America’s infrastructure is in bad shape. The American Society of Civil Engineers (ASCE) released a report card giving the United States’ infrastructure a D+. The Global Competitiveness Report for 2012 -2013 ranked US infrastructure 14th in the world, seven places lower than it was in 2008; the reliability of the US electric grid is now ranked 32nd, seven spots behind China. Infrastructure is key to any economy; imagine trying to run a business without roads, running water, or electricity.
The ASCE says that the US will need to spend an additional $1.1 trillion on infrastructure by 2020 just to maintain current facilities. 80 percent more ($3.6 trillion) is needed to put the US’s infrastructure in a state of good repair. That’s a lot of money, and the US government isn’t exactly in good financial straits. Part of the solution is a National Infrastructure Bank (NIB).
The Bank would issue bonds, loans, and loan guarantees to increase private sector spending on infrastructure. The fact that interest rates are at historic lows means that now is a better time than ever to do this. Obama’s current plan for a NIB would require $60 billion in federal money and bring in about $500 billion in private investment over the next 10 years. However, given the previously mentioned amount of money that the US must spend on infrastructure by 2020, the NIB should receive far more funding than what the Obama administration proposes.
Using a bank to fund infrastructure is not a new, untested idea: the World Bank has been used to fund infrastructure in poor nations since World War II. Infrastructure banks were also used in the aftermath of the 2004 Indian Ocean Tsunami and the 2010 Haiti earthquake. The use of private capital to fund infrastructure is also a tried and true method: private investment was brought in to construct the Transcontinental Railroad and rebuild New Orleans after Hurricane Katrina. In many European and Asian countries (including the countries with better infrastructure than the US) the private sector plays a much larger role in funding infrastructure.
One major benefit of a NIB is jobs: the ASCE estimates that for every one billion dollars invested in infrastructure, the program creates or saves 30,000 jobs. Thus, a NIB that would bring in hundreds of billions of dollars in investment could create millions of jobs. This would also help bring in badly needed government revenue since more jobs means more people paying taxes. Thus, the NIB would probably pay for itself.
The NIB would also fund infrastructure in a much more efficient manner than the way the US does it now. Currently, Congress makes most infrastructure appropriations. Since Congressmen need to bring jobs to their districts or risk losing the next election, they often spend money in ways that are politically helpful but economically nonsensical. The NIB would make decisions through a board of directors that aren’t up for re-election and thus free from beltway politics. Therefore, they could make decisions based on cost-benefit analyses that use merit rather than politics. Indeed, infrastructure projects would have to prove that they could provide a dedicated revenue stream to qualify for funding.
Repairing America’s infrastructure is also extremely important to economic growth. The economic impacts of failing to meet our infrastructure needs would be disastrous. “Overall, if the investment gap is not addressed throughout the nation’s infrastructure sectors, by 2020, the economy is expected to lose almost one trillion dollars in business sales, resulting in a loss of 3.5 million jobs. Moreover, if current trends are not reversed, the cumulative cost to the U.S. economy from 2012–2020 will be more than $3.1 trillion in GDP and $1.1 trillion in total trade,” reads an ASCE report.
Some argue against the infrastructure bank on the grounds of costs to taxpayers. However, most of the money would come from the private sector so cost to taxpayers would be minimal. Furthermore, as mentioned before, the NIB would help pay for itself by generating additional revenue for the government.
There was a time when the US had the best infrastructure in the world. People used to marvel at American structures like the Interstate Highway System. Sadly, we simply don’t build things like that anymore. However, we can always start building again. We have the knowledge and the wealth. The only thing we need is the will. If we don’t fix our infrastructure soon, future generations of Americans may look at the Interstate the same way Egyptians look at the Pyramids, expressing shock that we could build such a thing and asking why we can’t be that great again.
William Kim, Staff Writer