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.
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.
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.
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.
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.”