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Presentation to the National Surface Transportation
Policy and Revenue Study Commission
June 26, 2006
The Role of Transportation
in the U.S. Economy
Jack Wells
Chief Economist
U.S. Department of Transportation
Scope of the Transportation
Sector
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
NIPA accounts show Transportation as
2.9% of GDP in 2004 (for-hire only)
Adding in In-house Transportation
increases the total to about 4.9%
GDP produced for a Transportation
purpose: 11.2%
Adding in the Household sector raises
Transportation to about 18.6% of GDP
Growth in Passenger and Ton Miles
6
Miles (Millions)
5
4
Passenger-miles
3
Ton-miles
2
1
0
1960
1970
1980
1990
Year
1996
1998
2000
Growth in Freight Relative to GDP
350
GDP
300
250
GDP for Goods
200
Ton-miles
150
100
50
0
1965
1975
1985
1995
Year
1997
1999
Transportation is particularly
important to certain industries

Input-output data show transportation is
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12 % of Agricultural Fertilizers and Chemicals
10 % of Steel and other Metals
9 % of Coal
8 % of Chemicals
8 % of Motor Vehicles
8 % of Food
High percentages of Stone and Clay, Livestock,
Paper, Paints, Rubber, Lumber, and Plastics
Why is Transportation Critical
to These Industries?

Freight Transportation is important
because of the
Weight of goods that must be carried
 Distance that goods must be carried
 Speed that goods must be carried

Weight of Goods

Industries that use heavy inputs or outputs
include
Construction (stone and gravel)
 Steel and other metals
 Agriculture
 Energy (coal and oil)
 Chemicals

Distance of Goods

Industries that must move goods over
great distances include
Energy (coal and oil)
 Retail trade
 Agriculture

Speed that Goods Must be
Carried

Perishable commodities




Flowers, fresh foods
Fashion merchandise
High-Technology products
High-value commodities



High value creates incentives to reduce inventory
carrying costs by reducing transportation time
Pharmaceuticals
Electronics
Labor Productivity
Transportation vs. All U.S. Business, 1990-2000
Index (1990=100)
180
160
Local Trucking
Rail
140
Trucking, except local
Air Transp
120
U.S. Business
100
Petroleum Pipeline
80
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Year
Source: Bureau of Labor Statistics
Changes in Average Length of Haul
1,600
1,400
Air
1,200
1,000
Rail
800
600
Truck
400
200
Year
0
1960
1970
1980
1990
1996
1998
2000
U.S. International Merchandise Trade and GDP
1970-2001
(In current dollars)
Index of current dollars (1970=100)
2,500
2,000
1,500
Merchandise Trade
1,000
500
Gross Domestic Product
1970
1975
1980
1985
Year
1990
1995
2000
Source: BTS, based on BEA data
“The greatest improvements in the productive
powers of labor . . . seem to have been the effects
of the division of labor. . . . The division of labor is
limited by the extent of the market.”
-- Adam Smith,
Wealth of Nations, 1776
Domestic Freight Ton-Miles by Mode
1991-2001
1.8
1.6
Index 1991 = 1.0
Air
Railroad
1.4
Truck
1.2
Oil and Gas Pipelines
1.0
Water
0.8
0.6
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
Year
Source: Bureau of Transportation Statistics
Freight Transportation Output Index (FTOI)
Dec-99
Jul-02
120
May-03
110
Apr-00 Sep-01
100
90
Aug-90
Feb-88
80
Jul-89
70
Start of
the latest
recession
June-91
Start of
the latest
recession
Dec-80
60
Apr-79
50
1980
1985
1990
NBER-defined recession
1995
NBER-defined slowdown
2000
Business Travel and
Leisure Travel
90%
82%
80%
70%
60%
50%
40%
30%
20%
18%
10%
0%
Business
Leisure
Percentage of Business Trips
by Distance to Trip Destination
45%
41%
40%
33%
35%
30%
25%
20%
15%
12%
10%
5%
7%
5%
3%
500-749
miles
750-999
miles
0%
50-99
miles
100-249
miles
250-499
miles
1000+
miles
Passenger Transportation Output Index (PTOI)
Noc-00 Aug-01
Dec-02
120
Aug-02
110
May-03
100
Impact
of 9/11
90
Sep-01
Feb-89
80
Start of
the latest
recession
70
Nov-79
May-81
60
1980
1985
1990
1995
NBER-defined recession
Jan-03
2000
Average Hourly Earnings - Transportation vs.
Total Private Sector
10
1982 Dollars
9.5
Transportation and Public Utilities
9
8.5
8
Total Private Sector
7.5
7
6.5
6
Month/Year
Source: Bureau of Labor Statistics
Roadway Congestion Index
1.4
1.2
1
0.8
0.6
0.4
0.2
0
1982
1985
1990
1995
1996
Year
1997
1998
1999
2000
Source: Texas Transportation Inst
TTI Estimates Leave Out
Many Congestion Costs
Billions of dollars
TTI estimates of delay and fuel waste
63.1
Cities not included in TTI estimates
12.8
Productivity losses
38.0
Unreliability losses
38.0
Truck cargo delays
3.8
Safety and environmental costs
12.6
Total highway congestion costs
168.3
Congestion Costs are Growing
Faster than GDP
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Since 1982, the cost of congestion has
grown at 8 % per year, more than double
the rate of growth of the economy
In 20 years, continued growth at this rate
would bring the cost of congestion to
$890.5 billion
Equal to 4.3 % of GDP
Congestion is Growing Faster in
Rural Areas and Small Cities
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Congestion has traditionally been an
urban phenomenon
But congestion is growing most rapidly in
rural areas
From 1992 to 2002, traffic per lane-mile
grew
35 % on rural interstates
 21 % on urban interstates

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Rural congestion particularly affects freight
Congestion is growing more
rapidly in smaller cities

TTI found congestion costs grew from
1997 to 2003 –
24% in Very Large Cities
 26% in Large Cities
 36% in Medium Cities
 56% in Small Cities

Real Net Capital Stock for Transportation
and Other Industries
Log ($B)
4
Highway
Railroad
3
Motor Vehicles
2
Other Industries
1
0
1947
1952
1957
1962
1967
1972
Years
1977
1982
1987
1992
1997
Dollars ($Millions)
Government Revenues Generated by
Transportation
140,000
120,000
100,000
80,000
60,000
40,000
20,000
-
All Levels
Federal Highway
1985 1987 1989 1991 1993 1995 1997 1999 2001
Year