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Heritage Foundation Weighs in on Infrastructure Bank

For those following the debate over a national infrastructure bank, Ron Utt over at the Heritage Foundation has weighed in on the concept. He notes that the idea of the bank floated by the White House really seems like a backdoor mechanism for funding projects through grants. But, banks make loans, not grants. Also, it's unlikely a national infrastructure bank will do much to spur economic growth. Ron notes:

The President’s ongoing obsession with an infrastructure bank as a source of salvation from the economic crisis at hand is—to be polite about it—a dangerous distraction and a waste of his time. It is also a proposal that has consistently been rejected by bipartisan majorities in the House and Senate transportation and appropriations committees, and for good reason. Based on the ARRA’s dismal and remarkably untimely performance, Obama’s infrastructure bank would likely yield only modest amounts of infrastructure spending by the end of 2017 while having no measurable impact on job growth or economic activity—a prospect woefully at odds with the economic challenges confronting the nation.

Infrastructure spending is first and foremost about long-term growth, not short-term job creation. In order to be effective, infrastructure must provide meaningful value that can be capitalized into the production processes and decisions of private investors and businesses. Roads in and of themselves do not create value; they provide a foundation for future long-term growth if and only if they improve mobility, reduce travel costs, increase productivty and lower the costs of doing business. In other words, these projects must improve the bottom line on business balance sheets. If an infrastructure bank merely transfers wealth through grant making, and this spending goes into unproductive investments (e.g., trains and bridges to nowhere), then the effects will reduce growth and productivity, not enhance it.

Samuel Staley is Research Fellow


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