News / USA

    Panel Considers Bank to Promote Investment in US Infrastructure

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    A U.S. Senate panel is looking at ways to help spur investment in roads, bridges and other costly public projects.  The US currently spends less on infrastructure projects than most developed countries.  One idea that appears to be gaining traction is the president's proposal for the creation of a national infrastructure bank.  

    On expensive infrastructure projects, the US spends less than most countries:  only about two percent of Gross Domestic Product, compared to five percent for Europe and nine percent for China.

    Senator John Kerry warns without additional investment, the US will lose its competitive edge.

    "Rising economic powers around the world - our competitors China, India, Brazil, Mexico, other countries - are all investing in their future," said John Kerry. "And they're all investing in their future much more significantly than the United States.  The truth is, we are moving at our current rate towards a secondary competitive status, because of our inattention to the infrastructure of our country."

    One of the options before the Senate Banking Committee is a $50 billion fund to create a bank that would pool private and public resources to upgrade the nation's aging roads, railways and airports.

    Treasury Department chief economist Alan Krueger says that investment makes good economic sense.

    "Infrastructure investment will provide opportunities for workers who were disproportionately affected by the recession," said Alan Krueger. "Due to the collapse of the real estate market the contraction of employment in the construction industry has been especially acute."

    One in five of the eight million jobs lost during the recession was in construction, which has an unemployment rate nearly twice as high as the national average.  

    While most lawmakers on the panel were receptive, Montana Senator Jon Tester expressed concerns that smaller communities would not be able to compete.

    "How does Montana get a fair shot at any sort of investment when quite honestly we don't have a population base that's the size of a place like Pittsburgh, much less a bigger city or a bigger state?" asked Jon Tester.

    Still, others, like senior Republican Senator Richard Shelby, fear the proposal would create another Government Sponsored Enterprise (GSE) that puts public funds at risk.

    "I fear that the bank will simply be a new GSE or something like it and we will face another Fannie [Mae] and Freddie [Mac] type entity that will cost taxpayers money down the road," said Richard Shelby.

    But Pennsylvania Governor Ed Rendell argues that partnering with the private sector helps reduce the risk.

    "In fact, the bank, because it will leverage private sector investments in most cases, I think you will see a higher scrutiny on projects because the private sector is interested in the rate of return, and for the rate of return to be successful, the project has to be successful, so you'll not only have some level of government oversight, but you'll have the investor oversight as well," said Ed Rendell.

    The National Infrastructure Bank, also called I-bank, would use private, state and local capital to fund infrastructure projects without the normal red-tape from Congress.   

    The Congressional Budget Office, which reviews the fiscal implications of US legislation says infrastructure spending is one of the most effective policy options for reducing the nation's high unemployment rate.

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