Today, David Brooks argues that without its crippling pension obligations, the state of New Jersey might have had enough cash to build the Hudson River tunnel that governor Chris Christie killed last week. Public sector unions—and public sector union lobbies—have a stranglehold on the state coffer, he says, forcing successive governments to pay retired state employees at the expense of essential, long-term projects.
William Galston doesn't talk about the Hudson tunnel in this New Republic column, but he suggests a second possible tunnel killer: ObamaCare. Galston argues that because Obama spent all of his political capital on the health care debate, he was less willing to push for the establishment of a federally-managed infrastructure bank, which might have kept the Hudson project alive.
How would a national infrastructure bank work? The idea might be thought of as an attempt at a compromise between free-market funding and centralized infrastructure planning. It would be privately-capitalized but government-managed, and could allow for a combination of private and public input in granting loans in support of massive domestic projects. Galston says an infrastructure bank "could attract private capital, create a merit-based selection process for projects, and finance the kinds of infrastructure investments—multi-modal and multi-jurisdictional—that get short shrift in the congressional appropriations process."
The hope is that an infrastructure bank would help facilitate private investment in major projects that government is simply too broke to undertake on its own, while the whole "merit-based selection process" could crack down on the cronyism and inefficiency that make huge infrastructure projects such expensive, drawn-out affairs. Because private investors would be playing with their own money, the idea is that the bank would only grant loans to the most urgent yet cost-effective and best-run programs. And because it would be extremely discriminating in how it loans out money, taxpayers would, at least in theory, assume a relatively low level of risk.
But there are also drawbacks to the idea. An infrastructure bank has the potential to increase the deficit if those loans aren't repaid. And it might lead to ruinous Fannie Mae-style public-private entanglements. The Reason Foundation's Samuel Staley explained that an infrastructure bank could be successful only if it minded its balance sheet, and if Congress prevented it from functioning as an ATM for cosmetic, pork-barrel "stimulus" projects. He wasn't hopeful on either count:
Samuel Staley, director of urban growth and land-use policy for the Reason Foundation, a libertarian research group, said the best way to spend money efficiently would be to establish the bank as a revolving loan fund so that money for new projects would not become available until money for previous projects had been repaid.
Mr. Staley expressed concern that in their zeal to spur growth and create jobs, Congress and the Obama administration would not impose such limits.
"With the $800 billion stimulus program, they were literally just dumping money into the economy," he said. "There was little legitimate cost-benefit analysis."
That's a huge problem. In the hands of a more fiscally responsible presidential administration than the current one, a national infrastructure bank might bring private-sector money and know-how to major infrastructure decisions. But that would require a level of fiscal restraint that neither party seems ready to commit to.