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Did Obamacare Doom the Infrastructure Bank?

On Monday, the Treasury Department and the Council of Economic Advisors released a study that clearly and persuasively lays out the economic rationale for increasing our nation’s investment in infrastructure. Included in this document is a concise summary of the case for a national infrastructure bank that could attract private capital, create a merit-based selection process for projects, and finance the kinds of infrastructure investments—multi-modal and multi-jurisdictional—that get short shrift in the congressional appropriations process.

This is a good idea. It was a good idea when Barack Obama proposed it during his presidential campaign. It was a good idea when it made a cameo appearance in President Obama’s 2010 budget proposal released in February of 2009. And then it all but disappeared for eighteen months until the president resurrected it on Labor Day this year. That was a bad idea.

It may well be, as The New York Times reported, that the proposal was not included in the stimulus bill because the White House and congressional Democratic leaders “wanted to pass that package as quickly as possible.” But why did it vanish from the radar screen for as long as it did?

Known facts about internal White House conversations only deepen the mystery. Chief of staff Rahm Emanuel has long championed the bank, and NEC director Larry Summers has endorsed both the economic merits and timeliness of increased, well-targeted infrastructure investment.

Here’s a possible explanation: After the stimulus bill passed, the president wanted to shift to health care and didn’t want to get bogged down with any other issue. If so, the bank is one of many campaign pledges that fell victim to the protracted health care debate, intensifying the public’s belief that the federal government was out of touch with their core economic concerns.

This is troubling for several reasons. The United States desperately needs a major boost in infrastructure investment, which would pay rich dividends in increased economic efficiency and middle-class jobs. There’s no way that fiscally strapped governments at any level of the federal system can afford to pay for it. And the 112th Congress that convenes next January is unlikely to give the bank a warm reception.

It now falls to President Obama to devise a legislative strategy that can create bipartisan support for new infrastructure investment. One possibility: Shift a portion of current infrastructure spending out of the congressional appropriations process into a bank that can attract private capital and use merit-based project selection criteria rather than formulas and earmarks. Perhaps there are other possibilities. In any event, business as usual won’t get the job done.