MuniLand

Thumbs down on infrastructure bank

Thumbs down on President Obama’s infrastructure bank

The Bond Buyer is reporting that U.S. transporation groups have given the thumbs down to President Obama’s proposed infrastructure bank. The core repayment mechanism for loans guaranteed by the proposed bank would be user fees and tolls. This contrasts to the current methods, which involve state and local governments borrowing in the municipal market to fund projects or the federal government collecting gasoline taxes to fund highway infrastructure. Given the growing opposition globally to the privatization of public assets, the core purpose of the infrastructure bank is bound to create more unease among public players and citizens. From the Bond Buyer:

American Trucking Associations president Bill Graves was skeptical.

“We’ve long advocated that roads and bridges should be paid for primarily by their users, through the most direct taxes possible: fuel taxes,” he said. “Allowing private capital to take their cut as part of an infrastructure bank, or by taxing other sectors to pay for roads and bridges, takes us further away from this core principle.”

Direct grants to state and local govts most popular part of Obama’s jobs bill

President Obama is struggling to get traction for his jobs bill. From Bloomberg:

A majority of Americans don’t believe President Barack Obama’s $447 billion jobs plan will help lower the unemployment rate, skepticism he must overcome as he presses Congress for action and positions himself for re-election.

The Infrastructure Privatization Bank

The first time many heard about the United States creating a infrastructure bank was in President Obama’s Thursday speech, but the idea has actually been floating around Congress for a number of years. Former U.S. Senator Chris Dodd of Connecticut proposed the idea in 2007 with inauspicious timing. From the American Water Works Association:

In an eerie coincidence, legislation to create a National Infrastructure Bank to address the need for financing of infrastructure projects was introduced with bipartisan support in the US Senate the same day a bridge collapsed in Minneapolis.

The horrific 2007 bridge collapse in Minneapolis is often used as the poster child to promote a national infrastructure bank. In 2007 there were 75,000 other bridges in America that had the same rating of “structurally deficient” as the Minneapolis bridge; the problem continues today. The need for massive spending on our roads and bridges is well understood by everyone.

Must infrastructure spending shrink along with muniland?

Paul Krugman at the New York Times has a good graph that shows a substantial withdrawal of government demand from the economy. He attributed this to the decline of federal government stimulus to state and local governments as the American Recovery and Reinvestment Act winds down. There is also another factor that is reducing government demand: state and local governments are issuing less debt, which in turn creates fewer building projects and construction jobs.

Municipal bond issuance is about $108 billion less this year than the same period in 2010. Several stories today highlight how states and cities continue to face fiscal challenges that cause them to lower the amount of municipal bonds that they issue for infrastructure projects.

Does reduced state and local infrastructure spending suggest a rationale for increased national infrastructure spending as hinted at by President Obama? Will his proposal be big enough to make up the shortfall of municipal spending on infrastructure? From Bloomberg:

Modern American Bank™

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“The great difficulty with politics is that there are no established principles.”
- Napoleon Bonaparte (1769-1821)

Oh, America! It’s time to reinvent you. You are mired in a deep and prolonged slump. Economic activity keeps slowing. Our political class has been viciously testing the boundaries of their adversaries. We are faced with a lot of bills coming due and we are broke. What can be done?

I’ve been advocating a new type of effort involving the government and the private sector to rebuild and recharge America by creating a federal infrastructure bank funded by U.S. corporate offshore profits. These corporate profits would be repatriated at a 0% tax rate (current law requires their taxation at 35% if brought back to America).

Mapping the energy picture

Energy is the lifeblood of our economy. Today the U.S. Department of Energy relaunched their website and published a beautiful set of interactive maps that show various dimensions of our energy production and consumption. Unfortunately, DOE did not make what I think would be the best map which would be a mash-up, by state, of production and consumption. It would be interesting to see which states are net importers and exporters. Calling Secretary Chu!

Have a more detailed look by clicking on the thumbnails below.

Solar energy potential

Energy production by state

Renewable energy production


Infrastructure shuffle

Once the Congress and the Obama administration finish their negotiations on the debt ceiling, attention will turn to plans for reducing unemployment. The lack of jobs for Americans is the most crippling element of the recession. There seems to be a growing bipartisan consensus for the federal government to alleviate this problem through the establishment of an “infrastructure bank.” U.S. Senator Kerry has introduced Senate Resolution 652 to create the American Infrastructure Financing Authority. Here is what the legislation says:

    Establishment of AIFA- The American Infrastructure Financing Authority is established as a wholly owned Government corporation.
    General Authority of AIFA- AIFA shall provide direct loans and loan guarantees to facilitate infrastructure projects that are both economically viable and of regional or national significance, and shall have such other authority, as provided in this Act.

The legislation authorizes the AIFA to receive $30 billion in “start-up” funds from the federal government. Its role is to review proposals; determine which ones benefit the public and which ones are pork-barrel projects; and finance the ones that are worthwhile. These projects must be large-scale; the minimum size is $100 million, although rural projects will be considered that cost as little as $25 million. AIFA would be overseen by a panel of seven members appointed by the President and confirmed by the Senate.

In terms of generating jobs, the spending authorized for the AIFA is relatively small. From the bill:

Singing the passion song

Singing the passion song

Kathleen Kennedy Townsend, the former lieutenant governor of Maryland, writes passionately in The Atlantic about the need to create jobs in the United States, especially those linked to infrastructure. I welcome her opinion as we need more passionate voices drawing attention to the need to stop outsourcing American jobs. We will never recover if we make economic decisions solely on the the basis of manufacturing costs. Ms. Townsend says:

As a country we have to decide what our values are. Do we really want to be a nation that funds our spending spree through the Chinese, who then make our goods and do our work while we go into debt and remain unemployed? Work is more important than saving tax dollars. Jobs are critical. Work, not an unemployment check, is what makes people feel they are worth something.

I hope the combined forces of politicians, the unions, and the Chamber [of Commerce] will eventually overcome the resistance to the infrastructure bank. We need to create jobs, and we need to rebuild our roads, railways, sewage, and water systems. Most of all, we need to revive our sense of energy and excitement — the deep fulfillment that comes of making things we can touch and feel, things that really improve our lives.

The American Revolution was a beginning, not a consummation

“The American Revolution was a beginning, not a consummation.” ~Woodrow Wilson

Happy belated Independence Day to all! Step by step, the United States is transforming itself. It’s a good time to remember our founding principles:

Individual liberty
Personal responsibility
Constitutionally limited government
The rule of law

“To win the future, we must dream big and build big”

America’s Interstate Highway System celebrates 55 years

This is the best example of how public infrastructure can really anchor tremendous economic growth. We can learn from history and use this time of economic challenge to conceive of equally profound infrastructure goals. From Fastlane, the blog of U.S. Secretary of Transportation Ray LaHood:

As President Obama has said, to win the future, we must dream big and build big. One of the best examples of dreaming and building big in our nation’s history is America’s Interstate Highway System, which marks its 55th anniversary today.

On June 29, 1956, President Eisenhower signed the Federal-Aid Highway Act of 1956, which established a program for funding and building the new system. This legislation has been hailed by historians as one of the top ten bills in American history, surpassed only by the Civil Rights Act and Medicare, and the Interstate Highway System has been called the greatest public works project in history.

The infrastructure bank as political cover

If you have been around Washington much, you know that a lot of what happens is often kabuki. What may appear to be a geisha girl coyly teasing a samurai is really a young man with heavy make-up and mincing steps. It’s beautiful deception.

I think a little DC kabuki maybe happening with the renewed chatter around an infrastructure bank funded with corporate overseas profits. Bloomberg reports:

The Senate’s No. 3 Democrat [Senator Charles Schumer of New York] said yesterday that his caucus is exploring the potential of using the short-term revenue a [overseas profit] repatriation holiday would generate to fund an infrastructure bank. The focus on infrastructure, he said, would “guarantee” job creation and address a key line of Democratic opposition.

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