 million more people and 45 percent more freight in 2045 than today.

“We’re going to need to develop much more in the way of efficient intermodal systems,” Nadeau said.

He argued that the Fixing America’s Surface Transportation (FAST) Act, which Congress and the President approved last year, is a “modest down payment” to help meet that goal. The programme provides $305 billion over five years to maintain, improve and build new roads and bridges. It also created the National Surface Transportation & Innovative Finance Bureau, which develops and promotes PPP best practices.

Nadeau said the FAST Act had been rightly recognised as the first long-term transportation funding bill in decades, increasing highway funding by about 10 percent over previous levels. Yet he added that the capital provided “isn’t exactly the scale we’re going to need” if the US is to meet its infrastructure challenge.

The country faces a $1.1 trillion surface transportation funding gap from 2016 to 2025, according to a study by the Society of American Civil Engineers.

“Our infrastructure is not only vital to safety and mobility, but it is also crucial to the economic security of the next generation of Americans,” Nadeau said. “It’s going to continue to be remarkably important in how we move both goods and people.”