Another Bank? President Obama Pushing National Infrastructure Bank

White House Infrastructure Bank Proposal Faces Uncertain Fate in Congress

September 8, 2010, 11:46 AM

September 8, 2010 -- President Obama today in Ohio is touting a trio of economic proposals, including a $50 billion plan to improve the nation's transportation system and in doing so, create jobs to boost the country's sluggish economic recovery.

"I want America to have the best infrastructure in the world," the President said Monday in Wisconsin, vowing that the funds would help build or repair 150,000 miles of roads, 4,000 miles of railways, and 150 miles of runways.

If the plan is approved by Congress, the projects would be financed by a government-run bank, known as an Infrastructure Bank. According to the White House, the Infrastructure Bank would "leverage federal dollars and focus on investments of national and regional significance that often fall through the cracks in the current siloed (sic) transporation programs."

But proposing such a plan is the easy part. The hard part will come in getting it approved by a Congress bogged down in partisan gridlock and ever more focused on the November elections. And those are just two of a litany of roadblocks. Before a single shovel hits the pavement, numerous questions will have to be answered: How will the bank work? How will the $50 billion project be paid for? How will this plan not fall prey to the political grab-bagging so often seen with federal spending projects?

No sooner had Obama outlined his proposal than Rep. Eric Cantor, the House Republican Whip, accused the administration of "blindly throwing darts at the board and hoping for a bulls-eye."

"Reports from across the country show that dollars intended for infrastructure improvement in the President's first stimulus are being wasted, so how will his latest be any different?" asked Cantor. "Additionally, federal infrastructure projects are typically slow to commence on the ground, meaning that this new effort will do little in the immediate future to kick start the economy."

Congress Splits on Proposal

But across the political aisle Democrats quickly threw their support behind the President's new proposal.

Said Senate Banking Committee chairman Chris Dodd, "A significant investment in our ailing national infrastructure will create jobs, boost long-term economic growth, and improve safety. With a National Infrastructure Bank we could leverage state, local, and private funds to ensure our infrastructure systems are equipped to meet the demands of the 21st century."

Over in the House of Representatives, Rep. Rosa DeLauro, D-CT, has proposed legislation that would place the infrastructure bank under the purview of the Treasury Department and allow it to make loans much like the World Bank currently does.

"This is the kind of initiative we need to support the economy and produce long-term job growth," DeLauro said. "The National Infrastructure Bank is a concept which has garnered broad support from governors, mayors, the business and labor communities, as well as others. For such a bank to succeed, it should function as an independent entity and leverage private dollars to make objective investments in transportation, environmental, energy, and telecommunications projects of regional and national significance."

But Democrats are not unanimous in support. Before Obama took the podium in Cleveland on Monday, Sen. Michael Bennett of Colorado became the first Senate Democrat to come out against the President's infrastructure plan.

"I will not support additional spending in a second stimulus package," Bennet said. "Any new transportation initiatives can be funded through the Recovery Act, which still contains unused funds. Public-private partnerships that improve our infrastructure are a good idea, but must be paid for, should not add a dime to the deficit, and should be covered by unused Recovery Act dollars. We must make hard choices to significantly reduce the deficit."

The six-year plan, White House officials said, would be fully paid for, but officials did not say exactly how, beyond saying that some funding would come from closing tax loopholes exploited by oil and gas companies. Officials also acknowledged that details still have to be worked out on how to insulate the plan from the political gamesmanship that frequently plagues spending projects. The bank, they said, would use "performance measurement" and competitive practices to dish out the money.

William Galston, a senior fellow at the Brookings Institution, praised the administration's proposal, saying that it "offers a welcome new direction in an increasingly shrill and decreasingly productive economic debate. It shifts the focus toward the kinds of public action that can help build a more efficient and competitive economy in the long run."

Boost or Boondoggle?

However, Peter Morici, a professor at the University of Maryland School of Business, argued that the President's proposal will not boost infrastructure spending, but rather merely change where it's coming from.

"It's not going to increase infrastructure spending," Morici said. "It's only going to change the source of finance from bond financing to this bank. The municipalities and states are limited in how much financing or obligations they can take on. If they borrow from this Infrastructure Bank instead of the bond market, it still has the same impact on their bonding rates."

"This is another election year ploy from Obama," argued Morici. "He is basically putting out one deceptive program after another this week in an effort to save [Speaker of the House] Nancy Pelosi and it's not going to work. Instead of lending from the right hand, you lend from the left hand. It'll have no impact on infrastructure or employment this year or in the near future."

In addition, the very idea of a government-run bank could prove to be politically dicey at a time when lawmakers fighting for their political lives are loathe to argue for more government involvement in the private sector.

"What the President touted as the 'recovery summer' is built upon the misguided notion that government expansion creates prosperity, when it reality it has continued to drive debt and deficits," said Cantor.

One Senate GOP aide even suggested to ABC News that the administration's proposals "seem designed to fail," denouncing them as "PR stunts to get some headlines."

However, a House Democratic aide countered that the National Infrastructure Bank proposal has "broad support" on Capitol Hill. "The momentum is definitely building," the aide told ABC News. "The reaction [to the proposal] has been great."

Partisan opposition? The upcoming elections? The backlash against big government / Key questions left unanswered. President Obama just finished proposing his new infrastructure plan, but it's already encountering roadblocks in its path.

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