Infrastructure Bank Plan Gaining Attention And Momentum
In today’s New York Times, columnist Bob Herbert spotlights the congressional proposal for a National Infrastructure Development Bank that would issue bonds, make loans and create securities to help finance needed rebuilding projects around the country. As Herbert put it:
Rep. Rosa DeLauro (D-CT) (Photo: America2050 via Flickr)[T]here was a development in Congress last week that
should have been seen as significant but could not elbow its way into
the media precincts obsessed with Rush Limbaugh, Dick Cheney and swine
flu.Representative Rosa DeLauro, a Connecticut Democrat,
introduced a bill to establish a national infrastructure development
bank that would use public and private capital to fund projects of
regional and national significance. These are projects that are badly
needed and would be a boon to employment.
DeLauro’s plan would give the final say over which transportation, energy and telecom projects receive assistance from the development bank to an independent board of directors. Separate risk management and audit committees would keep an eye on the bank’s balance sheet, which would get a $5 billion annual infusion of taxpayer money to help attract more capital from private investors.
The development bank has won backing from a collection of strange political bedfellows, including the U.S. Chamber of Commerce, the AFL-CIO and Felix Rohatyn, the investment-banking magnate who helped New York City avert insolvency in the 1970s.
Still, the risk-management aspect of the plan appears particularly crucial. Why? The development bank would be able to "purchase and sell infrastructure-related loans and securities on the global capital market," according to DeLauro’s summary. That phrase sounds innocuous enough, but several communities that issued infrastructure-related bonds to pay for recent improvement projects have found themselves facing bankruptcy after making risky bets to help keep pace with fluctuating interest rates.
With the municipal bond market on shaky ground right now, it’s easy to envision the infrastructure bank taking — to use a euphemism — creative measures on the market to help convince private investors to participate. It’s important, therefore, for the bank to ensure states and localities aren’t getting talked into overly complex financing arrangements.
Does the infrastructure bank proposal have a real future in Congress? Its current 27 co-sponsors in the House are all Democrats, but former GOP senator Chuck Hagel signed onto a similar plan in 2007, and its appeal is undeniably bipartisan. Transportation Secretary Ray LaHood also has spoken approvingly of the bank, meaning that it has a strong chance of appearing in the federal transportation bill slated for introduction this summer.
So Herbert could soon get his wish for more media coverage of DeLauro’s proposal … if the House pushes forward to a final vote on its transportation bill.
It’s good to see lawmakers talking at least 1 new way of raising revenue for transportation. The highway trust fund, which pays for pretty much all of the federal government’s share of the surface transportation budget (highways and transit), will go broke before we see a new federal transportation bill.
In addition to coming up with new revenue streams, I think they need to go back and fix the existing ones. Two panels of experts–the National Surface Transportation Infrastructure Financing Commission and the National Surface Transportation Policy and Revenue Study Commission–released reports in the past two years recommending that the U.S. raise the gas tax and peg it to inflation. That’s a first, interim step to fixing things.
In the long-term, government should consider replacing the gas tax with a VMT fee (as was tested in Oregon and Seattle recently), a carbon tax and/or any other ways to better internalize the costs of driving a private motor car, get rid of the massive subsidies we all provide for drivers and provide more funding greener, healthier transportation.
Do others have ideas on this?
Barnard,
What is the policy justification for replacing the gas tax with a VMT tax?
As far as a carbon tax on driving, it seems like that can just be rolled into the gas tax: The amount of carbon emitted per gallon of gasoline does not depend on the efficiency of the automobile in question.
Generation Greed strikes again.
Rather than have the federal government use taxes to pay for a few years of infrastructure investment, they’ll loan money to state and local governments.
Who will pay it back, how?
This isn’t new revenues, it’s new debt. The “innovation” is that the federal government doesn’t count it as debt because it is with a “bank.” And state and local governments don’t have to try to borrow money from anyone who would be lending their own money, and thus worried about repayment.
What’s important is now how it will be paid back, but when. When Generation Greed finishes sucking every last dime out of the future and then passes on.
The “U.S. Chamber of Commerce, the AFL-CIO and Felix Rohatyn” all support the infrastructure bank because they, and the interests they represent— the building trades, construction contractors and Wall St — all stand to make money from it. Larry Littlefield is right that this is fundamentally a new way of issuing debt off the ledgers of the US Treasury or states and localities. Cities and states have maxed out their borrowing and don’t want to raise gas/VMT taxes or transportation user charges. The question is whether it is easier to default on loans from this bank or bond issuances. Odds are the states and cities borrowing the money believe the feds will ultimately let them slide because it will be too politically difficult too collect. One thing politicians of all stripes believe is that their constituents deserve a break. If this things happen, NYC and the MTA should borrow as much as they can as fast as they can and then try to shove the costs off on the feds like everyone else will. Since NYC sends billions more to Washington than it gets back, this is a rare chance to cash in and bring the money home.
“Larry Littlefield is right that this is fundamentally a new way of issuing debt off the ledgers of the US Treasury or states and localities.”
Deferred maintenance of our infrastructure is also an off the books debt. So are public employee retirement benefits that are promised but not fully funded, based on ridiculous assumptions about the rate of return on current assets.
The massive on the books debts, of course, are in addition.
The question is what happens when the bailouts stop because the federal government can’t borrow anymore?
Right… how about a “Sustainable Infrastructure Bank”?
“when a government is dependent upon banksters for money,they and not the leaders of the government control the situation,since the hand that gives,is above the hand that takes…money has no motherland:financiers are w/o patriotism and w/o decency: their sole goal and object is gain” – Napoleon Bonaparte
CAMPAIGN FOR STATE BANKS
“if the American people ever allow private banksters to control and issue their currency, the people and their children will one day wake up homeless on the continent their forefathers conquered” – Thomas Jefferson”….
the power to issue and control the currency/money, must be given back to the people to which it rightly belongs” – Thomas Jefferson….
“private central banksters controlling the peoples money are more dangerous than standing armies” – Thomas Jefferson….
its past time to END THE FED and big government for good..
Ron Paul’s bill HR 1207 to audit the fed,will sadly do nothing,as the federal reserve lawyers will cook the books and make everything look just dandy..an audit of the fed is sadly a waste of time we have precious little of left..
..the fed must be ABOLISHED..period..
and it can be done w/o nary a bill to get rid of it..with this new,honest,debt free,interest free, state banking money system,very much similar to Abe Lincoln’s greenbacks issued in 1862,and JFK’s silver certificates issued in 1963,the fed will die on its own accord..
state run banks ARE the solution..a new interest free paper currency issued in each of the 50 states backed by silver,
NO GOLD!..the banksters own nearly 96% of the worlds gold that they stole from the U.S. and the rest of the world with money they made from thin air on computers and printing presses! if we went back to a gold backed currency/money,the banksters would very quickly take back control of the money system!..soooo NO GOLD BACKED MONEY!..we had our money backed by gold in 1929 and the 1930’s..did it stop the great depression? NO!
[ although gold would still retain a value 16-20 times greater than silver per the constitution]
each individual state would make their own $1,$5,$10,$20,$50,and $100 paper notes backed by silver[ex: $20 Texas silver note..under that “payable to the bearer on demand $20 in silver [when presented at any state bank,you would receive either $20 worth of 90% silver coin, 20-.999 silver dollars,4 – 5 oz. .999 silver bars,or 2 -10 oz, .999 silver bars],and all 50 state paper notes would be accepted in every state and abroad..having 50 different notes for the 50 sovereign states would make it extremely difficult for the banksters to take back control of the U.S. money system again.. a dollar would be 31.1 grams of silver[ONE OUNCE] as per the constitution..change for the new paper notes would be pre-1965 90% silver again[only 90% silver with 10% copper is hard enough to take the day to day pounding/ movement/exchanging and hold up],and 100% copper again for pennies..a state run honest money/banking system with interest free loans run by the people.. for the people.. there would be only a small administrative fee/ cost, to borrow money to pay state bank employees and mgrs. etc.
EX: you[or a small business starting up lets say ]were to borrow $205,000 for a $200,000 house/loan,you would pay back $205,000 over the next 5,10,or 15 years[ditto credit cards],instead of the present parasitic fractional reserve “debt money system” where you would buy a $200,000 house[or a $200,000 loan] and because of compounding interest, you would pay the private parasitic fractional reserve banksters nearly $1,000,000 over 30,40 or even 50 years for that original $200,000 loan that was lent money made from thin air..nothing in the first place..they didn’t actually “loan” you a dime!..THIS IS ABSOLUTE,UNADULTERATED INSANITY..
paying the banksters for money made from nothing..it just blows you away when you think about it..its hard to wrap your mind around.. just like 9-11
the private non-federal reserve is simply the greatest scam,fraud, and deception in the history of the world..bar none
IS IT ANY WONDER MANY OF US ARE DEAD BROKE AND BURIED SO DEEP IN COMPOUNDING DEBT WE WILL NEVER GET OUT IN A LIFETIME??
and living paycheck to paycheck?
this isn’t living..this is [debt] slavery and many don’t even realize they are lifetime debt slaves of the banksters!
it just doesn’t have to be this way!
state controlled banks with “honest” money, will bring back manufacturing and real jobs!
a nation that is prosperous MUST produce goods folks!
3rd world countries don’t produce goods!
the U.S.A.. IS in fact a 3rd world country now!
a petition page will soon be up at WEB OF DEBT.COM
where you can sign it and DEMAND your state
implement state run banks! [unless you live in N.Dakota that already has state banks]
..BANKS AND “OUR” MONEY CONTROLLED BY WE THE PEOPLE..
talk about PROSPARITY RETURNING TO AMERICA..
imagine paying $500-$1,000 for a new car again..
of course a new state bank silver dollar will have the purchasing power of a 1913 dollar..but we can start all over again as a nation,
and bring ALL the troops home from abroad and have them protect OUR BORDERS! with 50 new sovereign state banks this country can be turned around in days
not months or years, but DAYS!