NEW YORK ( TheStreet) -- The specter of another recession and the lack of ammunition from the Federal Reserve to stimulate the economy has Washington scrambling to come up with job-creating ideas. One solution is taking hold with policymakers on all sides of the political spectrum: Sen. John Kerry (D., Mass) has teamed up with Kay Bailey Hutchison (R., Texas) to come up with a national infrastructure bank. Boring, yes, and mightily challenged by past failures such as the $800 billion stimulus package that passed in 2009, or by the specter of government-backed mortgage monsters Fannie Mae ( FNMA.OB)and Freddie Mac ( FMCC). But, proponents of an infrastructure bank argue, we have this problem we need to solve. The U.S. is expected to face an annual funding gap of between $134 billion and $262 billion for each of the next 25 years for transportation infrastructure, according to a report from a 2009 conference led by former transportation secretaries Norman Mineta and Samuel Skinner. A study this year by the Urban Land Institute reached some similar conclusions. Mineta, however, says both studies and others like them are "sitting on a shelf gathering dust." Mineta says he does believe the political will is there to spur infrastructure investment, citing support for the idea from state secretaries of transportation, builders and contractors, as well as President Obama. Listen to him long enough, however, and the frustration becomes evident. "Frankly it's stupid that we're not moving this thing. The public takes for granted the transportation system until it's denied them. Then when it's denied them there's a hue and cry about 'why aren't you doing something about it?' But even that hue and cry only has a shelf life of so long," Mineta says. For years, the obvious funding mechanism for increasing infrastructure spending is a higher gas tax, but Mineta says politicians repeatedly refuse to vote for it. As electric cars become more common, however, that idea may no longer make sense, he acknowledges. The attraction of an infrastructure bank would be to fund projects of national significance, and the hope is that it could be set up in such a way as to minimize political interference, according to Robert Puentes, a scholar at the Brookings Institute.
Spending to date "has been more aligned with pork and politics" than with national priorities such as "economic growth, environmental health--whatever it is you want to do," Puentes says. Bill Gross, co-CIO of bond giant Pimco, believes government spending on infrastructure is an important ingredient to an economic recovery. "You've got to create a demand for labor," Gross told the The New York Times . "The private sector is not going to do it." Even if the government must do it directly, he said, "Putting a shovel in the hands of somebody can be productive." And Brookings' Puentes believes initial spending by the U.S. government would attract foreign capital. "The private sector has capital to spend--whether its sovereign wealth funds or pension funds or private investors, equity investors--whatever it is, that money is out there, we know, but there really isn't a good home for it here in the U.S. so a lot of its going elsewhere. Some kind of national infrastructure bank would help provide a place for those funds and then connect it to the infrastructure projects that are out there," Puentes says. Even Rep. Ron Paul (R., Tex.), godfather of the cost-cut-obsessed Tea Party, acknowledges the need to spend more on infrastructure--even if it means cutting almost everything else. "Before any subsidies or welfare payments are paid out, before social security is handed out to illegal immigrants, or health care is given to everyone, before bridges to nowhere are built at home, or entire countries bombed and rebuilt abroad, before any other myriad of exotic government projects are even considered, infrastructure should be attended to and taken seriously," Paul said in a speech on the House floor. Paul spokesman Jesse Benton says Paul believes some government spending on infrastructure is necessary to pick up the slack for a time, though "ultimately it should be more of a free market approach." The government money would come from "not expanding universal healthcare and by cutting back what we're doing overseas," in terms of fighting foreign wars. Whether infrastructure is more important than health care is a matter for debate. Let's hope we are capable of providing ourselves with both. -- Written by Dan Freed in New York.
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