|The opening of The Trump International in Washington D.C,|
Photograph by Jim Bourg/Reuters
It is time for the weekly edition of Blogger Candidate Forum. Five days into the presidency of Donald J. Trump and the sky has not fallen, yet. POTUS's inaugural speech was darkly authoritarian. It painted a grim picture of the United States of America. It repeated one of the key themes of his campaign, "America First." Five days later, we are seeing President Trump carrying out what candidate Trump pledged to do. One of those campaign pledges is improving American infrastructure.
On the campaign trail, he repeatedly took Secretary Hillary Clinton to task for a proposed infrastructure bank. He criticized it as being controlled by politicians and bureaucrats in Washington and bankrupted by a $275 billion tax increase on American businesses. All familiar conservative critiques of a national infrastructure bank. Think about it, the just the word bank (national no less) can make a grown Republican cringe, as a Politico (http://www.politico.com) article, last year, pointed out.
We should not be surprised that POTUS is doing a policy U-turn and supporting this liberal-backed policy. The purpose of an i-bank is "encourage public-private partnerships on projects selected for their ability to return on loans-in addition to meeting key national objectives." Indications are that the Trump administration will heavily rely on private partnerships to fuel the much-tallied about $1 trillion spending spree.
What exactly is an infrastructure bank? What does a good i-bank look like? More important, why is this idea so embraced by liberals, only to be cast aside?
|Infrastructure bank flow chart|
The word bank conjures up a place that people go to deposit or withdraw money, get a loan for a house or car. An i-bank is not this type of a place.
Like a regular bank, a federal i-bank's purpose is to lend money but not for a house or car. Instead, it lends money to state or local governments to build or repair roads or dams. The operative word being lend as opposed to grant-"the expectation is that the federal government would get its money back." To make this possible, the bank would take several billion dollars in seed capital-possibly from repatriating foreign income tax, an idea supported by both major party candidates-"then use that money to issue bonds, tax credits, and loan guarantees to state and local governments and their various private partners." Like a typical individual loan, both parties would submit a loan application, which would be reviewed by the federal government and grant based on the project's merit. Federal backing of infrastructure loans would, theoretically, encourage private entities to invest more (exponentially more) amounts of money to fully fund a major project. Over time, the tolls, rate payments, and assorted usage fees would be used to repay the principle amount and interest.
Laura Bliss writes, "Federal administrators already use very similar financing tools to help state and local infrastructure projects." Case in point, the Department of Transportation has the TIFIA program that issues direct loans, loan guarantees, and lines of credit to qualifying road, transit, and walk-bikes proposals. The RRIF programs does something similar for railroads. Ms. Bliss continues, "The federal government also authorizes state infrastructure banks to use revolving funds for water and energy improvements. These programs function essentially as an infrastructure bank would."
The key difference is "...that a national infrastructure bank would consider and finance all kinds of infrastructure: ground, air and rail transportation, ports, energy projects, water, telecommunications, and so on." Typically, a water treatment plant in New Jersey would not compete with broadband expansion in California, which would not compete with a streetcar project in Michigan. However, all of these proposals could apply for loans from an i-bank, which would decide which one to finance based on a number of determinants.
|State of Michigan Infrastructure Bank|
One example, hypothetically if POTUS wanted to double American exports, improve access to ecumenic opportunity, or upgrade every neglected water system in the country, then an i-bank could use that as guidance for choose the projects it lends money to. Ms. Bliss writes, "Ideally, the bank would judge a project across multiple criteria, all at once-its social, environmental, and economic impacts."
|Secretary Hillary Clinton's Infrastructure Plan summary|
So far, we have been looking at the positives of an i-bank but what about the negatives? Let us start with the question of why we do not have a national infrastructure bank? First, like any regular financing scheme that requires federal decision-making, there is concern that if the performance guidelines are written to loosely, the bank could end choosing project proposals that fail to deliver on optimistic projects and end up being bailed out by the public sector. The flip side is if the federal government ran the bank, it might select projects that are most likely to yield a great return, not ones that serve the national or public interest.
|Georgia State Transportation Loan and Grant Basics|
All of the above reasons are why many a transportation policy makers have described a national i-bank as the next best idea for the past 25 years. Former President Bill Clinton pledged to establish one. Former President Barack Obama (this hurts yours truly to write) unsuccessfully tried to establish one during his tenure. The idea has Republican supporters, including South Carolina Senator Lindsey Graham. The idea sprung to life in 2015 just as Congress was careening towards its last "cliff". Its opponents argued that an i-bankwas "just another way to get stuff done with IOUS-and others just didn't like the fact that Obama was associated with the concept."
|A literal fork in the road|
Laura Bliss speculates, "Still, if it was seeded adequately and guided by strategic policy objectives, a national infrastructure bank could serve a new and meaningful purpose, as an addition to federal government's existing suite of financing tools."
Whether or not Congress gets behind a Trump-supported i-bank or, for that matter, any portion of a Trump infrastructure plan is a separate issue. Prominent Democrats have broadcast their intentions to work with POTUS on his public works projects. What is troubling is POTUS's plans to privatize infrastructure projects, as explained by his advisors, is seriously unviable. Also not entirely clear is what at the national objects of President Trumps's infrastructure building spree beyond, jobs, jobs, jobs.
|POTUS on the campaign trail|
a tax-cut plan for utility-industry and construction-sector investors, and a massive corporate welfare plan for contractors...
Mr. Klain warned that the i-bank was "just a deal-sweeter to win over liberal in Congress." Paul Krugman of The New York Times (http//www.nytimes.com) expressed similar concerns, referring to POTUS's scheme as a "scam primed to rip off taxpayers and enrich cronies in the construction and utility industries. " Mr. Krugman writes,
It's hard to see any real for a roundabout, indirect method that would offer a few people extremely sweet deals...unless the inevitable corruption is a feature, not a bug. (Ibid)
It is no secret that President Trump may already be mixing his business affairs with presidential duties thus, it seems logical to expect more.
Laura Bliss throws in a short paragraph that compares POTUS's rhetoric on infrastructure development with Germany in the thirties. She writes, "And then there's Hitler. It's hard not to notice the parallels between Trump's rhetoric on new roads and airports and the way highway construction helped citizens acquiesce to Nazi rule in 1930s Germany" A jarring comparison? Absolutely.
Which way are we headed? Hard to say until President Donald Trump outlines the legislative details, then who knows? Infrastructure bank or not, Americans should always remember "Buyer Beware."