Tuesday, July 15, 2008

Infrastructure Part 1

I attended a hearing on infrastructure the other day in the House of Representatives and heard testimony from a few representatives about possible solutions.

One solution, proposed by Representatives Keith Ellison (the guy from Minnesota who put his hand on a Qur'an when he was sworn in) and Rosa DeLauro, is to establish a national infrastructure bank that would act as a specially-chartered federal entity charged with investing in major infrastructure. Robert Goodspeed writes of the proposed infrastructure bank,
  1. An infrastructure bank would solve solves the short-sighted funding problem, and creates a new body to fund large projects beyond existing programs, expanding capital for infrastructure. However as planners are well aware, not all transportation infrastructure is self-supporting. The interstate highway system, many bus and subway lines, and an intercity transportation network would not exist today if each of their parts were required to be self-supporting, but that doesn't mean they are bad investments. I worry it would create additional funds for high-visibility projects, leaving the rest to fight over a limit pool of money.
The bank's funds would come from direct subsidies, direct loan guarantees, long-term tax-credit general purpose bonds, and long-term tax-credit infrastructure project specific bonds, with an aim of making the entity self-sustaining in five years. It's a good idea, and one supported by Barack Obama, but I think proposals for the infrastructure bank need to be more ambitious in terms of funding. If required infrastructure improvements alone are estimated to be $1.6 trillion, $60 billion for the bank is not nearly enough. It's also not enough to fund these "large" projects - most infrastructure projects of even moderate size run well into the tens of billions of dollars.

Representative Blumenauer proposed establishing a commission to assess the nation's infrastructure needs and draw up a national vision for infrastructure. He said that this vision should be tantamount to FDR's massive infrastructure plan, and I think that's a good idea. The problem is, Blumenauer's plan doesn't address funding, which is the major impediment to initiating federal infrastructure projects. Hiking up the gas tax is unreasonable andpolitically unpalatable. It is also a conceptually bad idea, as the emphasis should be on reducing driving; if that is achieved, revenue from a gas tax won't be enough to effectively fund infrastructure projects. Indeed, it already isn't - the Highway Trust Fund (which is funded by the gas tax) will go into deficit in 2009 for the first time ever.

It's quite obvious that funding from the federal government will not be able to sustain infrastructure projects alone, which is probably why Ellison's proposed national infrastructure bank is so modest in its funding proposals. One idea, put forward by DeLauro and supported by Representative Mica, is extensive public-private partnership programs. In such a program, which was said to be "more like a business deal," by Mica, the government and the private sector would jointly raise capital for an infrastructure project, with the government assuming a portion of the risk. User fees, usually taking the form of tolls or fees for ridership, are another solution to making infrastructure investment more viable. Regardless, more federal funding is needed, and fortunately Congress will now probably be more willing to release more money for infrastructure, especially transit.

There are also minor funding proposals, such as the container fee on incoming cargo proposed by Representative Calvert. This is a good idea, and a solid incremental step in securing additional infrastructure funding, but a more comprehensive national funding program, such as establishing a national infrastructure bank, is needed to ensure proper funding both for new infrastructure projects, and for infrastructure repair.

In sum, Congressional progress on this issue is encouraging, but if tax hikes are necessary to ensure sufficient funding it will be interesting to see if Congress' mettle holds up. Regardless of the political situation, massive funding increases are required in order to secure America's infrastructure future, especially considering the need, in face of higher gasoline prices and global warming, of a much more extensive nationwide transit system.

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