The Obama administration recently made the establishment of a National Infrastructure Bank part of its proposed budget. The project would allocate $10 billion to the National Infrastructure Bank with the goal of leveraging up to $20 billion in total infrastructure investment. Three major legislative proposals establishing a National Infrastructure Bank have been circulating since 2011.
An infrastructure bank is a government-run fund that collects money from initial appropriations that is then invested in infrastructure projects expected to generate revenue to repay the investment. The banks are intended to attract private investment and maximize the value of infrastructure spending.
The National Infrastructure Bank would be an independent entity established by the federal government and given considerable control over federal transportation funding. The bank would be empowered to accept for funding any infrastructure project with a potential federal commitment above a specific threshold (the original bill set this at $75 million).
The bank also would have the authority to determine the share of federal spending on the project and to issue bonds and loans (at differing interest rates) or grants to state or local governments issuing debt while providing guarantees for infrastructure project loans.
Proponents of the infrastructure bank idea say the funds will help leverage resources while stimulating additional public and private investment in infrastructure. A 2012 report from the Congressional Budget Office, however, pointed out the National Infrastructure Bank would only shift funding for infrastructure projects from state governments to the federal government and would create no real increase in investment.
Opponents of the plan also express doubts the infrastructure bank can avoid becoming a slush fund for pork barrel spending. Although the stated goal is to create an agency that bases its funding decisions on real-world technical factors, it is unlikely the bank and its board could avoid becoming involved in political wrangling and pork. The main effect would be to take more infrastructure decisions away from the states and shift them to the federal government.
The following articles examine infrastructure banks from multiple perspectives.
The CBO Just Poured Cold Water on Obama’s Idea for a National Infrastructure Bank
http://ricochet.com/main-feed/The-CBO-just-poured-cold-water-on-Obama-s-idea-for-a-national-infrastructure-bank
James Pethokoukis of Ricochet examines the Congressional Budget Office’s report on infrastructure banks and discusses how its findings could affect future infrastructure bank proposals.
Infrastructure Policy: Lessons from American History
http://www.thenewatlantis.com/publications/infrastructure-policy-lessons-from-american-history
Adam J. White of The New Atlantis examines the concept of infrastructure banks and other transportation policy measures across U.S. history.
Obama’s Jobs Agenda: An Infrastructure Bank that Robs You
http://cei.org/op-eds-articles/obamas-jobs-agenda-infrastructure-bank-robs-you
Writing in Forbes, Clyde Wayne Crews of the Competitive Enterprise Institute argues against implementation of a National Infrastructure Bank and highlights several better ways to increase infrastructure investment.
A National Infrastructure Bank?
http://reason.org/news/show/a-national-infrastructure-bank
Robert Poole, director of transportation policy at Reason Foundation, examines the idea of a national infrastructure bank and argues that although an NIB could fill a niche, the proposal has major problems and needs to be refined.
Infrastructure Bank a Bad Idea
http://www.americanthinker.com/blog/2011/09/infrastructure_bank_a_bad_idea.html
Writing in American Thinker, K.E. Campbell states a national infrastructure bank would be “an embodiment of statism, central authority, deficit spending, and social engineering (think ‘green jobs’ and union favoritism) in the form of a new, eternal and ever-expanding federal bureaucracy.”
Why We Don’t Need An Infrastructure Bank? Japan Is Why
http://www.forbes.com/sites/paulroderickgregory/2011/08/21/why-we-dont-need-an-infrastructure-bank-japan-is-why/
Paul Roderick Gregory compares the proposed national infrastructure bank to the Japanese Postal Bank, documents some of the problems the Postal Bank created, and explains how these problems could plague the NIB.
The Limited Benefits of a National Infrastructure Bank
http://www.heritage.org/research/testimony/2011/10/the-limited-beneftis-of-a-national-infrastructure-bank
In testimony regarding a proposed national infrastructure bank, Ronald Utt concludes they create little added value beyond what could be achieved by modest alteration in existing transportation programs. In addition, he states, any value the banks may create could be more than offset by the problems they create.
Setting Priorities, Meeting Needs: The Case for a National Infrastructure Bank
http://heartland.org/policy-documents/setting-priorities-meeting-needs-case-national-infrastructure-bank
In this paper from the Brookings Institution, Galston and Davis advocate the creation of a National Infrastructure Bank and offer recommendations on its structure, mission, and financial powers and responsibilities.
Taxpayer-Funded Infrastructure Bank: The “Investment” Isn’t Worth It
http://blog.heritage.org/2013/01/28/taxpayer-funded-infrastructure-bank-the-investment-isnt-worth-it/
Emily Goff argues that the president and Congress should put to rest the proposal for a national infrastructure bank to federally fund transportation and infrastructure projects with taxpayer dollars. Goff expresses doubt about the ability of the NIB to act as a stimulus for the economy.
Infrastructure Banks Explained: A Common State Tool Gets Mixed Marks
http://www.pewstates.org/projects/stateline/headlines/infrastructure-banks-explained-a-common-state-tool-gets-mixed-marks-85899375231
Writing for Stateline, Daniel Vock examines the track record of state infrastructure banks and finds mixed success.
Infrastructure Bank Proposals Would Concentrate Transportation Policy in Washington
http://heartland.org/policy-documents/infrastructure-bank-proposals-would-concentrate-transportation-policy-washington
Ronald Utt of The Heritage Foundation examines the various infrastructure bank proposals and finds one common element: “Although each proposal differs in significant ways, all would lead to a concentration of infrastructure investment decisions in Washington, DC, bypassing state departments of transportation and other government entities that are responsible for most such decisions under existing law.”
Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit the Budget & Tax News Web site at http://news.heartland.org/fiscal, The Heartland Institute’s Web site at www.heartland.org, and PolicyBot, Heartland’s free online research database, at www.policybot.org.
If you have any questions about this issue or The Heartland Institute, contact Heartland Institute Senior Policy Analyst Matthew Glans at 312/377-4000 or [email protected].
Matthew Glans joined the staff of The Heartland Institute in November 2007 as legislative specialist for insurance and finance.
