An infrastructure bank? 

On his New Republic blog the always insightful William Galston suggests a major road-building program to be financed by private capital. The nutshell of his proposal:

Setting aside details, the new model has three key structural features.

1.        To attract private capital, projects must earn a reasonable return, which means increased reliance on user fees (tolls or levies per unit consumed) rather than general taxation.

2.       Because most infrastructure projects generate public goods (such as economic growth in the areas it opens up) as well as private goods (such as easier commutes), user fees cannot capture their total worth. The market, then, will undersupply these goods unless public subsidies fill the gap. The new model requires a shift from traditional appropriations to subsidies based on the economics of individual projects.

3.       To promote economic efficiency and growth, projects must be chosen on economic rather than political grounds. The new model requires a shift away from congressional dominance of the selection process toward an empowered board substantially insulated from day-to-day political pressures.

An infrastructure bank—versions of which have already been introduced in Congress—is one way of meeting these three criteria. No doubt there are other institutional designs that would as well.

There are a lot of things to like in this proposal, including the reliance on private capital and the removal of this function from the congressional appropriations/public works (= pork barrel) committees. Texas, on this as on other economic issues, is ahead of the nation in this regard, as Wendell Cox notes on Joel Kotkin’s blog. And over on the Weekly Standard blog, Matthew Continetti (after citing a couple of my blogposts) suggests that Republicans may want to give it favorable consideration. Interesting.

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Michael Barone

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