Infrastructure catch-up needs to ease regulations 

Despite an $800 billion economic recovery stimulus package targeted at shovel-ready jobs, gross domestic product growth remains slow and unemployment high.

How strange, then, that Congress is considering additional funding for infrastructure in the form of a $10 billion infrastructure bank. The new entity, which would lend funds for transportation projects at low cost, has garnered an unusual array of bipartisan support.

President Barack Obama proposed creation of such a bank in his 2012 budget, and legislation to that end is sponsored by Sen. Kay Bailey Hutchison, R-Texas, and Sen. John Kerry, D-Mass.

The bank is supported by U.S. Chamber of Commerce President Tom Donohue and AFL-CIO President Richard Trumka, who rarely agree on anything.

According to Kerry, “When you’ve got a Massachusetts Democrat, a Texas Republican, the Chamber of Commerce and the AFL-CIO preaching from the same hymnal, you’ll find a sweet spot that can translate into a major legislative step forward.”

But that doesn’t make it a good idea. America needs more infrastructure development, but it should be provided by the private sector in collaboration with the states, not by the federal government.

In Tuesday’s Senate Finance Committee hearings on infrastructure funding, former Pennsylvania Gov. Edward Rendell, now co-chair of Building America’s Future, a nonprofit coalition of state and local officials, said that the new bank would be independent and make money.

And according to the finance panel’s chairman, Sen. Max Baucus, D-Mont., the bank would maintain America’s competitiveness and create jobs, including some for returning GIs.

Yet the effects of the stimulus spending from the American Recovery and Reinvestment Act and other programs tell a more inconvenient story. America’s unemployment rate is 9 percent, compared with 7.8 percent in January 2009.

The percentage of Americans who say they are participating in the labor force stands at 64.2 percent, the same level as in the summer of 1984. When Obama took office, the rate was 65.7 percent.

A new study by economists Timothy Conley of the University of Western Ontario and Bill Dupor of Ohio State found that highway funding in many states remained the same or declined between 2008 and 2010, despite the additional federal spending. Highway construction jobs declined by over 65,000 over the same period.

Rendell called for changes in laws that would make it easier for the private sector to invest in transportation infrastructure — changes that would obviate the need for federal involvement. “Lift the cap on tolling,” he said.

Currently, states need special waivers to place tolls on federally funded projects. If they were allowed more extensive use of tolls, private users could pay for maintenance.

Other federal laws slow down infrastructure and raise costs. Environmental impact statements can take two years. States are forced to spend money on mass transit, even if it has few users.

Regulations such as project labor agreements and high-road contracting require states to pay higher labor costs for federally funded projects, reducing the number of hires.

Sen. Orrin Hatch, R-Utah, the ranking minority member on the committee, agreed. Just because someone gives you a car, he said, it doesn’t mean that the donor has to pay for the tune-ups.

In the same way, just because the federal government funds a road, it should allow states flexibility in funding for maintenance.

Remember Fannie Mae and Freddie Mac? They were also supposed to be independent and make money. They reported losses of $9.6 billion in the first quarter of 2011 — almost enough to fund an infrastructure bank.

Examiner columnist Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute.

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