Government Failure in U.S. Transportation

Getting goods and people to their destinations accounts for an enormous share of U.S. economic activity. In 1996, Americans spent roughly $600 billion commuting to work, traveling for pleasure, and buying and operating vehicles. Firms spent more than $500 billion shipping products to distribution centers and retail outlets, sending their employees to meet with customers and suppliers, and buying and operating vehicles. Local, state, and federal government spending on transportation infrastructure and services upped the total to $1.3 trillion or roughly 17 percent of GDP.

Transportation also absorbed users’ time—a valuable commodity excluded from GDP. In 1996, travelers spent roughly 120 billion hours in transit, and surface and air freight absorbed 3.4 billion hours. If travelers value time at half their hourly wage—a common assumption among economists for urban commuters —and if shippers attach a cost of, say, 7 percent of their shipments’ value for each additional day spent in transit, then transportation accounts for another $1.2 trillion in economic activity.