National Infrastructure Bank — But where’s the cash?
While October hasn’t seen much discussion about the possibility of a National Infrastructure Bank — and with November being so close there probably won’t be much in the news besides than character attacks — why not take this time to consider at the issue?
Obama broached the idea of a NIB in September, though the idea had been introduced in the House by Rep. DeLauro and in the Senate by Senators Dodd and Hagel several years prior. The question is, how would such a bank function?
Yonah Freemark of TransportPolitic writes of his own view of the NIB:
Imagine the federal government began offering a bank savings account package to young people and seniors with a very favorable rate of return, run through private banks in exchange for, say, their participation in the FDIC bank insurance system. Then say the government “collected” all of those funds together in a public bank and used the money to invest as it wished in the private sector. If well managed, this system could make enough money through its investments not only to give its depositors high interest rates, but also a large profit that would go not to shareholders but instead towards the construction of new social housing and infrastructure.
It turns out that this is not that far-off of an idea: it’s exactly how France’s Caisse des Dépôts works. The independent agency, originally formed in 1816, finances much of the country’s affordable housing and urban redevelopment schemes; more recently, it has contributed to the construction of new high-speed rail lines. For the most part, these expenditures are in grant form, meaning that the Caisse is increasing France’s overall spending on infrastructure without increasing the nation’s debt load. That makes it significantly more effective in moving forward with new spending than would be the infrastructure banks proposed for the U.S.
Freemark rejects the idea of the bank functioning as a traditional investment bank because he sees it as frontloading spending into the present and leaving future generations with greater debt, and I can’t entirely disagree with him on that matter. But with programs like the European Investment Bank as a currently existing model for a NIB to be based on, and California’s 30/10 initiative as one example of the creative financing options open to states, an investment structure may be more politically feasible and cost-effective up front.
Of course, all of this is coupled the assumption that the NIB would function like a bank is supposed to, and not like a body that doles out grants and aid. The assumptions are that there is a profit motive in play for individuals and investors, and that this profit motive will lead to smart investing. There are still many details to be determined, though the process may gain some momentum when elections are over.