AED Report Finds 2:1 Return on Infrastructure Investment in First 2 Years

Money spent on public infrastructure has important benefits for the U.S. economy and can also boost government revenues, according to a recently released report from the Thomas Jefferson Program in Public Policy at Virginia’s College of William and Mary that was commissioned by the Associated Equipment Distributors.Authors found that each dollar spent on infrastructure construction over the course of two years produces almost double the initial spending in terms of economic output. The long-range impact was likewise significant: Each dollar in aggregate public infrastructure spending generates $3.21 in economic output over a 20-year period.

“The bottom line is that there’s a big difference between investment and wasteful spending,” Toby Mack, AED president and CEO, said in a statement. “When the federal government pays to build a road or sewer, it’s like a business buying a bulldozer or computer. It’s a productive asset that will spur economic activity and generate revenues for years to come.”

AED is an Illinois-based trade association representing companies involved in the distribution, rental, and support of equipment used in construction, mining, forestry, power generation, agriculture, and industrial applications.

Economic impacts of infrastructure investment go beyond just the construction industry, the report notes. Each dollar expended on infrastructure generates approximately 35 cents in direct economic activity for manufacturers; 20 cents for professional and business services providers; and 10 cents for the finance, insurance, real estate, rental, and leasing sectors.

Infrastructure investment also produces revenue for government at all levels, according to the report. Over the span of two decades, one dollar in aggregate infrastructure spending results in 96 cents in tax revenue. Each dollar specifically spent on highways and streets during that same period returned about 35 cents in tax revenue, with 23 cents of that amount accruing at the federal level.

The report also concludes that the United States, to adequately fund public infrastructure, must pursue innovative financing mechanisms that go beyond the gas tax and do not further increase budget deficits. Examples of these mechanisms include public/private partnerships, tolled highway lanes, and individual and corporate contributions to road financing.

“The William and Mary report strengthens the fiscal conservative case for infrastructure,” Christian Klein, AED’s vice president of government affairs, said in a statement. “The $39 billion the federal government invests in roads and bridges this year will generate close to $9 billion in additional federal tax revenues over the next 20 years. That’s a win/win proposition for both the American people and the government.”

AED’s 53-page report, “The Economic Impact and Financing of Infrastructure Spending,” is available at bit.ly/Economic-Report.