Brooklyn_Bridge_Under_Construction_1878

Rebuilding America’s Infrastructure

We're not living in 1950, so we need to stop planning our infrastructure like we are.

David Abney | UPS

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.

Increasing Demand

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.

Pullquote share icon. Share

The highway system is not the only transport mode in distress. Rail and air freight systems also need heavy investment.

As more Americans are born and the state of our infrastructure network worsens or remains the same, where is all of that freight going to go? And how will everyday Americans just get from Point A to Point B?

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?

Pullquote share icon. Share

The Trans-Pacific Partnership agreement alone would generate $123.5 billion per year in U.S. exports by 2025.

The U.S. is currently negotiating a series of groundbreaking trade agreements, all of which will drive huge gains in exports and imports–business growth that America needs. Is our infrastructure ready for that?

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.”

Rethinking Capacity

“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:

  1. getting to and from our destinations and
  2. making those commutes as quick, efficient and cost-effective as possible.

Pullquote share icon. Share

We need a long-term investment and improvement plan that looks at transportation through the lens of global competitiveness.

Of course, before even having a broader debate about infrastructure, we need Congress to pass, at minimum, funding support for vital maintenance and repair programs. Otherwise today’s infrastructure won’t even be around for tomorrow’s solutions.

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.

Pullquote share icon. Share

We’re not living in 1950, so we need to stop planning our infrastructure like we are.

In short, we cannot afford to operate in silos and be only focused on our own backyards. If we’re going to do anything about our declining transportation system, we need to fundamentally rethink how our country approaches the issue. The future of transportation demands that we make the investments needed to support unprecedented population growth, increasing global trade flows and the advantages of e-commerce.

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?

Moving Forward

bloom

Click image to download original article

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.

It’s time to make some tough choices, invest in the future and get to work on infrastructure. goldbrown2

This article first appeared on November 12, 2014 on Bloomberg BNA and was republished with permission.

 

Picture1
Visit David Abney's Linkedin profile page. David Abney is Chief Executive Officer of UPS.

Click the RSS icon to subscribe to future articles by this author. RSS Feed

Reuse

We welcome the re-use, republication, and distribution of our content – just as long as you credit us. So we ask that you insert the following tagline when you use our content:

Reprinted with permission of Longitudes, the UPS blog devoted to the trends shaping the global economy.

11 Comments

  1. R Public

    First of all lets upgrade the interactivity of highway travel. Every destination has alternative road choices, most of the time traffic occurs because people have no idea what the road looks like ahead and cannot predict traffic patterns . We need a full fledged traffic warning system that interacts with travelers warning them of upcoming traffic in time for them to make road choices that will avoid that traffic. This is needed FIRST , before the construction begins! Most of the traffic I encounter is caused by construction aimed at relieving traffic! It’s a viscous cycle.

  2. Andrew

    Your recommendations are spot on, and as CEO of UPS, you’re in the best position to make the assessment. In the 8 months since this has been posted, has there been any sign from Capitol Hill that they’re listening? My fear is that they’re not listening, and that my generation will bare the brunt of their inaction during what should be our best working years.

  3. Two Cents

    How about a traffic tax? A tax on traffic…well actuall traffic itself is a form of tax. It distributes the burdens of lack of investment in infrastructure. But instead of helping us solve problems , like a real tax might do, this time spent in traffic congestion is merely wasted. The costs are still there: wages lost in traffic, missed deliveries, missed meetings, missed flights at the airport, gasoline wasted and fumes spewed into the atmosphere. Time spent in traffic is the worst kind of “government waste” , because it shows the real effects of lack of investment, lack of political will, lack of communication, lack of planning, lack of understanding, lack of creativity.
    Traffic has gotten worse because it has become accepted. I was so upset that bridge construction , that was known about for months and years in advance had no plans for relieving traffic congestion during the construction.
    Oh, there were feeble attempts to warn interstate travelers that there was major construction ahead , but there was no solution put in place . No alternative route suggested, no warning for local travelers at highway entrances that you would be stuck I traffic for an hour if you entered and there would be no way to exit before you hit this traffic. No police presence to help bring home the seriousness of your decision to enter the highway. Just let them sit… For an hour …that is the answer the highway agency has.
    As for using alternative routes, one alternative route, that would have diverted large amounts of traffic would be to suggest a little used expressway. Was this done? No. The alternative road was also a toll road, could the toll be waived on this alternative road during construction, to encourage people to use it? No, that’s a different agency.
    Lack of communication, lack of planning, lack of action , lack of interest = traffic.

    Investment in infrastructure requires taxes or fees to be collected on road use.
    This is what government is supposed to do. I really question where the money actually goes that is supposed to be spent on roads. Is it spent on roads, or is it diverted to replace money that has been diverted somewhere else, because some politicians believes that all taxes are evil, that government is evil , that raising taxes is a sin of the first order… Well traffic …TRAFFIC is a bigger sin.

  4. Jeff Smith

    Your suggestions are exactly why it is so prohibitively expensive to build infrastructure. Every bridge that you build across a river in America has to be built twice. A temporary bridge under the real bridge to “protect” the river from anything falling in it. Then the temporary bridge has to be removed. If you repealed the EPA, then you could start building in America again.

    1. jonboinar

      Yes, and rivers in Ohio would catch fire as they used to before the EPA, and you’d be able to see and taste the air in Los Angeles as you could before the EPA, these type things to a much greater extent than at that earlier time due to much greater congestion, and we’d be losing species at an even greater rate than we are today. Get a libertarian grip!

  5. Ernest petito

    .American taxpayers are being buried alive financially! Especially the ones that don’t have the local, state, goverment jobs that pay a overpaid pensions, free benefits, guarantee job raises! Regular hard working Americans only see everything we need going sky high not one politician is doing the right thing for any of us Americans here! The infrastructure is failing because of the highest costs in history with us overpaying for everything that is done 50 years behind the times and 3rd partied out with a private crony politician friend making a profit that we Americans should get going to the treasury!

  6. stingray1

    We desperately need to spend on infrastructure. However, every time one of our federal politicians calls for a stimulus and claim its for infrastructure it goes directly to their cronies as repayment for their election support and fundraising like Obama’s nearly $1 trillion “stimulus”. Our nation must devise a system where the money goes directly from the people to the states for infrastructure to completely cut the Feds out of the process and avoid that corruption premium that wastes so much of our tax money.

  7. Jack

    Enter your comment here..
    I thought we were going digital and all work from our home computers – no need to have rush hour except on the “Information HIghway” ……WHAT HAPPENED?

  8. David

    A most perceptive and provocative article. However what it omits is the suggestion that American business should pay its share of infrastructure costs. Business profits enormously from adequate and efficient infrastructure; yet business both avoids paying corporate tax on those profits and chooses to focus on paying out short term profit rather than building long term value through reinvestment. How about suggesting that business should reinvest a substantial portion of its profits in infrastructure both via paying corporate tax and direct private investment instead of relying solely on regressive flat taxes: use taxes, fuel taxes, and tolls?

  9. Pingback: Secure Data, Safer Delivery | Longitudes

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s