At a time when talk of partisanship, polarization, and paralysis fills the air, it’s a concept that attracts support from both sides of the aisle. And of the ideological divide. The US Chamber of Commerce likes the notion. So does organized labor.
The Senate version of the concept has five Democrats and five Republicans aboard as co-sponsors. The House plan has 26 Democrats and 26 Republican who have attached their names.
So what is this intriguing idea? An independent entity (or, informally, bank) that would provide low-interest financing for infrastructure initiatives — road, bridge, rail, port, water, sewer, and energy-grid projects — deemed of national or regional importance.
For a startup cost of about $10 billion, the authority the Senate plan envisions would generate $300 billion to $400 billion in new infrastructure spending over a decade. The more ambitious House proposal aims at $750 billion in new project spending over 10 years, without any direct investment of federal revenue.
By way of comparison, over the last decade, the federal government has spent $40 billion to $50 billion a year on transportation infrastructure. Estimates are that every $1 billion in that kind of spending generates anywhere from 18,000 to 30,000 jobs, so if the authority’s work did result in hundreds of billions of new infrastructure dollars, it would have a pronounced effect on employment.
“I think it is the biggest economic idea that is politically plausible in the current environment,” says Jason Grumet, president of the Bipartisan Policy Center, a Washington organization that tries to catalyze bipartisan consensus on policy ideas.
The Senate version, similar to a plan that was pushed by former senators John Kerry and Kay Bailey Hutchison, would start with $10 billion in seed capital, raised by selling federal properties, that would backstop between $120 billion and $160 billion in federal loans. Those loans would be used to facilitate at least twice that much in private-sector investment and state and local funding for projects.
The House plan aims at a $50 billion fund capitalized by selling bonds; businesses that bought those bonds would be allowed to bring back a certain amount of overseas profits tax free. The fund could generate up to $750 billion in spending on a broader range of projects that would also include energy, communications, and education infrastructure.
At a time when the United States has fallen behind on infrastructure investments, the authority would help fill the financing gap for projects in the $50 million-plus range.
The Senate plan calls for a bipartisan board and an investment limit of 49 percent of any particular project. Securing the authority’s imprimatur should help a project win the credibility needed to attract private capital.
Senator Mark Warner, lead Democratic sponsor of the Senate plan, believes authority-backed projects would prove very attractive to long-term institutional investors.
“We are seeing long-term pension capital saying there are not enough [investment] products in America,” he notes. “So creating a vehicle that would offer more investment-grade-quality projects is very important.” Further, he says, the authority’s financing know-how would also be a big boon to state and local governments, which often lack that expertise.
For liberals, low-cost financing might not be as satisfying a solution as outright government funding, but it would be another way to get worthwhile infrastructure projects off the launching pad.
Conservatives are suspicious of any public works that seem designed mainly to spur employment. But it’s harder to argue with projects backed by significant private-sector capital. Or whose debt is supported, at least in the Senate version, by a revenue stream in the form of tolls or user fees. Both of those conditions should provide protection against boondoggles.
Any ambitious legislation faces an uphill slog in this era. But with more and more people recognizing the need to upgrade this country’s infrastructure, this idea is steadily generating converts — and deservedly so.