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:
- (2) MAXIMUM ANNUAL LOAN AND LOAN GUARANTEE VOLUME- The aggregate amount of direct loans and loan guarantees made by AIFA in any single fiscal year may not exceed–
- (A) during the first 2 fiscal years of the operations of AIFA, $10,000,000,000;
- (B) during fiscal years 3 through 9 of the operations of AIFA, $20,000,000,000; or
- (C) during any fiscal year thereafter, $50,000,000,000.
$10 billion in annual expenditures won’t create that many jobs unless it is in the form of loan guarantees. If the purpose of the AIFA is to create a new form of government sponsored entity (GSE) to guarantee infrastructure loans, then it is probably adequately funded.
But if the government is merely guaranteeing the construction of infrastructure, the question of ownership still lingers. Wall Street would certainly like to own it, and private investors are lining up to invest in public infrastructure. Businessweek said the following in May 2007: