Is it Time for a Federal Infrastructure Bank?
June 1, 2011
As Americans take to the roads this summer for vacation, almost all are blissfully ignorant that Congress must pass a highway bill by September 30, when authorization for the Highway Trust Fund expires. Although the Highway Trust Fund, funded by motor fuel taxes, is likely to be reauthorized, Congress probably will not provide the extra $10 billion to $15 billion annually from general revenues to keep highway spending at prior levels, says Diana Furchtgott-Roth, an adjunct fellow at the Manhattan Institute.
The Senate Finance Committee is well aware of the deadline and held hearings earlier this month to explore different options for infrastructure finance. The focus of the hearing was a proposal for a federally-funded $10 billion infrastructure bank, which would provide funding for the nation's highways and bridges.
The infrastructure bank would fill the gap by lending funds for transportation projects at low cost, but should the step be taken?
- Sen. John Kerry (D-MA) envisages the infrastructure bank as independent, with governors appointed by the president.
- Loaned funds would be repaid, with interest, so the bank would supposedly make a profit; similar promises were made for Amtrak, when it was established in 1971.
Gabriel Roth, a witness at the Senate hearing, disagreed about the need for a government-funded infrastructure bank. He testified that even with existing funding systems, transportation finance could be provided by the states in partnership with the private sector, rather than by the federal government.
- There are many examples of private sector investments in roads.
- A road in the suburbs of Washington, the Dulles Greenway, and California's electronically-tolled express lanes on Route 91 were conceived, designed, financed and built by private sector consortia, for example.
- The private sector is also operating other formerly-public infrastructure, such as garbage collection, water systems and wastewater treatment plants.
- With state budgets in difficulties, bringing in the private sector saves crucial dollars.
A federal infrastructure bank, although ostensibly independent, would be swayed by political criteria and would be tempted to invest in low-return projects, such as roads to nowhere, says Furchtgott-Roth.
Source: Diana Furchtgott-Roth, "Let's Leave Our Roads to the States," Real Clear Markets, May 26, 2011.
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