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Obama Boosts Infrastructure — but Too Late

One of the smartest policy thinkers I know, the Brookings Institution’s Bill Galston, praises President Barack Obama’s proposal to develop a National Infrastructure Bank as “win, win, win,” but he fears the president is advancing it too late. So do I.

Sadly, the politics of winning-through-infrastructure is turning terrible, with public investment of all kinds increasingly dismissed as mere “spending” or “pork.”

The NIB is a piece of Obama’s plan — unveiled on Labor Day and bolstered with a White House conference this week — to build or repair 150,000 miles of roads, 4,000 miles of rail tracks and 150 miles of airport runways over a six-year period.

First-year costs would be $50 billion — doubling federal transportation funding — with declining (but unspecified) outlays over the following five years. Details will be in next year’s budget.

It’s not clear how much money the NIB would get as seed capital, but the idea is that the independent entity would choose projects of major significance on a nonpolitical basis, then leverage public money to attract private investment.

Galston, a top domestic policy adviser in Bill Clinton’s White House, says win No. 1 is that the bank “would mobilize large amounts of private capital that is currently sitting on the sidelines.”

It’s estimated that as much as $3 trillion is being held in cash or Treasury bills by banks, corporations and institutional investors and is not being put to work. Republicans and Democrats fight over why — “uncertainty” about taxes and regulation versus lack of demand for goods — but properly structured user-fee infrastructure programs clearly could give investors better returns than 0.25 percent for T-bills.

Win No. 2, Galston says, is that a large-scale infrastructure program would “create good jobs that can’t possibly be outsourced,” especially in the construction industry, where the unemployment rate is 15 percent.

Estimates are that the economy needs to create 200,000 new jobs a month for five years to get the unemployment rate down from 9.6 percent to 5 percent, but job creation has averaged less than 12,000 a month over the past year.

The White House calculates $1 billion in infrastructure spending would create 10,000 jobs. The Federal Highway Administration says $1 billion in federal outlays, plus a 20 percent state match, creates nearly 35,000 jobs.

Win No. 3, Galston says, is that “this is a way to deal with an infrastructure problem that is truly massive — trillions of dollars in deferred maintenance which we are paying for in lost efficiency and, sometimes, reduced safety. This is work that needs to be done.”

A bipartisan panel of transportation experts assembled by the Miller Center of Public Affairs at the University of Virginia and headed by former Transportation secretaries Norman Mineta and Sam Skinner just reported that the nation needs to spend $134 billion to $262 billion a year for 25 years to make its roads, rail systems and air transport world class.

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