The Obama Administration’s idea of a pivot to jobs will include a push for an infrastructure bank. The idea is described by the financier Felix Rohatyn in this 2008 article in the New York Review of Books. He begins with a recitation of our infrastructure needs, which have increased dramatically since he wrote this article, and then describes the problems we face in improving things. He thinks the big problems are the lack of money and the inadequacy of a democracy to manage projects wisely. Here are his thoughts on money:
But where would the money come from? The Iraq war drains our national resources, and the 2001 cuts in personal income, capital gains, and inheritance taxes have slashed federal revenues. Meanwhile, several presidential candidates, including the Republican nominee, Senator John McCain, were unable to resist the temptation to endorse a motor fuels tax “holiday,” which would produce negligible saving for motorists but cut even further needed federal revenues. Thus, when it comes time for investments in our future, the federal cupboard is bare.
If he were writing today, he would see the same problem, only now aggravated by the anti-tax mania of the Tea-Zombies and their Democratic enablers; the miserable financial position of the States; and by the coming fight over the fuel tax, which expires at the end of September. The fuel tax is the funding source for the nation’s highway trust fund, which finances most of the road-building, major maintenance and mass transit systems. It is on the hit list for Grover Norquist and the crazy party. Without it, there will be even less money for infrastructure. [cont’d.]
Rohatyn says that the decision-making process is also a big a problem. We don’t have an organized process for making good decisions about major programs, what to repair, what to replace and what to create, whether it’s water treatment plants, airport expansion or highways. Instead, we have bureaucratic fiefdoms handing out whatever money they have based on their own ideas, or earmarks directed at filling the needs of congresscritters to bring home the bacon to their contributors. Or, we rely on state government to figure out the best way to handle their needs. Rohatyn wants something like an industrial policy, where the federal government picks winning and losing projects:
No responsible body has the mission of impartially deciding whether we’d be better off with more mass transit and better train service and fewer major roads, because these are never compared when a specific proposal is under review. Moreover, the different agencies that analyze projects—if they do so—generally use different (and self-interested) criteria for determining such critical variables as the value of time, the value of new jobs created, the discount rate, the cost of capital, and so on. As a result, the public is left without the apples-to-apples comparisons that any rational investor would use to allocate a portfolio of billions of dollars of investment.
In Rohatyn’s telling, the infrastructure bank would apply meritocratic criteria to the projects it funds. And by bank he means the board of directors: unelected people like cabinet officials and people appointed by President Obama, Majority Leader Reid and Speaker Boehner. He wants us to cede control of major infrastructure completely to unelected and unaccountable people. At least, they will not be accountable to citizens. They will be solely responsible to the investors in the bank, the rich and the entitled. What else would you expect from the profoundly anti-democratic elites?
We wouldn’t have this problem if we raised taxes, but that would violate the rights of Americans not to pay taxes. Instead of taxes, we pay interest or tolls to Abu Dhabi and other clients of Goldman Sachs and JPMorgan Chase. The interests of these financiers and their clients are certainly aligned, but not with the interests of US citizens.