Toxic Tribalism Poisons Hope for Infrastructure Plan

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A car travels under rusty beams along the Brooklyn Bridge on September 18, 2013 in New York City. In a new federal report, nearly 600 bridges in New York and New Jersey are in need of crucial repairs and are structurally deficient. Brooklyn, which averages 75,000 and 100,000 vehicles driving over its some 240 bridges per day, is in particularly dire shape with the the landmark Brooklyn Bridge included on the list of unsafe bridges.
National Journal
Norm Ornstein
May 7, 2014, 8 a.m.

Among the most em­bar­rass­ing and un­con­scion­able fail­ures of the 113th Con­gress has been the in­ab­il­ity to act in any way to help the eco­nomy through an in­fra­struc­ture ini­ti­at­ive, in­clud­ing but not lim­ited to en­ergy. The coun­try’s in­fra­struc­ture is crum­bling, and the en­ergy in­fra­struc­ture is out­moded. Among the long-term un­em­ployed, there are huge num­bers of con­struc­tion work­ers and skilled trades­people who could be giv­en a new lease on life, while en­er­giz­ing a con­tinu­ing slug­gish eco­nomy. And the money to pay for a ma­jor in­fra­struc­ture ini­ti­at­ive can be bor­rowed now at the low­est rates ima­gin­able. The busi­ness com­munity, in­clud­ing the U.S. Cham­ber of Com­merce, is en­thu­si­ast­ic­ally in fa­vor of it.

The U.S. polit­ic­al sys­tem is dys­func­tion­al; the U.S. eco­nomy re­mains slug­gish. Treas­ury in­terest rates re­main at his­tor­ic lows. But glob­al de­mand for U.S.-backed pa­per is ex­traordin­ar­ily high; we re­main the safe har­bor of choice every­where. Bloomberg colum­nist Barry Ri­tholtz has a sug­ges­tion: Do as Canada has re­cently done, and in­tro­duce a 50-year Treas­ury bond. As Ri­tholtz notes, we are cur­rently pur­su­ing the ul­tra-fool­ish strategy of fin­an­cing long-term debt with short-term pa­per; far, far bet­ter to fin­ance it with bonds that lock in lower rates for a long time. And that is es­pe­cially true when it comes to in­vest­ments in our eco­nom­ic and en­ergy fu­tures.

In­ter­est­ingly, there are bills in both the House and Sen­ate to deal with the prob­lem — and un­like most is­sues, these have ro­bust bi­par­tis­an sup­port. They all rely on the concept of bor­row­ing cheaply now to in­vest in the fu­ture.

Let me start with the bills in­tro­duced in the House by Demo­crat John Delaney of Mary­land (with more than 30 co­spon­sors from each party), and its coun­ter­part in the Sen­ate, in­tro­duced by Demo­crat Mi­chael Ben­net of Col­or­ado and Re­pub­lic­an Roy Blunt of Mis­souri. These bills cre­ate a fund that would be cap­it­al­ized with $50 bil­lion in in­fra­struc­ture bonds with 50-year terms pay­ing a fixed in­terest rate of 1 per­cent. Cor­por­a­tions could re­pat­ri­ate a sub­stan­tial amount of the profits they have ac­cu­mu­lated over­seas tax-free if they buy the bonds. The amounts re­pat­ri­ated would be set by what is called a “re­verse Dutch auc­tion,” which I will not even at­tempt to de­scribe. Suf­fice to say that the pro­cess would be a win-win — com­pan­ies would likely end up pay­ing low tax rates on the re­pat­ri­ated profits and have a sub­stan­tial amount of the money to re­in­vest, while also provid­ing a bundle of cap­it­al for in­fra­struc­ture in­vest­ments, which in turn would be lever­aged by the fund in­to as much as $750 bil­lion in loans or guar­an­tees for in­fra­struc­ture pro­jects. A sub­stan­tial share of those pro­jects would be pub­lic-private part­ner­ships, with most of the de­cisions made not by the fed­er­al gov­ern­ment, but by state and loc­al gov­ern­ments with their own skin in the game.

The pro­cess may be com­plic­ated, but the goal and the out­come are both highly de­sir­able and do not cross the ideo­lo­gies of either party. The same is true of an­oth­er highly com­mend­able idea in­tro­duced by Chris Van Hol­len of Mary­land in the House and Chris Murphy and Richard Blu­menth­al, both of Con­necti­c­ut, in the Sen­ate. Their pro­pos­al is based on a com­pel­ling idea from former Fed­er­al Com­mu­nic­a­tions Com­mis­sion Chair­man Reed Hun­dt — the Green Bank Act of 2014, fo­cused, as the name sug­gests, on a plan to trans­form Amer­ica to a clean-en­ergy plat­form. This bill, based on a highly suc­cess­ful mod­el in Con­necti­c­ut and three oth­er states, would cre­ate an in­de­pend­ent, self-sus­tain­ing non­profit cor­por­a­tion that would serve as a cata­lyst for lever­aging cap­it­al to ac­com­plish the goal. The bank would have less cap­it­al ini­tially than the broad­er in­fra­struc­ture fund in the Delaney and Ben­net/Blunt bills, but the same broad concept: Cap­it­al­ize at $10 bil­lion, per­haps up to $50 bil­lion, and then use the lever­age for loans, loan guar­an­tees, debt se­cur­it­iz­a­tion, and so on to provide fin­an­cial sup­port for clean-en­ergy pro­jects, in­clud­ing via part­ner­ships with state green banks.

The Green Bank would use a mod­el that would in­centiv­ize com­pan­ies to re­pat­ri­ate some of their profits abroad in re­turn for in­vest­ing in the bank as well. It would also fo­cus on the bur­geon­ing num­ber of clean-en­ergy and en­ergy-ef­fi­ciency pro­jects — in­clud­ing ret­ro­fit­ting build­ings, which provide great high-value con­struc­tion jobs, among oth­ers — and would not re­quire in any way that con­sumers pay high­er en­ergy prices now for a clean-en­ergy fu­ture. The bill cre­ates an in­de­pend­ent gov­ernance mod­el for the bank to pre­vent its cor­rup­tion or use as a cash cow for pols and their be­ne­fact­ors. Right now, we tend to use ex­pens­ive ways to sub­sid­ize clean en­ergy; this bank uses the mar­ket­place via low-cost cap­it­al to ac­com­plish pos­it­ive ends.

Po­lar­iz­a­tion does not ex­plain the fail­ure to act on bills that tran­scend typ­ic­al ideo­logy. In a “nor­mal” po­lar­ized en­vir­on­ment, the fact is that Con­gress could and would pass bills that re­quire no ap­pro­pri­ations, no in­creases in gov­ern­ment spend­ing, the act­ive par­ti­cip­a­tion of labor and busi­ness, and a way to pre­pare for the eco­nomy of the rest of the 21st cen­tury by bor­row­ing low to cre­ate high­er eco­nom­ic growth and im­prove the en­vir­on­ment. In­stead, we have an ab­nor­mal, tri­bal en­vir­on­ment, where any bill that would ac­com­plish a sign­ing ce­re­mony in the Oval Of­fice or the Rose Garden is act­ively shunned. Low in­terest rates will not last forever; not to take ad­vant­age of them now to provide a bet­ter fu­ture for our chil­dren is simply pathet­ic.

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