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When Does an Infrastructure Bank Make Sense?

Samuel Staley
September 9, 2010, 2:11pm

President Obama, speaking before an enthusiastic labor crowd in Milwaukee, called for a $50 billion investment in the nation's infrastructure funded in part through a national infrastructure bank. The long term goals, according to the White House's Fact Sheet, include:

The president promises that the infrastructure bank will "leverage" federal resources to maximize the productivity of transportation investments. As the President said in Milwaukee,

"This is a plan that will be fully paid for.  It will not add to the deficit over time -– we’re going to work with Congress to see to that.  We want to set up an infrastructure bank to leverage federal dollars and focus on the smartest investments.  We’re going to continue our strategy to build a national high-speed rail network that reduces congestion and travel times and reduces harmful emissions.  We want to cut waste and bureaucracy and consolidate and collapse more than 100 different programs that too often duplicate each other.  So we want to change the way Washington spends your tax dollars.  We want to reform a haphazard, patchwork way of doing business.  We want to focus on less wasteful approaches than we’ve got right now.  We want competition and innovation that gives us the best bang for the buck."  

But, as I pointed out in testimony before the House Ways & Means Select Revenue Measures Subcommittee on May 13, 2010, how the bank is structured will be fundamental to determining whether these funds will be squandered or productively add to the transportation network. A key component will be whether its set up as a true revolving loan program, without ongoing subsidy from general taxes, so that it has to survive on the merits of the programs it funds.

Of course, imbedded in the president's remarks is a remarkabley shallow understanding about how some of these investments will actually improve the transportation network. An intercity rail system-high speed or slow speed-will not reduce congestion in a meaningful sense, nor will it have a meaningful impact on air quality. 

As always, the devil is in the details. Stay tuned.


Samuel Staley is Research Fellow


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