During the Obama administration there was some thought about forming a National Infrastructure Bank (NIB) but the idea never came to fruition. The Build America Bond program was undertaken instead; this effort enabled states and municipalities to issue bonds tied to capital expenditures at significantly lower rates primarily through the use of tax credits. Now, as Joe Biden has promised to Build Back Better, it is time for the United States to join many other G20 countries and form a National Infrastructure Bank (NIB).
Critics across the political spectrum have reasons to dislike NIBs. Conservatives have historically disliked the concept of large centralized national banks (think Thomas Jefferson vs Alexander Hamilton) and today’s pundits would likely raise concerns about a large entity controlled by government bureaucrats determining national spending. Progressives are similarly leery of large banking institutions and doubtless would cite concerns about business interests, or billionaires, benefiting from public private partnerships amongst other negative consequences.
But the idea has real merit and could be sold to both sides of the political spectrum. For one thing, the US only spends around half a percent of GDP on national infrastructure: this compares to 0.68% by Germany, 0.95% by Japan, 1.65% by Norway and over 5% by China[i] and these countries have infrastructure banks. For any US citizen transiting an international airport or traveling abroad the differences can be regretfully noticeable. Infrastructure spending is very popular right now with many policy makers, economists and the electorate who see that we have to repair and improve our crumbling roads and bridges – and ports and airports amongst other things – if we are to compete with other countries let alone mitigate some of the mounting hassles caused by deficient infrastructure which impact many Americans on a daily basis. The American public, comfortable enough with cryptocurrencies and social networking, certainly seems ready enough for the idea of an infrastructure bank.
And the formulation of a bank could do a great deal to engender support. A bank committee or board comprised of people across the spectrum would be able to evaluate projects proposed on their merits and economic impact; not just political appeal lessening the influence of Congress and the Department of Transportation from one election cycle to the next, improving decision making, and depoliticizing a vital process.
The right could be persuaded to form an infrastructure bank by the idea of accelerating investment into infrastructure with private funds. Another attractive idea to conservatives is that a bank would entail less burden to the taxpayers and diminish government influence in infrastructure selection.
The left could be persuaded by much the same idea. Poor working people would not shoulder the entire burden. Large institutional investors would also be putting up capital for use but only after certain agreed upon standards for investment were met.
Furthermore, while public private partnerships have come under criticism for murky side dealings a bank like entity could be set up to avoid a lot of conflicts. Project proposals could be presented to the public as well as bank staff; the bank board or selection committee could be given specific guidelines to adhere to, and the tenure of the board could be staggered to depoliticize the composition of the bank. Transparency would eliminate, or at least lessen, painful episodes like the Bridge to Nowhere or Solyndra. Data dependence, a staggered board, and a technocratic staff could bring back trust and some degree of bipartisanship, or non partisanship, to a vital government function that we can no longer afford to ignore.
[i] Statista 2018 review of worldwide Infrastructure spending.
