November 2014

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Infrastructure 24 | www.cedmag.com | Construction Equipment Distribution | November 2014 addition to investment of about $83 billion in constant 2009 dollars (about $100 billion per year in today's dollars). This enhancement is about 0.6 percent of GDP. Increasing infrastructure formation by these amounts in the LIFT model illustrates how such enhanced invest- ment can generate substantial long-term economic returns that significantly exceed their costs. A sustained multiyear investment boost for public infrastructure could be derived from a combination of funding sources – federal, state and local governments as well as the private sector. Indeed, all sources responsible for supplying funding for public infrastructure would be required to make more significant commitments in this modeling scenario. Compared to a baseline forecast that assumes contin- ued and relatively low levels of public infrastructure investment, the report finds the following: n In the short term, enhancing the level of infrastruc- ture investments would boost jobs by almost 1.3 million by 2015 and 1.7 million by 2017. This number would fall over time as the productivity effects of better infrastruc- ture take hold. As a result, the economy would improve significantly. By 2020, the level of real GDP would rise about 1.3 percent, and by 2030, 2.9 percent. Over the long term, competitiveness, output and employment across industries would be enhanced largely due to the productivity effects of better infrastructure. Increased productivity would be largely responsible for the higher GDP, but so would higher labor participation within a more dynamic economy. n The resulting increase in household disposable income is the best indicator of the net welfare gain. The enhanced infrastructure spending raises real disposable income, providing gains of 1.2 percent by 2015 and 3.4 percent by 2030. In this case, net of investment and after taxes, improve- ments to all types of infrastructure would imply a net gain in real income of $1,300 per household by 2020 and $4,400 per household by 2030, measured in 2009 dollars. n Sustained infrastructure spending creates a progres- sively more productive economy. Because of cumulative effects through time, by 2030 infrastructure investments would produce economy-wide returns of close to $3 per every $1 invested. n Enhanced economic growth from increased infra- structure investments would ultimately provide greater government revenue levels, which would help to recover the costs of higher public investment spending. Outlook As multiple sectors of public infrastructure show signs of aging and decay with no solutions in sight, we are at an appropriate juncture to consider a highly focused infrastruc- ture effort designed to improve safety, increase competi- tiveness and improve economic throughput. Accelerated private- and public-sector efforts to develop infrastructure, including a significant supply of new spending, allows the pursuit of three economic objectives at once: 1. New funding will help the United States catch up from a well-documented backlog of deferred infrastruc- ture projects that have accumulated over the past 10 years, including maintenance, repair and new capacity. Many of the critical problems already are identified. It is urgent to take immediate action on long-standing and stalled projects. 2. A new national infrastructure strategy that embraces proven innovations in finance and regulatory reform as well as construction and operational efficiencies can help to lower operating costs, increase profitability, mitigate logistical challenges, attract economic development and provide a catalyst for businesses to invest in new expan- sion and growth. 3. Greater infrastructure investment will improve an economy that continues to suffer from high unemploy- ment and lackluster growth. The necessity of new investment does not mean we ("The Case for Catching Up" continued from page 23) (continued on page 26) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 HONG KONG SINGAPORE GERMANY FRANCE SWITZERLAND UNITED KINGDOM NETHERLANDS UNITED ARAB EMIRATES KOREA SPAIN JAPAN LUXEMBOURG CANADA UNITED STATES WORLD INFRASTRUCTURE RANKING 2012 Global Competitiveness Index Source: World Economic Forum, "The Global Competitiveness Report 2012–2013," Table 5. Source: Building America's Future, "Falling Apart and Falling Behind," 2012. PROJECTED INCREASE IN U.S. TRAVEL AND FREIGHT PORT VOLUME TO DOUBLE BY 2020 FREIGHT TONNAGE TO INCREASE 88% BY 2035 PASSENGER MILES TRAVELED TO INCREASE 80% IN 30 YEARS SHANGHAI TOP EIGHT U.S. PORTS 30,607 TEUS 2011 PORT VOLUME PER 1,000 TEUS * + SEATTLE 2,033 TEUS 31,700 TEUS > + + + + + LOS ANGELES 7,940 TEUS LONG BEACH 6,061 TEUS OAKLAND 2,342 TEUS NEW YORK/ NEW JERSEY 5,503 TEUS HAMPTON ROADS 1,918 TEUS SAVANNAH 2,944 TEUS HOUSTON 1,866 TEUS only about 1.7% of GDP in infrastructure. Manufacturing CEOs on the front lines tell us they require a highly functional and better performing transportation network to move $1.8 trillion in goods and services. "A major investment in infrastructure—specifically, road, rail, seaports and energy—is needed and could help build, rebuild or strengthen American manufacturers' competitive advantage over foreign competition. When you look at the opportunities to improve and attract from competitor nations, it gets down to things like the quality of the road system." – Manufacturing CEO "Rail, highways and aviation tie together. Without those things, it's hard to see how a company like us could do business. One of the competitive advantages that the U.S. has, although I think it's losing it, is an efficient infrastructure that allows goods to flow to market." – Manufacturing CEO "Our ports need a huge amount of work, especially if you are exporting." – Manufacturing CEO FALLING BEHIND IN PORT CAPACITY * A TEU is a Twenty-Foot Equivalent Unit, a volume measurement equal to the dimensions of a 20-foot shipping container. U.S. Manufacturers on Vital National Infrastructure | Executive Overview 3

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