Wednesday, August 31, 2011

"A Fannie Mae for 'infrastructure.'" (GE)

That is one of the more evocative headlines I've seen in a while.
From the Wall Street Journal:

Bank of Political Works
Here's a novel idea: Have Congress create a "bank" that could borrow huge sums with only a small federal outlay and would be independent of any political interference. If you believe in this miracle, you probably thought Fannie Mae was a private company that wouldn't cost taxpayers a dime.

We're referring to Washington's latest marketing tool to sell spending to a skeptical public, a new federal "infrastructure bank." For the low, low price of $30 billion or so, President Obama says Congress can conjure hundreds of billions in new "grants and loans" to rebuild "roads, bridges, and ports and broadband lines and smart grids."

He says the bank would put "all those construction workers" back to work and "be good for the economy not just for next year or the year after that, but for the next 20 or 30 years." In a cats and dogs living together moment, the Chamber of Commerce and the AFL-CIO are both in favor. Since both unions and construction companies would be beneficiaries, this alone ought to give taxpayers pause.

This is the Fannie Mae model applied to public works. The new bank would be a government-sponsored enterprise, or GSE, whether or not anyone admits it. The bank would have an implicit subsidy for its debt because it is backed by the government. And the debt it issued would be "off-budget," which means it wouldn't show up in annual outlays. When she first proposed the concept in 2008, Connecticut Democrat Rosa DeLauro explicitly described the bank as a "public private partnership like Fannie Mae."

Such an outfit will inevitably be politicized, as similar examples have been all over the world. Japan's postal bank has been used for decades to finance public works. Japan's roads and bridges are grand but its economy has grown little in 20 years. Agribanks, regional development banks, Brazil's BNDES national bank have all become vehicles for the political allocation of credit.

Ms. DeLauro's bill admits as much, stating that the bank must take into account the "economic, environmental, social benefits and costs" of the projects seeking financial assistance. Among the considerations: responsible employment practices, use of renewable energy, reduction in carbon emissions, poverty and inequality reduction, training for low-income workers and public health benefits.

No one disputes that American public works need improving, and government has been spending huge sums to do so. As the nearby table shows, between 2001 and 2011 federal "public physical capital investment outlays" more than doubled to $330 billion from $142 billion. Every major area of infrastructure—transportation, Army Corps of Engineers, energy—is up by at least 75% in a decade....MORE 
General Electric's Jeff Immelt proposes a tax holiday with the maximum 5% tax on rapatriated profits devoted to an infrastructure bank to fund projects by companies such as, well, General Electric.

July 13 
General Electric's Immelt Calls for Tax Holiday on Overseas Funds, Hows About we Just let Them Leave the Money in China? (GE)

August 23 
Economic Policy Journal Doesn't Much Care for the National Infrastructure Bank