Traffic congestion is a sexy topic for the general media — everyone relates to pictures of stopped cars and trucks stretching to the horizon. And with unemployment over 10%, job creation is certainly a hot topic in the press. But utter the word “infrastructure” and all eyes glaze over. So it comes as no surprise that no major media outlet noticed when Congress rejected one of the most innovative ideas for funding a long-term solution to our infrastructure problems.
The proposal for creation of a national infrastructure bank was first introduced in the Senate in 2007. It went nowhere. Although it's taken on slightly different names, it's cropped up every year since and been rejected every time. The latest rejection came just last month when the Senate removed it from the fiscal 2010 budget bill it approved.
So what is this idea that refuses to go away, yet attracts little support or attention beyond a few special interest policy groups? Without getting into the complex Federal budgetary processes, a national infrastructure bank, or NIB among the policy wonks, would be a development bank that would issue bonds and use the proceeds to fund major infrastructure projects.
In general terms, creation of a NIB would have two major advantages. First, it would remove Federal infrastructure funding from the six-year reauthorization cycle which is causing so many delays and problems right now. Also, moving those investment decisions outside the Congressional authorization process would eliminate the hodgepodge of pork-barrel projects larded into reauthorization bills needed to attract votes, but adding little to national transportation efficiency. Instead, a NIB could fund projects based on overall merit and bring accountability to infrastructure investment.
Today, the Federal government collects fuel taxes to fund highway and other infrastructure projects, but it actually has little control over those projects. More than three-quarters of those funds are distributed as grants to states or local governments. Yet the Federal government has little direct control over the projects funded or how they might fit into national goals such as congestion reduction. Worse, the current highway funding mechanism actually discourages preventive maintenance. That money can only be used for major maintenance projects, in effect giving states an incentive to ignore preventive maintenance until the situation deteriorates enough to qualify for Federal funds.
Insulated from Congressional influences, a NIB could choose infrastructure projects based on merit, focusing on those that cross state lines and other jurisdictional barriers to satisfy regional and national transportation needs. Such power to choose projects would also allow it to enforce performance standards and give us clearer accountability for the way our infrastructure money is spent.
The European Investment Bank has filled just such a role for over fifty years, helping build an effective transportation network that spans many national borders. It could work here, as well.
(For a detailed look at NIBs, I recommend a paper just released last month by The Brookings Institute. You can download “Investing for Success” by Emila Istrate and Robert Puentes at www.brookings.edu/metro.)