Time for a national infrastructure bank?

Douglas Rediker and Heidi Crebo-Rediker at the New America Foundation have released a policy paper suggesting a novel way to fund improvements in America’s crumbling infrastructure. They recommend two financing initiatives (beyond direct government grants):

[W]hile we have enormous infrastructure financing needs, there are also enormous pools of capital available for investment. The trick is to bring the two together in a commercial, sustainable, and politically acceptable way.

First, we suggest the enactment of legislation and the development of regulations to facilitate the origination and issuance of public sector covered bonds in the United States, which will provide a market-based, efficient, and secure mechanism to attract capital for infrastructure investment.

Second, along the lines of a proposal by Congresswoman Rosa DeLauro (D-CT) last year, we recommend that the federal government consider the creation of a new, government-owned and -capitalized infrastructure financing entity — a National Infrastructure Finance Enterprise — that would pool, package, and sell existing and future public infrastructure securities in the capital markets. The proposed entity would also seek to develop an in-house capability to originate infrastructure loans and would be able to fund itself through the international capital markets. We believe that the entity should be capitalized at a far higher level than proposed in the DeLauro bill. Further, its scope should extend beyond that of the National Infrastructure Bank as currently proposed by Senators Christopher Dodd (D-CT) and Chuck Hagel (R-NE).

The need for much greater investment in U.S. infrastructure should be obvious. But if you’re new to this issue, here’s the intro:

America’s basic infrastructure is outdated, worn, and in some cases, failing. Most experts agree that it is inadequate for meeting the demands of the 21st-century global economy. If we are to remain competitive, we must invest in capital assets like roads, ports, bridges, mass transit, water systems, and broadband infrastructure. Many other countries — both rich and poor — see investing in infrastructure as imperative for economic survival and success in an increasingly competitive economic environment. But the United States has lagged in infrastructure investment, in both relative and absolute terms. We are spending less than 2 percent of GDP on infrastructure, while China and India are spending 9 percent and 5 percent of GDP, respectively.

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Related: Rebuilding and Renewing America: Toward a 21st Century Infrastructure Investment Plan (Wilson Center event summary)

Update: (23 February 2009) NYTimes.com Op-Ed columnist Bob Herbert on the need for a U.S. infrastructure bank: http://idek.net/3RJ (via @michaelgoldberg)

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