Job creation: Fixing America with an infrastructure bank

August 5, 2011

We have iPhones, iPods and iPads. Why not an “iBank?”

This wouldn’t be an electronic gizmo that’s obsolete in a year, though. It would be a public-private partnership to bolster America’s infrastructure. It will create jobs, cut the deficit and repair what needs to be fixed all over the country.

An infrastructure bank, or iBank, solves a lot of problems without busting the budget. Instead of providing direct government grants or earmarks for specific projects, loans are made by a government-banking entity.

The U.S. is inexcusably late to the game on this time-tested idea. The European Investment Bank has financed some $350 billion in projects from 2005 through 2009. China spent 9 percent of its gross domestic product — also roughly $350 billion — to build subways, highways and high-speed rail in 2009 alone. Brazil invested $240 billion over the past three years.

The idea is not without high-level support. President Obama recently called for the creation of an iBank. In backing a U.S. iBank, Senator John Kerry of Massachusetts testified last year that “a national infrastructure bank will make Americans builders again.”

If the iBank became reality — and really it’s a necessity to compete in a globalized economy — there’s no shortage of projects. According to the American Society of Civil Engineers, more than $2 trillion is needed to fix U.S. bridges, dams, waterways and wastewater plants.

The sheer scale of a big fix is staggering: Some 69,000 bridges need to be repaired. The outdated electrical grid needs to be modernized everywhere. You can build solar plants and windmills all you want, but if you have no power lines to transport the electrons from the deserts and plains, you’re whistling in the wind.

Several spin-offs of an iBank have been floating around for years, and the idea already has support across the political spectrum. A “Clean Energy Bank” would fund solar energy equipment. Sen. Bernie Sanders of Vermont, supports legislation that would install 10 million roof solar panels. Sen. Mark Kirk of Illinois proposed a “Lincoln Legacy” infrastructure bill.

How is the iBank different from just handing out the money to each Congressional district and letting the local representative decide where the money should go?

In Kerry’s vision, federal dollars would be matched with private dollars from pension funds and endowments. Kerry told the Time’s Joe Klein recently that “a $10 billion federal contribution will leverage about $640 billion in private investments.” Kerry claims he has support from business, labor and Republican Senators.

Instead of doling out pork-barrel funding for bridges to nowhere, an independent board would decide which projects are needed most. It’s the inverse of a military base closing commission. Instead of shutting down facilities, this entity would greenlight and finance the most-worthy projects.

One thing an iBank wouldn’t be is another big-check stimulus plan, which Congress passed in 2009. That nearly $800 billion package was a huge fiscal band-aid to help states, school districts and wage earners through the recession. Yes, there were some public works projects that created short-term jobs, but the bulk of the money went to tax relief and the states.

The U.S. needs a new approach to economic triage. The June jobs report was nothing short of dismal as employment growth hit a wall with only 18,000 new jobs coming on the market.

Crumbling infrastructure will cost the U.S. economy nearly 1 million jobs and shave $3.1 trillion from gross domestic product by 2020, the Society of Civil Engineers estimates.

What about the budget? Isn’t there a disconnect between the current passion for cutting the federal deficit and spending money to fix America?

There’s little question that putting people to work will help the economy. Working people pay income, sales and property taxes, which flow back into communities. The steadily employed buy homes, vehicles and appliances. Increased tax revenue in turn reduces the deficit.

The iBank may be able to accomplish what a decade of personal income and estate-tax cuts didn’t: Provide the necessary public-private capital to revive the economy. Not even Harry Potter can make magic work on the U.S. economy without some significant infrastructure investment.

13 comments

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How about iJobs, iBank is totally confusing branding. This is about rebuilding crumbling infrastructure and about putting people back to work. iJobs looks a lot better.

Posted by TezSez | Report as abusive

Sounds like a good idea. Little short on details though. I don’t think it would work in our current version of capitalism. But after this system collapses (shortly I think) it may take hold.

Posted by tmc | Report as abusive

John Kerry is an economist now?

Posted by diddums | Report as abusive

Sounds like a way to assume even more indebtedness to the bankster class.

What is wrong with a carbon tax???

Posted by upstater | Report as abusive

“Not even Harry Potter can make magic work on the U.S. economy without some significant infrastructure investment.”

Sure, just swish & flick… 😉

What is an iBank?

Is that a code word for Apple or Toll Roads & Toll Bridges?

I don’t want private financial rulers taking control of our public infrastructure, no way!

Let’s be responsible: Pay for what you build & built in the public domain… that’s called Federal Income Taxes AND, also, the additional tax we ALREADY pay every time we buy a gallon of gas! Duhhh!

iBank? Just one more taxing authority we don’t need, ever! Just another financial scam in the making…

Posted by deVries | Report as abusive

There is a tremendous need for infrastructure improvement, there is little risk of displacing private economic activity in a slump that has lasted for years and there are armies of the unemployed. The private economy is not going to generate jobs until the economy deleverages– as Rogoff and Reinhart have shown this is going to take years from now. The US has had many private/public partnerships over its history and some very successful–in the current political climate, people have forgotten about them. This program can create jobs and improve our infrastructure in a period in which we desperately need both. Excellent column.

Posted by MikeDelMar | Report as abusive

A better idea would just be to privatize so we don’t have to worry about government corruption and incompetence to take care of our national infrastructure. All this proposed iBank will result in is funneling money to construction companies and engineering firms that are well connected and lobby for the projects. Why do so many people think that the government has to be part of the solution to anything that is wrong? All increasing government involvement does is decrease competition and increase corruption.

Posted by jtknop | Report as abusive

An infrastructure bank (which this article does nothing to explain) is a method for moving expenditures off budget. They say they can turn $10 billion into $640 billion but what they leave out is that the government then agrees to pay back that $640 billion with interest. You know, like selling bonds only they wouldn’t have to raise the debt ceiling.

As a 24 yr old I am shocked that the baby boomers care so little about their children and grandchildren that they refuse to just spend the money (on budget) necessary to repair this nation’s infrastructure. The only way to convince them to do it is to pull this shady back door financing which most of them don’t understand and take the decision making power away from congress and putt it in the hands of bankers. S&P wouldn’t be downgrading the U.S. if they knew all those billions that we failed to cut from the deficit were being redirected into investment that will actually increase the country’s long term economic potential. It’s the fact that we are wasting our money on useless pet projects that refuse to die and can’t put the money where it can do the most good. Oh and let’s not forget that Baby Boomers refuse to pay higher taxes today and expect their children and grandchildren to pay back all the bills (including Social Security and Medicare) that they are running up. Thanks guys.

Posted by hindumuninc | Report as abusive

So now the government needs to BE a bank? What part of “taxpayers ultimately pay for infrastructure” doesn’t this author understand? Congress has, for the past 40 years, systematically robbed the money which should have been used to update and replace infrastructure, year by year, social program by social program. The tax revenue benefits from the buildings, roads, bridges and dams that were built 40, 60 and 80 years ago are long gone. Noticing today that infrastructure has been neglected for 40 years hardly makes it a great idea to start fixing it now. Sure, it needs to be done, but not before the government gets a major overhaul. Business as usual is washing this country down the sewer fast. A serious start would be for the government to divest itself of the USPS, at auction, to the highest bidder. Collect rent from all existing postal facilities for one year, then sell every last piece of real estate owned by the Postal Service at the end of exactly one year. That would only buy the US some working capital, but it would be a start. Ibank, my ibutt.

Posted by Trinhou | Report as abusive

So jtknop, you expect the private sector to build bridges and water treatment plants? There are somethings only governments can do.

Posted by iThink2 | Report as abusive

Why involve the government? Why privatize? Both segments have show a propensity for unbridled greed, corruption, incomprehension of the idea of “conflict of interest”.

When the culture gets guts enough to hold such behaviors in unwavering contempt, this can be done easily. Willingness to govern on behalf of the “flesh and blood” citizens must take precedence over the governance mainly for “eternal, paper and ink CORPORATE” citizen’s benefit.

Posted by 1159pm | Report as abusive

Fuel taxes and toll roads are two good examples that work as long as daGubamint doesn’t cook the books. As a Libertarian I am often get accused of being an anarchist. That isn’t true. There are some things that DO require collectivist action.

A dozen “private” bridges crossing the river makes even less sense than having three sets of electric, water and sewer lines connected to every building. Sadly the power of corruption always ends up steering these ideas off course. Just like the 20 or so percent of highway funds being used for Intermodal and other Mass Transit pet projects while railroads pay property taxes on their facilities to support education …

User fees only work if the system is transparent and the users of the “service” are the only ones who have access to the revenue collected.

Posted by GLsword | Report as abusive

An iBank is a public-private entity that would leverage government funds and private dollars from endowments, pension funds, etc. for infrastructure projects. The bank would be transparent, somewhat independent of the political process with its own trustees and operate in the public interest. Projects would be selected objectively and perhaps chosen for their expected utility and proximity to population centers.

Posted by johnwasik | Report as abusive

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