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Obama to Propose Infrastructure Bank

Friday, February 11, 2011

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President Obama will propose a new National Infrastructure Bank to fund large-scale public works projects in the 2012 budget he unveils Monday (Feb. 14), Treasury Secretary Timothy Geithner says.

Treasury Secretary Timothy Geithner

The bank will draw capital and promote “merit-based investment” in infrastructure by selecting projects “on the basis of rigorous analysis,” Geithner said in a blog post Wednesday (Feb. 9) on the Treasury Department web site.

Echoing Obama’s call in his State of the Union address for an infrastructure bank to "rebuild America," Geithner said: “We must ensure that the U.S. has the fastest, most reliable ways to move people, goods, and information to maintain our competitive edge.”

Rail Funding Plan

Geithner noted that Vice President Joe Biden and Secretary Ray LaHood visited a rail yard Tuesday in Philadelphia to announce a six-year, $53 billion proposal by Obama to continue construction of a national high-speed and intercity passenger rail network.

The goal is to connect 80% of American households to high-speed rail in the next 25 years; high-speed rail would get $8 billion from the plan next year.

“[T]here are key places where we cannot afford to sacrifice as a nation—one of which is infrastructure,” said Biden, a longtime Amtrak rider and advocate.

‘Jobs Today, Competition Tomorrow’

Infrastructure investments yield immediate and long-term economic benefits, by helping “to create jobs today and out-compete the world tomorrow,” Geithner said.

Moreover, he said, investment in one community’s infrastructure directly and indirectly benefits others nationwide.

For example, he said, investing in freight railroads at the Port of Seattle creates jobs, reduces transportation costs, opens new markets and ultimately lowers prices for consumers, he said. Adding new rail cars to the New York City subway would reduce street traffic, speed deliveries and cut smog, while creating jobs at the Midwestern plants that manufacture the cars, he said. Upgrading air-traffic control benefits shippers and travelers, he said.

Funding Reform Cited

While increasing infrastructure spending, however, “we must also reform the ways in which we invest,” Geithner cautioned.

“Not all infrastructure investments are good investments, and too often we have seen transportation projects exemplify the worst of Washington—the ‘bridges to nowhere’ that rightly make American taxpayers cringe.”

An Infrastructure Bank will help the government “spend wisely” so that it “can better leverage scarce taxpayer dollars,” Geithner said.

The bank would “support projects that produce significant returns on our investment, allow Americans more choices in their modes of transportation, and improve the interconnectedness of our existing transportation networks to maximize the value of our current infrastructure,” Geithner said.

The Treasury Department said details of the bank’s structure, size and operation would await Monday’s budget presentation.

Infrastructure Banks

The concept of an infrastructure bank is not new and has recently been gaining attention nationwide. Among lawmakers vowing to back Obama’s plan with legislation are Sen. John Kerry (D-MA) and Rep. Rosa DeLauro (D-CT).

South Carolina created an infrastructure bank in 1997 to leverage limited state funding into larger amounts through borrowing for highway and bridge projects. State officials say the program has been successful.

A bipartisan group called Building America's Future also backs the idea. The organization was formed by then-Gov. Ed Rendell of Pennsylvania, then-Gov. Arnold Schwarzenegger of California, and New York Mayor Michael Bloomberg.

Speaking for the group in December, Rendell noted that infrastructure currently has no federal capital budget and thus must compete with defense, health care and other needs for funds. Projects are at the mercy of individual lawmakers to support them, and most large projects get little widespread support, he said.

"We need a national infrastructure bank staffed by experts ... and you compete on the cost-benefit analysis and the bank makes good decisions," he said.

Hurdles Ahead

Despite the well-documented crisis in America’s aging infrastructure system, Obama’s proposal is likely to face hurdles, “as the government struggles to find a balance between economy-lifting investment and stimulus-type spending,” the Journal of Commerce reports.

One challenge will be developing strategies and funding mechanisms that encompass all transportation modes, the magazine said in a cover story last week. For example, the plan could include remaking the Highway Trust Fund as a Transportation Trust Fund, potentially putting the highway and rail industries in competition for federal money.

U.S. Chamber of Commerce President and CEO Thomas J. Donohue

Still, the magazine sees signs that old adversaries may be able to work together on a plan, noting a recent joint statement by U.S. Chamber of Commerce President and CEO Thomas J. Donohue and AFL-CIO President Richard Trumka:

"Whether it is building roads, bridges, high-speed broadband, energy systems and schools, these projects not only create jobs and demand for businesses, they are an investment in building the modern infrastructure our country needs to compete in a global economy.”

   

Tagged categories: Finance; Government; Maintenance programs; Public Transit

Comment from Andrew Darak, (2/14/2011, 9:15 AM)

Sounds like another government boondoggle designed to support unions and create temporary jobs. Jobs come from a need or demand for a product or service. There is no demand for high-speed rail in this country.


Comment from S.R. jordan, (2/14/2011, 9:47 AM)

The above proposal is going to create additional govt obligation when it comes to tax spending for the nation's roadways, railways and other means of modes of movement. Why should the govt create another level or means of budget to pay for the needed conveyances that the country relies on? There is a check and balance process in place already. Why should we have additional levels of check/balance created? This appears to be another govt monopoly set up as a business proposal. Let's be cautious of proposals that explain that there is a better way to obligate tax dollars. This is the reason we elect men/women to office to oversee these issues. There is no need to give the transportation tax to another form of govt. How will the banking proposal be regulated??


Comment from James Johnson, (2/15/2011, 10:50 PM)

One can only wonder how this President, who has a reply for everything, proposes to do this without yet another increase in the deficit. For someone who is supposed to care about America, he surely has no thought to what he is costing Americans nor what they think of him spending our grandkids' future. As I see it we have two choices: either A) Call the White House and compliment him, or B) Call our Congressmen and insist they NOT increase the deficit.


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