Bad ideas never seem to die. But the proposal to create a national infrastructure bank to federally fund transportation and infrastructure projects with taxpayer dollars is one such idea that President Obama and lawmakers in the 113th Congress should put to rest.
A recent Politico article noted that the departure of lawmakers—whether realized or expected—who spearheaded the infrastructure bank idea creates room for new leadership. For example, Senators John Kerry (D–MA) and Kay Bailey Hutchison (R–TX) co-sponsored 2011 legislation to create the American Infrastructure Financing Authority. The bill calls for a one-time, $10 billion appropriation to fund water, transportation, and energy projects through loans and loan guarantees. Yet, as former Heritage Foundation expert Ronald Utt observes, this “bank” could not borrow money as banks traditionally do.
Representative Rosa DeLauro (D–CT), who is remaining in office, introduced a similar proposal in the House: A government-owned bank would fund projects through $5 billion in annual appropriations. Her legislation would give the bank authority to borrow money.
While consistently scant on detail, President Obama’s past three budget requests and ill-fated American Jobs Act of 2011 also called for a national infrastructure bank. His most recent proposal mirrors that of Representative DeLauro in terms of funding.
Problems abound with all of these proposals, particularly regarding transportation policy. First, they reinforce a Washington-centric view. States and regions know their transportation priorities and how to execute projects better than the federal government. Concentrating the decision making in Washington would sidestep the role of state governments and expand an already bloated federal bureaucracy.
National infrastructure bank advocates uniformly say such a bank would spur economic growth and job creation. Recent history, however, tells a different tale about government “stimulus.” Even Obama remarked with chagrin how slowly projects funded under the 2009 stimulus bill were to get going. Further, the nonpartisan Congressional Budget Office reports that existing projects that could be candidates for national infrastructure bank funding are too small, and in the near-term the “bank would probably generate neither significant new revenues for surface transportation nor significant new interest from private-sector investors.”
Any economic growth and job creation from an infrastructure bank would likewise be marginal. That fact does not justify more stimulus spending, but rather policy prescriptions that let the private sector be the engines of job creation, without federal government meddling. It also makes forcing taxpayers across the country to pay for the bank difficult to justify.
Future means of funding transportation projects is the subject of much debate at both the federal and state levels. Opting for an augmented federal role is the last thing we need, as experience in other sectors shows. The federal government has generated and worsened existing problems in the housing market vis-à-vis Fannie Mae and Freddie Mac, in addition to the taxpayer funded bailout, and it is further complicating mortgage lending rules, for example, through the Consumer Financial Protection Bureau. Isn’t it counterintuitive to believe that Washington bureaucrats would somehow fare better with transportation, especially when current policy diverts up to 35 percent of transportation spending to projects that don’t improve mobility or safety?
In his upcoming fiscal year 2014 budget, President Obama should refrain from reintroducing this failed, flawed policy proposal. Lawmakers in the new Congress should also steer clear of recycled or new infrastructure bank proposals. As they set policy and spending priorities, they should instead propose reforms that soften the federal vise grip on transportation policy and give states more flexibility in meeting their transportation needs.