Infrastructure Bank again in play as an idea in search of its time

Democrats and Senate Republicans trying to turn President Joe Biden’s signature infrastructure plan into legislation are looking to a new bank to help pay for roads, bridges and public transportation.

The idea, endorsed in a framework last week by a group of about 20 senators, has been thrown for decades as an alternative to increasing the gasoline tax or other infrastructure funding mechanisms. . Democratic Senator Mark Warner (Va.), Who argued for a $ 20 billion infrastructure bank, called it a “personal part of the package.”

Proponents argued that a federal infrastructure bank would allow more private funding to pay for the nation’s transportation network. But demand for privately funded infrastructure in the United States was limited beyond toll roads, and when there was interest, some projects were plagued by overly optimistic forecasts that burned down. Investors. Critics also warn that politics could seep into the lending process.

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Construction workers perform roadwork during a heat wave in Dallas, Texas on June 17, 2021.

Photo: Kathy Tran / Bloomberg via Getty Images

An infrastructure bank could initially be created with money from the federal government. The bank would lend to projects that would end up repaying funds plus interest, for example through income generated from bridge tolls or passage fees. Public loans could provide low-interest loans for large portions of projects, making private investment in infrastructure more attractive, proponents say, and allowing plans to move forward without significantly raising taxes. or the deficit.

Warner, as well as other senators, including the Republican Roy Blunt (Mo.), introduced a bill earlier this year (S.1499) about this question.

“We are the only industrial country in the world that does not have this tool,” Warner said at a virtual conference last week. “This kind of tool, in terms of raising private capital with a federal backstop, is smart policy.”

Despite bipartisan support for the concept in recent years, it has not taken off, and not all analysts agree with Warner’s characterization of smart politics.

“As we move infrastructure decision making to Washington rather than state level, local level I think at the end of the day you’re going to get decisions that won’t be as good,” he said. said Robert Krol, professor of economics at California State University. “They will be biased in favor of construction over maintenance and projects that are not worth the effort will be built.”

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Past obstacles

Recent presidents – including Barack obama and Donald trump – unsuccessfully launched the concept of an infrastructure bank.

More recently, as Democrats have turned to proposals to raise corporate taxes to finance infrastructure, more Republicans have joined a national infrastructure bank. Senator Rob portman (R-Ohio) called it an “interesting” and “two-party” idea last week.

The White House did not respond to a request for comment on whether Biden supports the concept.

But critics say there is already money available to borrow. Charles Marohn, chairman of advocacy group Strong Towns, warned the bank could become an “off-the-book” granting body. “It’s not their ability to get money, it’s their ability to pay it back,” Marohn said.

The idea also has criticism in Congress. Senator Bernie sanders (I-Vt.) Told NBC’s “Meet the Press” show on Sunday that he would not support “privatization of infrastructure.”

The private sector has also been reluctant to invest in large infrastructure projects for the associated risk, as projects may face delays and cost changes. A passenger train proposed from Southern California to Las Vegas recently failed to attract enough investors for a bond sale even after its reduction.

A global infrastructure hub report last year found that global private investment in infrastructure has declined steadily over the past decade.

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Other efforts

Congress established a pilot state infrastructure banking program in 1995, allowing states to offer a range of loans and credit assistance to public and private sponsors, according to the Federal Road Administration. Use is “not widespread” today, according to Joseph Kile, director of microeconomic analysis at the Congressional Budget Office.

Of the 33 states that have state infrastructure banks, only about a dozen actively used them, Kile said in his May testimony. Banks do not receive designated federal grants, but states can use a federal funding formula for them, according to at the CBO.

From 2007 to 2016, the average annual funding for road infrastructure from state banks was $ 200 million, or about 1% of the amount of new state and locality funding subsidized by the federal government, according to the CBO. Krol said the government could give more money to state banks, but the creation of a national bank would be “redundant.”

“I really don’t see a lot of value in it,” Krol said.

Some proponents, like Alphecca Muttardy, macroeconomist for the Coalition for a National Infrastructure Bank, want to see a massive $ 5,000 billion bank that would only lend to infrastructure projects and be large enough to cover the entire deficit. infrastructure funding in the federal budget. The coalition supports a House bill (RH 3339) which would create a national infrastructure bank, which was introduced by the Rep. Danny davis (Dill.).

“You have to have it big enough to cover everything,” she said. “By having it big enough to cover everything, then all of these backcountry areas would be able to get their fair share of the funding. Right now the pie is too small.

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