The Economic Impact and Financing of Infrastructure Spending

The goal of this report is to understand the short- and long-term effects of public infrastructure spending on the U.S. economy, as well as to contribute new suggestions towards alternative financing of future road construction. Estimated Short-Run Effects: 1. In the short-run, a dollar spent on infrastructure construction produces roughly double the initial spending in ultimate economic output. 2. The biggest effects of infrastructure spending occur in the manufacturing and business services sectors. 3. In better economic times, spending on infrastructure construction generates a larger return. Yet even in a recession, the overall effects of initial spending still double output as they ripple through the economy. Estimated Long-Run Effects: 1. Over a twenty-year period, generalized ‘public investment’ generates an accumulated $3.21 of economic activity per $1.00 spent. 2. Over twenty years, investing $1.00 in highways and streets returns approximately $0.35 in tax revenue to federal and state/local governments, of which $0.23 specifically accrues at the federal level. 3. Over twenty years, investing $1.00 in sewer systems and water infrastructure returns a full $2.03 in tax revenue to federal and state/local governments, of which $1.35 specifically accrues at the federal level. Spending on public infrastructure stimulates the U.S. economy in the short-run. Investing in infrastructure goes beyond mere improvements to the quality of roads, highways, sewers, and power plants. These investments also generate significant economic returns for other portions of the U.S. economy and substantially increase ultimate tax revenue for the government. In order to adequately fund public infrastructure, the U.S. must seek innovative new funding mechanisms that do not burden rising deficits, and likely must stimulate the private sector. Programs like public-private partnerships, individual and corporate contributions to road financing and user fee lanes are potential mechanisms through which public spending on infrastructure can be supplemented beyond the gas tax.

  • Record URL:
  • Corporate Authors:

    College of William and Mary

    Thomas Jefferson Program in Public Policy
    Williamsburg, VA  United States 

    Associated Equipment Distributors

    565 Pennsylvania Avenue, NW, Suite 601
    Washington, DC    20001
  • Authors:
    • Cohen, Isabelle
    • Freiling, Thomas
    • Robinson, Eric
  • Publication Date: 2012


  • English

Media Info

  • Media Type: Web
  • Features: Figures; References; Tables;
  • Pagination: 53p

Subject/Index Terms

Filing Info

  • Accession Number: 01370211
  • Record Type: Publication
  • Files: TRIS
  • Created Date: May 16 2012 3:06PM