We're not living in 1950, so we need to stop planning our infrastructure like we are.
Unless we start to invest in transportation infrastructure, there will come a time when huge snarls of traffic choke our nation’s economy.
Years of political infighting and not investing holistically will constrict America’s growth potential. And worse, while our transportation system deteriorates and freight delays increase, the rest of the world will have kept investing, especially countries like China, where CEOs including myself gathered last weekend for the APEC CEO Summit.
Quite simply, we can’t allow that to happen. All signs point to increasing transportation costs, coupled with rapidly growing populations worldwide. If we don’t take action now, the results will be disastrous for American businesses and our national economic well-being.
Cost of Congestion
The reason is a continued lack of investment in America’s transportation infrastructure. Every single aspect of this infrastructure – from roads to rail to airports to shipyards–is under-funded and under-serviced. Congestion is worsening and we’re going to pay for it. Every hour, every minute, every second … we’re waiting to go somewhere–and that, in turn, translates into real dollars and cents for our economy.
These costs are staggering. Americans spend 5.5 billion hours in traffic each year, according to a White House report, costing families more than $120 billion in extra fuel and lost time. Businesses likewise take a hit, spending $27 billion annually in extra freight costs and shipping delays that raise prices on everyday products.
Without investment, that impact will rise sharply in the coming years. The Census Bureau predicts a 42 percent population increase by 2050, and we are already moving 57 tons of goods per person per year, according to the Department of Transportation.
“The highway system is not the only transport mode in distress. Rail and air freight systems also need heavy investment. ”
If we think we can stand idle and the problem will resolve itself, we’re all wrong. In 2011, approximately 11 million trucks moved 16.1 billion tons of freight worth $14.9 trillion.
According to the Department of Transportation, that level of activity–which accounted for only 9 percent of all vehicle highway miles that year–caused recurring peak-period congestion on 10 percent of the National Highway System.
If we stay on our current course, these rush hour delays (with their associated costs to businesses and consumers) will only increase. The Federal Highway Administration predicts that over the next 30 years, the number of trucks on the road will grow by 60 percent to keep pace with demand, which in turn will translate into more stop-and-go conditions.
A savvy reader might suggest adjusting for this increased demand and road congestion by shifting some freight to other modes of transport. But those systems are in need of investment, too.
DOT is currently predicting an 88 percent increase in rail freight demand by 2035, but we certainly haven’t allocated enough national resources to add 88 percent capacity.
The American Society of Civil Engineers gave America’s rail network a “C+” grade in its 2013 annual infrastructure report card.
Though efficient and highly functional for many long-hauls, rail is expensive to build and maintain, a fact that constrains both rail companies and the businesses that rely on them to move large quantities of goods.
At the same time, our reliance on air cargo is likewise increasing. As one of the world’s largest airlines, UPS has a unique vantage on that, and we’ve seen first-hand just how much of global trade is taking to the air. Though it only currently accounts for 2 percent of trade by weight, air cargo accounts for 40 percent of global trade’s value, and that number will continue to increase.
DOT predicts a 56 percent increase in the per-ton value of air goods by 2040, and that’s just for starters. And think about all the volume going by sea; are our ports ready?
“The Trans-Pacific Partnership agreement alone would generate $123.5 billion per year in U.S. exports by 2025. ”
The Trans-Pacific Partnership agreement alone would generate $123.5 billion per year in U.S. exports by 2025, and then you add the Transatlantic Trade and Investment Partnership, and the Trade in Services Agreement and you have exponential volume growth that our current infrastructure just isn’t ready to move.
The Transportation Equation
It doesn’t take an expert statistician to figure out what’s going to happen. On one side of the equation, we have ever increasing demand from all around the world. On the other side of the equation, we have infrastructure that can’t physically handle it. We’re in the negative, and unless we add something to that infrastructure side, we are going to come up short in terms of growth and jobs.
In the U.S., we’ve always thought our highways and shipyards, rail networks and airports were among the very best. But the data says otherwise. According to the World Economic Forum, our road conditions are ranked 18th in the world–down from 7th less than a decade ago.
How bad will it get? Today, for the trucking industry alone, highway bottlenecks cause 243 million hours of delay each year, at a cost of $7.8 billion. Now what happens in 5, 10 or 20 years if we don’t change course? There’s no such thing as “too big to fail.”
“Adding something to the infrastructure side,” though, isn’t as easy as just adding new capacity.
My sense tells me that to truly impact America’s transportation infrastructure problem, we can’t approach it just from the standpoint of “trying to fix our roads” or “trying to fix our ports.” Instead, we need to think first about the real end goals:
- getting to and from our destinations and
- making those commutes as quick, efficient and cost-effective as possible.
“We need a long-term investment and improvement plan that looks at transportation through the lens of global competitiveness. ”
Beyond this immediate fix, we need a long term investment and improvement plan that looks at transportation through the lens of global competitiveness. We need to do whatever it takes–no playing favorites–if we want to keep pace with the rest of the world.
A Bold New Take
This bold new take on transportation infrastructure will require tremendous political cooperation and tough, even unpopular choices. To address congestion and drive down transportation costs, we need a holistic approach–one that integrates all modes of transport, and that includes dedicated funding mechanisms.
Whether it’s a vehicle-miles-traveled tax, raising the gas tax, implementing waste-reduction policies or reallocating government spending, we’ll need a way to pay for these crucial investments.
Needless to say, both of those components–a multimodal transportation approach with a dedicated funding mechanism–won’t come easily. Part of that is because most politicians, businesses and traditional transportation analysts have not ever thought about infrastructure in this way.
It’s relatively easy to come up with a plan to build a bypass locally, but it’s another to convince voters and politicians to support projects that go beyond their constituent boundaries.
“We’re not living in 1950, so we need to stop planning our infrastructure like we are. ”
We’re not living in 1950, so we need to stop planning our infrastructure like we are.
America’s transportation infrastructure can become stronger and more efficient if we work at moving people, not just planes, trains and automobiles separately. “Good” can’t be defined exclusively according to road engineering manuals, and while a nationwide “people-based approach” might sound idealistic, it’s also the approach most informed by bottom line impact.
A truly functional transportation infrastructure system isn’t just about how many cars we can fit on a particular stretch of highway; it might be, for example, about how we can allow trucks to deliver along busy retail corridors, or how we can best facilitate customers being able to reach their local businesses, no matter where they are in the world.
Put differently, to really get the best bang for our infrastructure buck, we must measure and account for how transportation investments drive growth and support quality of life. The questions we ask about infrastructure need to change accordingly:
- Are there ways to achieve the same transportation goals by investing limited resources differently?
- Are we investing in the research, engineering and alternative fuels that will transform commutes and save money?
- And are we thinking about ways to “right-size” projects–selecting infrastructure investments that might accomplish 90 percent of our goals, but at a fraction of the cost?
Real-world results confirm that those kinds of questions will pay back huge dividends to the countries and communities who adopt innovative approaches to transportation. For instance, the Tennessee Department of Transportation saved $171 million in 2012 after conducting a “right-sizing” review of five ongoing projects.
What would happen if we applied concepts like that at the national level? And that’s to say nothing of the land-use, housing, education and financial policies that similarly affect how, why and where our transportation system gets built. If we can delve into those, too, we’ll make huge gains in reducing congestion and getting back on the fast lane to economic success.
Needless to say, those kinds of innovative, integrated solutions won’t come easily–especially on Capitol Hill. But the alternative isn’t an option. We can’t let America fall behind.
This article first appeared on November 12, 2014 on Bloomberg BNA and was republished with permission.
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Reprinted with permission of Longitudes, the UPS blog devoted to the trends shaping the global economy.