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Selling Public Works to the Tea Party

I know Tea Party Republicans don’t care for infrastructure spending. But I presume they still care for infrastructure.

That is, I presume they like well-maintained roads, affordable electricity, and clean drinking water as much as I do. And when those things aren’t available – when antiquated air traffic control systems delay their flights, for example, or broken down street sewers flood their neighborhoods – I presume they are just as frustrated as I am.

The problem, for the Tea Partiers and their allies, is the government part. They don’t trust Congress to assign, or oversee, these investments efficiently. And you know what? They have reason to be skeptical. Congress has been known to allocate infrastructure spending based on which lawmaker sits on which committee, rather than on which project has the greatest intrinsic virtue. It’s also been known to go a bit lax on the oversight. And so we end up with Alaska’s infamous “Bridge to Nowhere,” courtesy of former Senate Transportation Committee Chairman Ted Stevens, rather than, say, a hi-speed train linking St. Louis, Chicago, and Detroit.

But the alternative shouldn’t be to stop funding public works altogether, particularly when new reports on the sorry state of American infrastructure seem to appear every month. The alternative should be to fund them in a better way. And, as it happens, that’s precisely what the Obama Administration and some of its allies have in mind, as part of their push for new steps to revive the economy.

You have probably heard about this proposal already: It’s called the National Infrastructure Bank. And the concept is pretty simple. The federal government would create a quasi-independent bank – which, in turn, would finance infrastructure projects by offering grants, loans, and subsidies to worthy projects. The federal government would provide the bank with start-up funds, through a large initial appropriation. But the idea is to have the bank finance itself over the long run, issuing bonds or borrowing money through the Treasury Department as necessary.

The primary rationale for the bank – and the reason it should, in theory, appeal to skeptics of government – is to insulate decision-making from the usual political influences. And that doesn’t simply mean staying away from legislators’ pet projects. It also means moving away from funding formulas that have distributed infrastructure funds with little regard for actual need, particularly when it comes to transportation. 

As Ethan Pollack, of the Economic Policy Institute, explains: 

The problem goes beyond the earmarking process – in in fact, the program formulas are often written to reapportion funding to certain states at the expense of others for the sake of parochial interests, with little regard for overall efficiency of allocation. … In order to garner sufficient political support (especially in the Senate), the funds are spread evenly across the country. This was not a problem in the past, as funds were needed across the country during the construction of the interstate highway system. But as the system neared completion, this investment strategy began exhibiting steep diminishing returns.

The bank, by contrast, would make its decisions based on cost-benefit analysis, without all the congressional meddling. It might sound like a pipe dream, but the Recovery Act launched a working model for that sort of program in 2009. It’s called the Transportation Investment Generating Economic Recovery program, or TIGER. And it counts among its fans journalist Michael Grunwald, who knows a thing or two about government waste. (Yes, that's twice today I'm quoting him.) As Grunwald writes:

The so-called TIGER program doesn't just hand out cash to every project with the proper paperwork; it rewards the applicants with the most impressive economic and environmental benefits, and it's attracted $40 worth of applications for every dollar in grants. The winners have included several freight-rail projects that will take thousands of trucks off the road, a green-themed revitalization of a Kansas City neighborhood, and a multi-modal transportation center at the intersection of three interstates, a major rail corridor and a popular 26-mile bicycle and pedestrian pathway in Normal, Ill.

Whether the bank could replicate TIGER's success – and, more fundamentally, whether it could significantly bolster the country’s decaying infrastructure – will obviously depend on the specifics, as Pollack's paper points out. How independent should the bank be? (Obama’s proposal would put it inside the Transportation Department; others, like a bill from Senators John Kerry and Kay Bailey Hutchison, would make it a stand-alone entity.) How much start-up money should the federal government give it? (Kerry’s bill calls for just $10 billion while Obama’s calls for $30 billion. An earlier proposal, from Senators Chris Dodd and Chuck Hagel, would have allocated $75 billion.) How wide a range of proposals would it consider? (Obama's bank would limits itself to transportation. Under a proposal from Rep. Rosa DeLauro, the bank would take on energy and telecommunications projects, as well.) 

Perhaps more immediately, it’s an open question just how quickly the bank could move money into the economy. Then again, an infrastructure bank bill could include additional, short-term funding for more immediate projects. And the way things look now, the economy will need stimulus well past 2012 anyway.

The main obstacle to creating the bank, really, is political. On the one hand, the infrastructure has a strong bipartisan and cross-ideological pedigree: In March, when Kerry (a Democrat) and Hutchison (a Republican) held a press conference to unveil their proposal, Richard Trumpka (of the AFL-CIO) and Tom Donohue (of the U.S. Chamber of Commerce) appeared with them to offer their endorsement.

On the other hand, the infrastructure bank is part of Obama's agenda. And, as we've all seen, sometimes that's all it takes to generate fatal Republican opposition.

Purely on the merits, conservatives ought to embrace the infrastructure bank. Alas, that doesn’t mean they will.