Right Idea, Wrong Scale
Michael Likovsky makes the case for an infrastructure bank in this New York Times op-ed earlier this week. Readers of the blog know I've been on something of a crusade for 3.5 years about this, so it's worth taking a look at the proposal. Here's the key excerpt:
A bipartisan bill introduced by senators including John Kerry, Democrat of Massachusetts, and Kay Bailey Hutchison, Republican of Texas, seeks a similar but modernized solution: it would create an American Infrastructure Financing Authority to move private capital, now sitting on the sidelines in pension, private equity, sovereign and other funds, into much-needed projects.
Rather than sell debt to investors and then allocate funds through grants, formulas and earmarks, the authority would get a one-time infusion of federal money ($10 billion in the Senate bill) and then extend targeted loans and limited loan guarantees to projects that need a push to get going but can pay for themselves over time — like a road that collects tolls, an energy plant that collects user fees, or a port that imposes fees on goods entering or leaving the country.
Does America need an infrastructure bank? Need, not necessarily. But America does need enormous investments in infrastructure, so if such a bank is a means to that end, then I am happy to recommend it. But look at the piddling amount of money in the proposal -- $10 billion when our total needs exceed $2000 billion and our unfunded needs exceed $1000 billion. Even at the higher amounts that President Obama has floated in the past ($30 - $50 billion), we would have to achieve incredible leverage on the government's funds to attract enough private funds to make a dent in our total needs.