Obama takes aim at US Infrastructure

President Obama is stumping for
the creation of a National Infrastructure Bank that would closely mirror the
system that currently exists in Europe.
Senate Bill 1926, introduced by Chris Dodd of Connecticut and Chuck
Hagel of Nebraska, would set up an independent financing entity that would be
charged with funding various road projects, provide financial relief for
local government, and could create thousands of jobs for the struggling US
economy.

Modelling the EIB

The European Infrastructure Bank (EIB) does make some
sense for the US, but there are several glaring differences that should be
considered carefully.

“It has to be understood in the context of European
arrangements,” said Alistair Milne, a professor of banking and finance at the
Cass Business School at City University in London. European organisations are not as comfortable
as American ones with selling bonds to fund infrastructure projects, Milne
explained.

Supporters claim the plan would significantly cut
federal spending by combining more than 100 programmes

“The EIB fills a bit of a gap which may not exist in
America,” he said.

Originally, Obama’s administration had planned to set
up a system that would lend money to individual states. It is hoped that a national infrastructure bank
model would allow more private capital funding for interstate projects.

The plan now includes a six-year strategy for
improving the American transportation infrastructure: rebuilding more than 150,000 miles of road,
an intercity passenger rail initiative that calls for building and maintaining
4,000 miles of track, and repairing more than 150 miles of airport
runways.  There is also a provision that
calls for more efficient air traffic control technology.

Pros and cons

The American National Infrastructure Bank would be yet
another piece of Obama’s complex US stimulus initiatives.

Supporters claim the plan would significantly cut
federal spending by combining more than 100 programmes. Because the bank model would be backed by the
federal government, there would be less risk for private investors, and it
would be much easier to raise funds for projects. Furthermore, a federal funding institution
could supplant limited local government budgets and would rise above petty
political conflicts and election cycles.
For large-scale projects like electric, water, and rail systems
construction, which usually take decades to complete and cross numerous state
lines, a federal programme could be a viable way to leverage the kind of
private capital needed to keep the US infrastructure from crumbling. A National Infrastructure Bank would also
expand the reach of many of Obama’s eco-friendly initiatives like reducing
dependence on foreign oil, lowering carbon emissions, and funding for
non-vehicular travel.

Critics of the bank model say that the plan grossly
underestimates how much money it will take to improve and expand the American
infrastructure. While the Obama
administration is calling for about $60bn, experts estimate the actual
cost of repairs will climb as high as $2.2trn. Detractors further claim that the
infrastructure bank model is redundant and wasteful. They argue that the programme would overlap
work that can be done now through programmes that already exist, such as the
Transportation Infrastructure and Finance and Innovation Act. They also caution that a banking programme,
if it fails, could plunge US taxpayers further into debt and kill the still
delicate US economy. These detractors
point to the more than $150bn taxpayer dollars that went to Fannie Mae
and Freddie Mac to help them remain solvent after the US housing market
collapsed.