President Obama recently put some meat on the bones of the notion of a National Infrastructure Bank that he spoke about in his State of the Union address. He essentially calls for investing $50 billion in transportation infrastructure, most of that to upgrade bridges, highways, transit systems and airports most in need of repair.
There is no question that our aging infrastructure is in dire need of repairs and upgrades. Our once mighty Interstate Highway System for example is increasingly congested. We lose 4.2 billion working hours per year due to traffic tie-ups, costing $78 billion in wasted time and fuel. But the term infrastructure encompasses much more than roads. We move a tremendous amount of goods via inland waterways that require major investment. Many of our harbors are unable to accommodate the new generation of ocean transports. The American Water Works association estimates that investment in water supply and sanitation will need to be $250 billion above current levels of spending over the next 20-30 years. Major portions of our electrical grid are obsolete and vulnerable to sabotage. The American Society of Civil Engineers says the infrastructure needs $3.6 trillion in spending between now and 2020, but current plans leave us about $1.6 trillion short of that goal.
A National Infrastructure Reinvestment Bank was first proposed by Senators Christopher Dodd and Chuck Hagel in 2007. President Obama backed the legislation in 2008 and repeated his call in 2010. At the time he suggested the government would put up about $60 billion in seed money over 10 years that would leverage up to $500 billion in private investment.
According to the original legislation, the Bank would be administratively similar to the Federal Deposit Insurance Corporation with the power to conduct hearings, issue subpoenas, obtain information from other federal agencies, accept funding for infrastructure projects, direct subsidies to qualified projects, issue general purpose infrastructure bonds, provide loan guarantees to state and local governments issuing debt to fund specific projects, and encourage states to create additional opportunities for the financing of infrastructure projects.
I believe a National Infrastructure Bank is a great idea if only because it would offer some coherence to our diverse, scattered and inconsistent approach to infrastructure upkeep. But we need to gird up for the long haul and anticipate the inevitable problems that will ensue. A lot of money on the table will always attract rival claimants. The states are primary keepers of our highways and bridges and will jealously defend their turf. And there will always be efforts to divert resources into dicey concepts such as high-speed rail.
Of course, the most obvious problem will be the gridlock in Washington where it is increasingly difficult to get anything done. But if there is one initiative on the table that should enjoy bi-partisan support is surely investment in infrastructure. Our economy is built upon our infrastructure that is in clear need of investment. And that investment will create jobs in a time when new jobs are hard to find.
Jerry Jasinowski, an economist and author, served as President of the National Association of Manufacturers for 14 years and later The Manufacturing Institute. Jerry is available for speaking engagements. March 2013