Open Evidence Archive | National Debate Coaches Association
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1AC – NIB Aff
Plan
The United States federal government should substantially increase investment in its transportation by establishing a foundation, with the authority to form partnerships with private investors, to disperse grants for transportation infrastructure in the United States.
Economy
Contention 1 is the Economy
Public and private infrastructure investment is declining significantly
Nutting, 12 (Rex, MarketWatch's international commentary editor, 6/1/2012, “Investments in the future have dried up; Commentary: Infrastructure spending down 20% since recession began,” )
WASHINGTON (MarketWatch) – When I was growing up in the 1960s and 1970s, the legacy of the Great Depression was everywhere: Dams, bridges, roads, airports, courthouses and even picnic areas and hiking trails. Leaders of that dire time — Democrats and Republicans — took advantage of the Depression to put millions of Americans back to work, building the infrastructure that we still rely on today. They had lemons, and they made lemonade. This time, however, we’re not so fortunate. Instead of picking up the shovel and getting to work, we’ve thrown the shovel aside, complaining that we just can’t afford to repair what Hoover, FDR, Eisenhower, and LBJ built, much less invest in the infrastructure than our grandchildren will need. The fact is, we’re investing less than we were before the recession hit more than four years ago, not just in government money but in private money, as well. Here are the facts, according to the Bureau of Economic Analysis: Government investments (in structures and in equipment) ramped up between 2007 and 2010, only to fall back to 2005 levels by early 2012. The trajectory for private-sector investments was the opposite — a collapse followed by a modest rebound — but they arrived in the same place: back at 2005 levels, some 6% lower than when the recession began. Looking just at investments in structures (such as buildings, roads, mines, utilities and factories), private companies are investing no more today (in inflation-adjusted terms) than they were in late 1978, according to data from the BEA. All together, public- and private-sector investments in structures are down about 20% compared with 2007, in inflation-adjusted terms. In 2007, we spent $684 billion on structures; in 2011, we spent $550 billion. Even before the recession arrived, we were underinvesting. Investments in infrastructure as a share of the economy had declined by 20% compared with 1960, according to a study by the Congressional Research Service. One widely cited estimate from civil engineers put the infrastructure gap at more than $2 trillion.
Scenario 1 is Keynesian Stimulus
Double Dip by 2013 without stimulus now – don’t trust neg authors, empirics prove they suck at predicting dips
Rasmus 12 (Jack, Jack Rasmus Ph.D in Political Economy and currently teaches economics and politics at St. Mary’s College and Santa Clara University in California is the author of the just-released book, "Obama's Economy: Recovery for the Few," Thursday, 05 January 2012, Economic Predictions for 2012 to 2013,
A striking fact of the past four years is that the world's 10,000 or so economists have overwhelmingly failed to predict the three major economic developments of this period, 2007-2011. First, only a handful predicted the financial crash of 2007-08 and subsequent deep global contraction that I have called an "Epic" recession, to distinguish it from normal recessions (and also from depressions). Second, the 10,000 have failed to predict the current protracted economic stagnation that has occurred since 2008 as well; instead, nearly all mainstream economists in recent years forecast a sharp "V"-shaped sustained economic recovery since 2008-09 that has yet to take place. Third, at year end 2011, they once again failed to see the sharp and even deeper retrenchment of the US and global economies that is coming, no later than 2013 - and possibly even earlier should the eurozone currency and banking system crash in 2012, which appears increasingly likely. In contrast to mainstream economists, the methodology applied to the US and global economy used by this writer to predict the US and global economies the past four years (as outlined in my book, "Epic Recession: Prelude to Global Depression") has relatively accurately forecast the course of economic events. Based on that same methodology, this writer has recently predicted a double-dip recession in the US no later than early 2013, a major financial crisis in the eurozone and a slowing of the global economy once again. This double dip in the US and global slowdown in 2012-13 is treated in more detail in this writer's forthcoming book available in 2012, Obama's Economy: Recovery for the Few." In the meantime, here are this writer's predictions for 2012-13 for the US, euro and global economy. Predictions for 2012 to 2013 1. The US will experience a double-dip recession in early 2013. Or, in the event of another banking crisis in Europe, perhaps - though less likely - earlier in 2012. Despite a continual hyping of economic reports by the media and business press in recent months, there is no recovery underway for jobs, housing or state and local government finances. Job growth has been stuck throughout 2011 at around 80,000 to 100,000 a month per the Labor Department's monthly data. The broader measure of unemployment, the U-6 rate, has been consistently in the 16 percent range, or about 25 million to 26 million for the past year. State and local governments continue to lay off workers in the 20,000 range every month. Little effective stimulus will be forthcoming from the federal government in 2012, despite the election year, and further deficit cutting is even possible in 2012. The first quarter of 2012 will record a significant slowing of gross domestic product (GDP) growth once again. Should the eurozone debt crisis escalate once more in the second quarter of 2012, the US economy will weaken further in the second quarter. It may even slip into recession if the euro crisis is particularly severe. More likely, however, is the scenario of an emerging double-dip recession in early 2013, when deficit cutting by Congress and the administration intensifies.
Infrastructure stimulus is effective – empirics prove
Blodget 12 ( Henry Blodget is co-founder, CEO and Editor-In Chief of Business Insider a top-ranked Wall Street Internet analyst. Jun. 19, 2012, Yes, It's Time For A Massive Infrastructure Spending Program, ://infrastructure-spending-program-2012-6?op=1)
YES, GOVERNMENT SPENDING DOES WORK--SOME GOVERNMENT SPENDING. The economy is basically composed of three big spending engines —consumers, corporations (investment), and governments. So when the first two weaken, as they have in recent years, the third can help offset this weakness. Specifically, the government can increase its spending to offset the lost consumer and business spending. When governments spend money well, moreover—such as on infrastructure projects that benefit all citizens—the impact of this spending lasts far beyond the years in which the money is spent. Roads, bridges, schools, airports, national broadband networks, and other investments can improve the country for decades. When the government spends money badly, meanwhile--on bailouts and handouts and by perpetuating unsustainable promises of entitlement programs--the money is just wasted. Ever since the 2009 stimulus "failed to fix the economy," the consensus in the US has been that government stimulus doesn't work. There's actually a lot of evidence to suggest that it did work, or at least helped improve the situation (check out these charts). But the theory that government spending "doesn't work" is pervasive. In support of this theory, everyone first points to Japan, where the government has been frantically "stimulating" the economy for two decades now. Then they point to the Great Depression, with its massive public-works programs. But other evidence suggests that the impact of government stimulus, specifically infrastructure stimulus, is being badly misunderstood. Richard Koo Think Japan's stimulus has failed? Look at what it would have done with government intervention (red line). The work of economist Richard Koo, for example, suggests that Japan's stimulus has been vastly more successful than is commonly believed. Far from not working, Koo argues, Japan's government stimulus has kept Japan's economy alive for the past 20 years. Without the stimulus, Koo says, Japan's economy would not have crawled along for the last two decades—it would have collapsed. When the same logic is applied to the US stimulus of 2009-2010, the conclusion is that the stimulus "failed to fix" the US economy, but that it kept the recession from being much worse. In addition to Japan, one of the most often-repeated examples cited by those who say stimulus doesn't work is the US experience in the Great Depression. To see that stimulus doesn't work, they say, all you need to do is look at the huge public-works programs of the 1930s, which failed to pull the US permanently out of the Depression. What finally got the US out of the Depression, these folks continue, was World War 2. World War 2: The biggest Keynesian stimulus ever. But what was World War 2 if not a gigantic government stimulus? That's exactly what World War 2 was. It put the US government deeply in debt, vastly deeper in debt than we are today. But it got our production engine humming again. And it set the stage for decades of impressive growth, during which we eventually worked off the World War 2 debt. So there's a lot of evidence to suggest that the current consensus that stimulus "doesn't work" is flat-out wrong. In fact, the evidence suggests, stimulus can keep the economy from collapsing while the private sector heals itself. And this, in turn, suggests that ruling out future stimulus in the form of infrastructure investment as a way to help the economy is a major mistake, especially with US infrastructure in such lousy shape and so many US workers idled by the construction industry slowdown. To learn more about how government stimulus helps economies get through depressions, flip through some of Richard Koo's excellent slides below. They focus on Japan, the Depression, and recent US and Europe experiences...
Keynesian stimulus is good – monetarists got it wrong by basing their theory on beauty and greed rather than fact and monetarist statistical analyses are false
Krugman ’09 (Paul Krugman is a Professor of Economics and International Affairs at Princeton University, Centenary Professor at the London School of Economics, and an op-ed columnist for The New York Times. In 2008, Krugman won a Nobel Prize in Economics, September 6, 2009, “ How Did Economists Get It So Wrong?”, ) SRK
I. MISTAKING BEAUTY FOR TRUTH It’s hard to believe now, but not long ago economists were congratulating themselves over the success of their field. Those successes — or so they believed — were both theoretical and practical, leading to a golden era for the profession. On the theoretical side, they thought that they had resolved their internal disputes. Thus, in a 2008 paper titled “The State of Macro” (that is, macroeconomics, the study of big-picture issues like recessions), Olivier Blanchard of M.I.T., now the chief economist at the International Monetary Fund, declared that “the state of macro is good.” The battles of yesteryear, he said, were over, and there had been a “broad convergence of vision.” And in the real world, economists believed they had things under control: the “central problem of depression-prevention has been solved,” declared Robert Lucas of the University of Chicago in his 2003 presidential address to the American Economic Association. In 2004, Ben Bernanke, a former Princeton professor who is now the chairman of the Federal Reserve Board, celebrated the Great Moderation in economic performance over the previous two decades, which he attributed in part to improved economic policy making. Last year, everything came apart. Few economists saw our current crisis coming, but this predictive failure was the least of the field’s problems. More important was the profession’s blindness to the very possibility of catastrophic failures in a market economy. During the golden years, financial economists came to believe that markets were inherently stable — indeed, that stocks and other assets were always priced just right. There was nothing in the prevailing models suggesting the possibility of the kind of collapse that happened last year. Meanwhile, macroeconomists were divided in their views. But the main division was between those who insisted that free-market economies never go astray and those who believed that economies may stray now and then but that any major deviations from the path of prosperity could and would be corrected by the all-powerful Fed. Neither side was prepared to cope with an economy that went off the rails despite the Fed’s best efforts. And in the wake of the crisis, the fault lines in the economics profession have yawned wider than ever. Lucas says the Obama administration’s stimulus plans are “schlock economics,” and his Chicago colleague John Cochrane says they’re based on discredited “fairy tales.” In response, Brad DeLong of the University of California, Berkeley, writes of the “intellectual collapse” of the Chicago School, and I myself have written that comments from Chicago economists are the product of a Dark Age of macroeconomics in which hard-won knowledge has been forgotten. What happened to the economics profession? And where does it go from here? As I see it, the economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth. Until the Great Depression, most economists clung to a vision of capitalism as a perfect or nearly perfect system. That vision wasn’t sustainable in the face of mass unemployment, but as memories of the Depression faded, economists fell back in love with the old, idealized vision of an economy in which rational individuals interact in perfect markets, this time gussied up with fancy equations. The renewed romance with the idealized market was, to be sure, partly a response to shifting political winds, partly a response to financial incentives. But while sabbaticals at the Hoover Institution and job opportunities on Wall Street are nothing to sneeze at, the central cause of the profession’s failure was the desire for an all-encompassing, intellectually elegant approach that also gave economists a chance to show off their mathematical prowess. Unfortunately, this romanticized and sanitized vision of the economy led most economists to ignore all the things that can go wrong. They turned a blind eye to the limitations of human rationality that often lead to bubbles and busts; to the problems of institutions that run amok; to the imperfections of markets — especially financial markets — that can cause the economy’s operating system to undergo sudden, unpredictable crashes; and to the dangers created when regulators don’t believe in regulation. It’s much harder to say where the economics profession goes from here. But what’s almost certain is that economists will have to learn to live with messiness. That is, they will have to acknowledge the importance of irrational and often unpredictable behavior, face up to the often idiosyncratic imperfections of markets and accept that an elegant economic “theory of everything” is a long way off. In practical terms, this will translate into more cautious policy advice — and a reduced willingness to dismantle economic safeguards in the faith that markets will solve all problems. II. FROM SMITH TO KEYNES AND BACK The birth of economics as a discipline is usually credited to Adam Smith, who published “The Wealth of Nations” in 1776. Over the next 160 years an extensive body of economic theory was developed, whose central message was: Trust the market. Yes, economists admitted that there were cases in which markets might fail, of which the most important was the case of “externalities” — costs that people impose on others without paying the price, like traffic congestion or pollution. But the basic presumption of “neoclassical” economics (named after the congestion or pollution. But the basic presumption of “neoclassical” economics (named after the late-19th-century theorists who elaborated on the concepts of their “classical” predecessors) was that we should have faith in the market system. This faith was, however, shattered by the Great Depression. Actually, even in the face of total collapse some economists insisted that whatever happens in a market economy must be right: “Depressions are not simply evils,” declared Joseph Schumpeter in 1934 — 1934! They are, he added, “forms of something which has to be done.” But many, and eventually most, economists turned to the insights of John Maynard Keynes for both an explanation of what had happened and a solution to future depressions. Keynes did not, despite what you may have heard, want the government to run the economy. He described his analysis in his 1936 masterwork, “The General Theory of Employment, Interest and Money,” as “moderately conservative in its implications.” He wanted to fix capitalism, not replace it. But he did challenge the notion that free-market economies can function without a minder, expressing particular contempt for financial markets, which he viewed as being dominated by short-term speculation with little regard for fundamentals. And he called for active government intervention — printing more money and, if necessary, spending heavily on public works — to fight unemployment during slumps. It’s important to understand that Keynes did much more than make bold assertions. “The General Theory” is a work of profound, deep analysis — analysis that persuaded the best young economists of the day. Yet the story of economics over the past half century is, to a large degree, the story of a retreat from Keynesianism and a return to neoclassicism. The neoclassical revival was initially led by Milton Friedman of the University of Chicago, who asserted as early as 1953 that neoclassical economics works well enough as a description of the way the economy actually functions to be “both extremely fruitful and deserving of much confidence.” But what about depressions? Friedman’s counterattack against Keynes began with the doctrine known as monetarism. Monetarists didn’t disagree in principle with the idea that a market economy needs deliberate stabilization. “We are all Keynesians now,” Friedman once said, although he later claimed he was quoted out of context. Monetarists asserted, however, that a very limited, circumscribed form of government intervention — namely, instructing central banks to keep the nation’s money supply, the sum of cash in circulation and bank deposits, growing on a steady path — is all that’s required to prevent depressions. Famously, Friedman and his collaborator, Anna Schwartz, argued that if the Federal Reserve had done its job properly, the Great Depression would not have happened. Later, Friedman made a compelling case against any deliberate effort by government to push unemployment below its “natural” level (currently thought to be about 4.8 percent in the United States): excessively expansionary policies, he predicted, would lead to a combination of inflation and high unemployment — a prediction that was borne out by the stagflation of the 1970s, which and high unemployment — a prediction that was borne out by the stagflation of the 1970s, which greatly advanced the credibility of the anti-Keynesian movement. Eventually, however, the anti-Keynesian counterrevolution went far beyond Friedman’s position, which came to seem relatively moderate compared with what his successors were saying. Among financial economists, Keynes’s disparaging vision of financial markets as a “casino” was replaced by “efficient market” theory, which asserted that financial markets always get asset prices right given the available information. Meanwhile, many macroeconomists completely rejected Keynes’s framework for understanding economic slumps. Some returned to the view of Schumpeter and other apologists for the Great Depression, viewing recessions as a good thing, part of the economy’s adjustment to change. And even those not willing to go that far argued that any attempt to fight an economic slump would do more harm than good. Not all macroeconomists were willing to go down this road: many became self-described New Keynesians, who continued to believe in an active role for the government. Yet even they mostly accepted the notion that investors and consumers are rational and that markets generally get it right. Of course, there were exceptions to these trends: a few economists challenged the assumption of rational behavior, questioned the belief that financial markets can be trusted and pointed to the long history of financial crises that had devastating economic consequences. But they were swimming against the tide, unable to make much headway against a pervasive and, in retrospect, foolish complacency. III. PANGLOSSIAN FINANCE In the 1930s, financial markets, for obvious reasons, didn’t get much respect. Keynes compared them to “those newspaper competitions in which the competitors have to pick out the six prettiest faces from a hundred photographs, the prize being awarded to the competitor whose choice most nearly corresponds to the average preferences of the competitors as a whole; so that each competitor has to pick, not those faces which he himself finds prettiest, but those that he thinks likeliest to catch the fancy of the other competitors.” And Keynes considered it a very bad idea to let such markets, in which speculators spent their time chasing one another’s tails, dictate important business decisions: “When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done.” By 1970 or so, however, the study of financial markets seemed to have been taken over by Voltaire’s Dr. Pangloss, who insisted that we live in the best of all possible worlds. Discussion of investor irrationality, of bubbles, of destructive speculation had virtually disappeared from investor irrationality, of bubbles, of destructive speculation had virtually disappeared from academic discourse. The field was dominated by the “efficient-market hypothesis,” promulgated by Eugene Fama of the University of Chicago, which claims that financial markets price assets precisely at their intrinsic worth given all publicly available information. (The price of a company’s stock, for example, always accurately reflects the company’s value given the information available on the company’s earnings, its business prospects and so on.) And by the 1980s, finance economists, notably Michael Jensen of the Harvard Business School, were arguing that because financial markets always get prices right, the best thing corporate chieftains can do, not just for themselves but for the sake of the economy, is to maximize their stock prices. In other words, finance economists believed that we should put the capital development of the nation in the hands of what Keynes had called a “casino.” It’s hard to argue that this transformation in the profession was driven by events. True, the memory of 1929 was gradually receding, but there continued to be bull markets, with widespread tales of speculative excess, followed by bear markets. In 1973-4, for example, stocks lost 48 percent of their value. And the 1987 stock crash, in which the Dow plunged nearly 23 percent in a day for no clear reason, should have raised at least a few doubts about market rationality. These events, however, which Keynes would have considered evidence of the unreliability of markets, did little to blunt the force of a beautiful idea. The theoretical model that finance economists developed by assuming that every investor rationally balances risk against reward — the so-called Capital Asset Pricing Model, or CAPM (pronounced cap-em) — is wonderfully elegant. And if you accept its premises it’s also extremely useful. CAPM not only tells you how to choose your portfolio — even more important from the financial industry’s point of view, it tells you how to put a price on financial derivatives, claims on claims. The elegance and apparent usefulness of the new theory led to a string of Nobel prizes for its creators, and many of the theory’s adepts also received more mundane rewards: Armed with their new models and formidable math skills — the more arcane uses of CAPM require physicist-level computations — mild-mannered business-school professors could and did become Wall Street rocket scientists, earning Wall Street paychecks. To be fair, finance theorists didn’t accept the efficient-market hypothesis merely because it was elegant, convenient and lucrative. They also produced a great deal of statistical evidence, which at first seemed strongly supportive. But this evidence was of an oddly limited form. Finance economists rarely asked the seemingly obvious (though not easily answered) question of whether asset prices made sense given real-world fundamentals like earnings. Instead, they asked only whether asset prices made sense given other asset prices. Larry Summers, now the top economic adviser in the Obama administration, once mocked finance professors with a parable about “ketchup economists” who “have shown that two-quart bottles of ketchup invariably sell for exactly twice as much as one-quart bottles of ketchup,” and conclude from this that the ketchup exactly twice as much as one-quart bottles of ketchup,” and conclude from this that the ketchup market is perfectly efficient. But neither this mockery nor more polite critiques from economists like Robert Shiller of Yale had much effect. Finance theorists continued to believe that their models were essentially right, and so did many people making real-world decisions. Not least among these was Alan Greenspan, who was then the Fed chairman and a long-time supporter of financial deregulation whose rejection of calls to rein in subprime lending or address the ever-inflating housing bubble rested in large part on the belief that modern financial economics had everything under control. There was a telling moment in 2005, at a conference held to honor Greenspan’s tenure at the Fed. One brave attendee, Raghuram Rajan (of the University of Chicago, surprisingly), presented a paper warning that the financial system was taking on potentially dangerous levels of risk. He was mocked by almost all present — including, by the way, Larry Summers, who dismissed his warnings as “misguided.” By October of last year, however, Greenspan was admitting that he was in a state of “shocked disbelief,” because “the whole intellectual edifice” had “collapsed.” Since this collapse of the intellectual edifice was also a collapse of real-world markets, the result was a severe recession — the worst, by many measures, since the Great Depression. What should policy makers do? Unfortunately, macroeconomics, which should have been providing clear guidance about how to address the slumping economy, was in its own state of disarray. IV. THE TROUBLE WITH MACRO “We have involved ourselves in a colossal muddle, having blundered in the control of a delicate machine, the working of which we do not understand. The result is that our possibilities of wealth may run to waste for a time — perhaps for a long time.” So wrote John Maynard Keynes in an essay titled “The Great Slump of 1930,” in which he tried to explain the catastrophe then overtaking the world. And the world’s possibilities of wealth did indeed run to waste for a long time; it took World War II to bring the Great Depression to a definitive end. Why was Keynes’s diagnosis of the Great Depression as a “colossal muddle” so compelling at first? And why did economics, circa 1975, divide into opposing camps over the value of Keynes’s views? I like to explain the essence of Keynesian economics with a true story that also serves as a parable, a small-scale version of the messes that can afflict entire economies. Consider the travails of the Capitol Hill Baby-Sitting Co-op. This co-op, whose problems were recounted in a 1977 article in The Journal of Money, Credit and Banking, was an association of about 150 young couples who agreed to help one another by baby- sitting for one another’s children when parents wanted a night out. To ensure that every couple did its fair share of baby-sitting, the co-op introduced a form of scrip: coupons made out of heavy did its fair share of baby-sitting, the co-op introduced a form of scrip: coupons made out of heavy pieces of paper, each entitling the bearer to one half-hour of sitting time. Initially, members received 20 coupons on joining and were required to return the same amount on departing the group. Unfortunately, it turned out that the co-op’s members, on average, wanted to hold a reserve of more than 20 coupons, perhaps, in case they should want to go out several times in a row. As a result, relatively few people wanted to spend their scrip and go out, while many wanted to baby- sit so they could add to their hoard. But since baby-sitting opportunities arise only when someone goes out for the night, this meant that baby-sitting jobs were hard to find, which made members of the co-op even more reluctant to go out, making baby-sitting jobs even scarcer. . . . In short, the co-op fell into a recession. O.K., what do you think of this story? Don’t dismiss it as silly and trivial: economists have used small-scale examples to shed light on big questions ever since Adam Smith saw the roots of economic progress in a pin factory, and they’re right to do so. The question is whether this particular example, in which a recession is a problem of inadequate demand — there isn’t enough demand for baby-sitting to provide jobs for everyone who wants one — gets at the essence of what happens in a recession. Forty years ago most economists would have agreed with this interpretation. But since then macroeconomics has divided into two great factions: “saltwater” economists (mainly in coastal U.S. universities), who have a more or less Keynesian vision of what recessions are all about; and “freshwater” economists (mainly at inland schools), who consider that vision nonsense. Freshwater economists are, essentially, neoclassical purists. They believe that all worthwhile economic analysis starts from the premise that people are rational and markets work, a premise violated by the story of the baby-sitting co-op. As they see it, a general lack of sufficient demand isn’t possible, because prices always move to match supply with demand. If people want more baby-sitting coupons, the value of those coupons will rise, so that they’re worth, say, 40 minutes of baby-sitting rather than half an hour — or, equivalently, the cost of an hours’ baby-sitting would fall from 2 coupons to 1.5. And that would solve the problem: the purchasing power of the coupons in circulation would have risen, so that people would feel no need to hoard more, and there would be no recession. But don’t recessions look like periods in which there just isn’t enough demand to employ everyone willing to work? Appearances can be deceiving, say the freshwater theorists. Sound economics, in their view, says that overall failures of demand can’t happen — and that means that they don’t. Keynesian economics has been “proved false,” Cochrane, of the University of Chicago, says. Yet recessions do happen. Why? In the 1970s the leading freshwater macroeconomist, the Nobel laureate Robert Lucas, argued that recessions were caused by temporary confusion: workers and companies had trouble distinguishing overall changes in the level of prices because of inflation or deflation from changes in their own particular business situation. And Lucas warned that any attempt to fight the business cycle would be counterproductive: activist policies, he argued, would just add to the confusion. By the 1980s, however, even this severely limited acceptance of the idea that recessions are bad things had been rejected by many freshwater economists. Instead, the new leaders of the movement, especially Edward Prescott, who was then at the University of Minnesota (you can see where the freshwater moniker comes from), argued that price fluctuations and changes in demand actually had nothing to do with the business cycle. Rather, the business cycle reflects fluctuations in the rate of technological progress, which are amplified by the rational response of workers, who voluntarily work more when the environment is favorable and less when it’s unfavorable. Unemployment is a deliberate decision by workers to take time off. Put baldly like that, this theory sounds foolish — was the Great Depression really the Great Vacation? And to be honest, I think it really is silly. But the basic premise of Prescott’s “real business cycle” theory was embedded in ingeniously constructed mathematical models, which were mapped onto real data using sophisticated statistical techniques, and the theory came to dominate the teaching of macroeconomics in many university departments. In 2004, reflecting the theory’s influence, Prescott shared a Nobel with Finn Kydland of Carnegie Mellon University. Meanwhile, saltwater economists balked. Where the freshwater economists were purists, saltwater economists were pragmatists. While economists like N. Gregory Mankiw at Harvard, Olivier Blanchard at M.I.T. and David Romer at the University of California, Berkeley, acknowledged that it was hard to reconcile a Keynesian demand-side view of recessions with neoclassical theory, they found the evidence that recessions are, in fact, demand-driven too compelling to reject. So they were willing to deviate from the assumption of perfect markets or perfect rationality, or both, adding enough imperfections to accommodate a more or less Keynesian view of recessions. And in the saltwater view, active policy to fight recessions remained desirable. But the self-described New Keynesian economists weren’t immune to the charms of rational individuals and perfect markets. They tried to keep their deviations from neoclassical orthodoxy as limited as possible. This meant that there was no room in the prevailing models for such things as bubbles and banking-system collapse. The fact that such things continued to happen in the real world — there was a terrible financial and macroeconomic crisis in much of Asia in 1997-8 and a depression-level slump in Argentina in 2002 — wasn’t reflected in the mainstream of New Keynesian thinking. Even so, you might have thought that the differing worldviews of freshwater and saltwater economists would have put them constantly at loggerheads over economic policy. Somewhat surprisingly, however, between around 1985 and 2007 the disputes between freshwater and saltwater economists were mainly about theory, not action. The reason, I believe, is that New Keynesians, unlike the original Keynesians, didn’t think fiscal policy — changes in government spending or taxes — was needed to fight recessions. They believed that monetary policy, administered by the technocrats at the Fed, could provide whatever remedies the economy needed. At a 90th birthday celebration for Milton Friedman, Ben Bernanke, formerly a more or less New Keynesian professor at Princeton, and by then a member of the Fed’s governing board, declared of the Great Depression: “You’re right. We did it. We’re very sorry. But thanks to you, it won’t happen again.” The clear message was that all you need to avoid depressions is a smarter Fed. And as long as macroeconomic policy was left in the hands of the maestro Greenspan, without Keynesian-type stimulus programs, freshwater economists found little to complain about. (They didn’t believe that monetary policy did any good, but they didn’t believe it did any harm, either.) It would take a crisis to reveal both how little common ground there was and how Panglossian even New Keynesian economics had become. V. NOBODY COULD HAVE PREDICTED . . . In recent, rueful economics discussions, an all-purpose punch line has become “nobody could have predicted. . . .” It’s what you say with regard to disasters that could have been predicted, should have been predicted and actually were predicted by a few economists who were scoffed at for their pains. Take, for example, the precipitous rise and fall of housing prices. Some economists, notably Robert Shiller, did identify the bubble and warn of painful consequences if it were to burst. Yet key policy makers failed to see the obvious. In 2004, Alan Greenspan dismissed talk of a housing bubble: “a national severe price distortion,” he declared, was “most unlikely.” Home-price increases, Ben Bernanke said in 2005, “largely reflect strong economic fundamentals.” How did they miss the bubble? To be fair, interest rates were unusually low, possibly explaining part of the price rise. It may be that Greenspan and Bernanke also wanted to celebrate the Fed’s success in pulling the economy out of the 2001 recession; conceding that much of that success rested on the creation of a monstrous bubble would have placed a damper on the festivities. But there was something else going on: a general belief that bubbles just don’t happen. What’s striking, when you reread Greenspan’s assurances, is that they weren’t based on evidence — they striking, when you reread Greenspan’s assurances, is that they weren’t based on evidence — they were based on the a priori assertion that there simply can’t be a bubble in housing. And the finance theorists were even more adamant on this point. In a 2007 interview, Eugene Fama, the father of the efficient-market hypothesis, declared that “the word ‘bubble’ drives me nuts,” and went on to explain why we can trust the housing market: “Housing markets are less liquid, but people are very careful when they buy houses. It’s typically the biggest investment they’re going to make, so they look around very carefully and they compare prices. The bidding process is very detailed.” Indeed, home buyers generally do carefully compare prices — that is, they compare the price of their potential purchase with the prices of other houses. But this says nothing about whether the overall price of houses is justified. It’s ketchup economics, again: because a two-quart bottle of ketchup costs twice as much as a one-quart bottle, finance theorists declare that the price of ketchup must be right. In short, the belief in efficient financial markets blinded many if not most economists to the emergence of the biggest financial bubble in history. And efficient-market theory also played a significant role in inflating that bubble in the first place. Now that the undiagnosed bubble has burst, the true riskiness of supposedly safe assets has been revealed and the financial system has demonstrated its fragility. U.S. households have seen $13 trillion in wealth evaporate. More than six million jobs have been lost, and the unemployment rate appears headed for its highest level since 1940. So what guidance does modern economics have to offer in our current predicament? And should we trust it? VI. THE STIMULUS SQUABBLE Between 1985 and 2007 a false peace settled over the field of macroeconomics. There hadn’t been any real convergence of views between the saltwater and freshwater factions. But these were the years of the Great Moderation — an extended period during which inflation was subdued and recessions were relatively mild. Saltwater economists believed that the Federal Reserve had everything under control. Freshwater economists didn’t think the Fed’s actions were actually beneficial, but they were willing to let matters lie. But the crisis ended the phony peace. Suddenly the narrow, technocratic policies both sides were willing to accept were no longer sufficient — and the need for a broader policy response brought the old conflicts out into the open, fiercer than ever. Why weren’t those narrow, technocratic policies sufficient? The answer, in a word, is zero. During a normal recession, the Fed responds by buying Treasury bills — short-term government debt — from banks. This drives interest rates on government debt down; investors seeking a higher rate of return move into other assets, driving other interest rates down as well; and normally these lower interest rates eventually lead to an economic bounceback. The Fed dealt with the recession that began in 1990 by driving short-term interest rates from 9 percent down to 3 percent. It dealt with the recession that began in 2001 by driving rates from 6.5 percent to 1 percent. And it tried to deal with the current recession by driving rates down from 5.25 percent to zero. But zero, it turned out, isn’t low enough to end this recession. And the Fed can’t push rates below zero, since at near-zero rates investors simply hoard cash rather than lending it out. So by late 2008, with interest rates basically at what macroeconomists call the “zero lower bound” even as the recession continued to deepen, conventional monetary policy had lost all traction. Now what? This is the second time America has been up against the zero lower bound, the previous occasion being the Great Depression. And it was precisely the observation that there’s a lower bound to interest rates that led Keynes to advocate higher government spending: when monetary policy is ineffective and the private sector can’t be persuaded to spend more, the public sector must take its place in supporting the economy. Fiscal stimulus is the Keynesian answer to the kind of depression-type economic situation we’re currently in. Such Keynesian thinking underlies the Obama administration’s economic policies — and the freshwater economists are furious. For 25 or so years they tolerated the Fed’s efforts to manage the economy, but a full-blown Keynesian resurgence was something entirely different. Back in 1980, Lucas, of the University of Chicago, wrote that Keynesian economics was so ludicrous that “at research seminars, people don’t take Keynesian theorizing seriously anymore; the audience starts to whisper and giggle to one another.” Admitting that Keynes was largely right, after all, would be too humiliating a comedown. And so Chicago’s Cochrane, outraged at the idea that government spending could mitigate the latest recession, declared: “It’s not part of what anybody has taught graduate students since the 1960s. They [Keynesian ideas] are fairy tales that have been proved false. It is very comforting in times of stress to go back to the fairy tales we heard as children, but it doesn’t make them less false.” (It’s a mark of how deep the division between saltwater and freshwater runs that Cochrane doesn’t believe that “anybody” teaches ideas that are, in fact, taught in places like Princeton, M.I.T. and Harvard.) Meanwhile, saltwater economists, who had comforted themselves with the belief that the great divide in macroeconomics was narrowing, were shocked to realize that freshwater economists hadn’t been listening at all. Freshwater economists who inveighed against the stimulus didn’t sound like scholars who had weighed Keynesian arguments and found them wanting. Rather, they sounded like people who had no idea what Keynesian economics was about, who were sounded like people who had no idea what Keynesian economics was about, who were resurrecting pre-1930 fallacies in the belief that they were saying something new and profound. And it wasn’t just Keynes whose ideas seemed to have been forgotten. As Brad DeLong of the University of California, Berkeley, has pointed out in his laments about the Chicago school’s “intellectual collapse,” the school’s current stance amounts to a wholesale rejection of Milton Friedman’s ideas, as well. Friedman believed that Fed policy rather than changes in government spending should be used to stabilize the economy, but he never asserted that an increase in government spending cannot, under any circumstances, increase employment. In fact, rereading Friedman’s 1970 summary of his ideas, “A Theoretical Framework for Monetary Analysis,” what’s striking is how Keynesian it seems. And Friedman certainly never bought into the idea that mass unemployment represents a voluntary reduction in work effort or the idea that recessions are actually good for the economy. Yet the current generation of freshwater economists has been making both arguments. Thus Chicago’s Casey Mulligan suggests that unemployment is so high because many workers are choosing not to take jobs: “Employees face financial incentives that encourage them not to work . . . decreased employment is explained more by reductions in the supply of labor (the willingness of people to work) and less by the demand for labor (the number of workers that employers need to hire).” Mulligan has suggested, in particular, that workers are choosing to remain unemployed because that improves their odds of receiving mortgage relief. And Cochrane declares that high unemployment is actually good: “We should have a recession. People who spend their lives pounding nails in Nevada need something else to do.” Personally, I think this is crazy. Why should it take mass unemployment across the whole nation to get carpenters to move out of Nevada? Can anyone seriously claim that we’ve lost 6.7 million jobs because fewer Americans want to work? But it was inevitable that freshwater economists would find themselves trapped in this cul-de-sac: if you start from the assumption that people are perfectly rational and markets are perfectly efficient, you have to conclude that unemployment is voluntary and recessions are desirable. Yet if the crisis has pushed freshwater economists into absurdity, it has also created a lot of soul- searching among saltwater economists. Their framework, unlike that of the Chicago School, both allows for the possibility of involuntary unemployment and considers it a bad thing. But the New Keynesian models that have come to dominate teaching and research assume that people are perfectly rational and financial markets are perfectly efficient. To get anything like the current slump into their models, New Keynesians are forced to introduce some kind of fudge factor that for reasons unspecified temporarily depresses private spending. (I’ve done exactly that in some of my own work.) And if the analysis of where we are now rests on this fudge factor, how much confidence can we have in the models’ predictions about where we are going? The state of macro, in short, is not good. So where does the profession go from here? VII. FLAWS AND FRICTIONS Economics, as a field, got in trouble because economists were seduced by the vision of a perfect, frictionless market system. If the profession is to redeem itself, it will have to reconcile itself to a less alluring vision — that of a market economy that has many virtues but that is also shot through with flaws and frictions. The good news is that we don’t have to start from scratch. Even during the heyday of perfect-market economics, there was a lot of work done on the ways in which the real economy deviated from the theoretical ideal. What’s probably going to happen now — in fact, it’s already happening — is that flaws-and-frictions economics will move from the periphery of economic analysis to its center. There’s already a fairly well developed example of the kind of economics I have in mind: the school of thought known as behavioral finance. Practitioners of this approach emphasize two things. First, many real-world investors bear little resemblance to the cool calculators of efficient- market theory: they’re all too subject to herd behavior, to bouts of irrational exuberance and unwarranted panic. Second, even those who try to base their decisions on cool calculation often find that they can’t, that problems of trust, credibility and limited collateral force them to run with the herd. On the first point: even during the heyday of the efficient-market hypothesis, it seemed obvious that many real-world investors aren’t as rational as the prevailing models assumed. Larry Summers once began a paper on finance by declaring: “THERE ARE IDIOTS. Look around.” But what kind of idiots (the preferred term in the academic literature, actually, is “noise traders”) are we talking about? Behavioral finance, drawing on the broader movement known as behavioral economics, tries to answer that question by relating the apparent irrationality of investors to known biases in human cognition, like the tendency to care more about small losses than small gains or the tendency to extrapolate too readily from small samples (e.g., assuming that because home prices rose in the past few years, they’ll keep on rising). Until the crisis, efficient-market advocates like Eugene Fama dismissed the evidence produced on behalf of behavioral finance as a collection of “curiosity items” of no real importance. That’s a much harder position to maintain now that the collapse of a vast bubble — a bubble correctly diagnosed by behavioral economists like Robert Shiller of Yale, who related it to past episodes of “irrational exuberance” — has brought the world economy to its knees. On the second point: suppose that there are, indeed, idiots. How much do they matter? Not much, argued Milton Friedman in an influential 1953 paper: smart investors will make money by buying when the idiots sell and selling when they buy and will stabilize markets in the process. But the second strand of behavioral finance says that Friedman was wrong, that financial markets are sometimes highly unstable, and right now that view seems hard to reject. Probably the most influential paper in this vein was a 1997 publication by Andrei Shleifer of Harvard and Robert Vishny of Chicago, which amounted to a formalization of the old line that “the market can stay irrational longer than you can stay solvent.” As they pointed out, arbitrageurs — the people who are supposed to buy low and sell high — need capital to do their jobs. And a severe plunge in asset prices, even if it makes no sense in terms of fundamentals, tends to deplete that capital. As a result, the smart money is forced out of the market, and prices may go into a downward spiral. The spread of the current financial crisis seemed almost like an object lesson in the perils of financial instability. And the general ideas underlying models of financial instability have proved highly relevant to economic policy: a focus on the depleted capital of financial institutions helped guide policy actions taken after the fall of Lehman, and it looks (cross your fingers) as if these actions successfully headed off an even bigger financial collapse. Meanwhile, what about macroeconomics? Recent events have pretty decisively refuted the idea that recessions are an optimal response to fluctuations in the rate of technological progress; a more or less Keynesian view is the only plausible game in town. Yet standard New Keynesian models left no room for a crisis like the one we’re having, because those models generally accepted the efficient-market view of the financial sector. There were some exceptions. One line of work, pioneered by none other than Ben Bernanke working with Mark Gertler of New York University, emphasized the way the lack of sufficient collateral can hinder the ability of businesses to raise funds and pursue investment opportunities. A related line of work, largely established by my Princeton colleague Nobuhiro Kiyotaki and John Moore of the London School of Economics, argued that prices of assets such as real estate can suffer self-reinforcing plunges that in turn depress the economy as a whole. But until now the impact of dysfunctional finance hasn’t been at the core even of Keynesian economics. Clearly, that has to change. VIII. RE-EMBRACING KEYNES So here’s what I think economists have to do. First, they have to face up to the inconvenient reality that financial markets fall far short of perfection, that they are subject to extraordinary delusions and the madness of crowds. Second, they have to admit — and this will be very hard for the people who giggled and whispered over Keynes — that Keynesian economics remains the best framework we have for making sense of recessions and depressions. Third, they’ll have to do their best to incorporate the realities of finance into macroeconomics.
Stimulus through increased financing would greatly increase GPD in the short term
McConaghy and Kessler 11
(Ryan, Deputy Director of the Third Way Economic Program, Jim, Vice President for Policy at Third Way, January 2011, “A National Infrastructure Bank”, )
By providing a new and innovative mechanism for project financing, the NIB could help provide funding for projects stalled by monetary constraints. This is particularly true for large scale projects that may be too complicated or costly for traditional means of financing. In the short-term, providing resources for infrastructure investment would have clear, positive impacts for recovery and growth. It has been estimated that every $1 billion in highway investment supports 30,000 jobs,37 and that every dollar invested in infrastructure increases GDP by $1.59.38 It has also been projected that an investment of $10 billion into both broadband and smart grid infrastructure would create 737,000 jobs.39 In the longer-term, infrastructure investments supported by the NIB will allow the U.S. to meet future demand, reduce the waste currently built into the system, and keep pace with competition from global rivals.
Scenario 2 is Infrastructure
All sectors of American transportation infrastructure are falling apart
The Economist 11 (Life in the slow lane, Americans are gloomy about their economy’s ability to produce. Are they right to be? We look at two areas of concern, transport infrastructure and innovation, Apr 28th 2011, )
America, despite its wealth and strength, often seems to be falling apart. American cities have suffered a rash of recent infrastructure calamities, from the failure of the New Orleans levees to the collapse of a highway bridge in Minneapolis, to a fatal crash on Washington, DC’s (generally impressive) metro system. But just as striking are the common shortcomings. America’s civil engineers routinely give its transport structures poor marks, rating roads, rails and bridges as deficient or functionally obsolete. And according to a World Economic Forum study America’s infrastructure has got worse, by comparison with other countries, over the past decade. In the WEF 2010 league table America now ranks 23rd for overall infrastructure quality, between Spain and Chile. Its roads, railways, ports and air-transport infrastructure are all judged mediocre against networks in northern Europe. America is known for its huge highways, but with few exceptions (London among them) American traffic congestion is worse than western Europe’s. Average delays in America’s largest cities exceed those in cities like Berlin and Copenhagen. Americans spend considerably more time commuting than most Europeans; only Hungarians and Romanians take longer to get to work (see chart 1). More time on lower quality roads also makes for a deadlier transport network. With some 15 deaths a year for every 100,000 people, the road fatality rate in America is 60% above the OECD average; 33,000 Americans were killed on roads in 2010. There is little relief for the weary traveller on America’s rail system. The absence of true high-speed rail is a continuing embarrassment to the nation’s rail enthusiasts. America’s fastest and most reliable line, the north-eastern corridor’s Acela, averages a sluggish 70 miles per hour between Washington and Boston. The French TGV from Paris to Lyon, by contrast, runs at an average speed of 140mph. America’s trains aren’t just slow; they are late. Where European passenger service is punctual around 90% of the time, American short-haul service achieves just a 77% punctuality rating. Long-distance trains are even less reliable. The Amtrak alternative Air travel is no relief. Airport delays at hubs like Chicago and Atlanta are as bad as any in Europe. Air travel still relies on a ground-based tracking system from the 1950s, which forces planes to use inefficient routes in order to stay in contact with controllers. The system’s imprecision obliges controllers to keep more distance between air traffic, reducing the number of planes that can fly in the available space. And this is not the system’s only bottleneck. Overbooked airports frequently lead to runway congestion, forcing travellers to spend long hours stranded on the tarmac while they wait to take off or disembark. Meanwhile, security and immigration procedures in American airports drive travellers to the brink of rebellion. And worse looms. The country’s already stressed infrastructure must handle a growing load in decades to come, thanks to America’s distinctly non-European demographics. The Census Bureau expects the population to grow by 40% over the next four decades, equivalent to the entire population of Japan. All this is puzzling. America’s economy remains the world’s largest; its citizens are among the world’s richest. The government is not constitutionally opposed to grand public works. The country stitched its continental expanse together through two centuries of ambitious earthmoving. Almost from the beginning of the republic the federal government encouraged the building of critical canals and roadways. In the 19th century Congress provided funding for a transcontinental railway linking the east and west coasts. And between 1956 and 1992 America constructed the interstate system, among the largest public-works projects in history, which criss-crossed the continent with nearly 50,000 miles of motorways. But modern America is stingier. Total public spending on transport and water infrastructure has fallen steadily since the 1960s and now stands at 2.4% of GDP. Europe, by contrast, invests 5% of GDP in its infrastructure, while China is racing into the future at 9%. America’s spending as a share of GDP has not come close to European levels for over 50 years. Over that time funds for both capital investments and operations and maintenance have steadily dropped (see chart 2). Although America still builds roads with enthusiasm, according to the OECD’s International Transport Forum, it spends considerably less than Europe on maintaining them. In 2006 America spent more than twice as much per person as Britain on new construction; but Britain spent 23% more per person maintaining its roads. America’s dependence on its cars is reinforced by a shortage of alternative forms of transport. Europe’s large economies and Japan routinely spend more than America on rail investments, in absolute not just relative terms, despite much smaller populations and land areas. America spends more building airports than Europe but its underdeveloped rail network shunts more short-haul traffic onto planes, leaving many of its airports perpetually overburdened. Plans to upgrade air-traffic-control technology to a modern satellite-guided system have faced repeated delays. The current plan is now threatened by proposed cuts to the budget of the Federal Aviation Administration. The Congressional Budget Office estimates that America needs to spend $20 billion more a year just to maintain its infrastructure at the present, inadequate, levels. Up to $80 billion a year in additional spending could be spent on projects which would show positive economic returns. Other reports go further. In 2005 Congress established the National Surface Transportation Policy and Revenue Study Commission. In 2008 the commission reckoned that America needed at least $255 billion per year in transport spending over the next half-century to keep the system in good repair and make the needed upgrades. Current spending falls 60% short of that amount.
Infrastructure degradation will cost the US increasingly more – congestion already saps 1.6 percent of GDP
Regan 12 (Ed Regan is a CDM Smith senior vice president based in Columbia, South Carolina, USA, and a preeminent thought leader on transportation finance and planning. Nearly 4 decades of dedication to the toll industry have fed his passion to advocate sustainable solutions for funding transportation infrastructure today and in the future. January 10, 2012, Falling Behind: A Crisis in Transportation Infrastructure Investment FUNDING FUTURE MOBILITY: EXIT 1, )
This is our first stop in a thought leadership series that discusses the current state of transportation infrastructure and explores future funding solutions. In “Falling Behind,” we examine how today’s investments are not meeting the growing needs of the U.S. transportation system, creating a gap that will continue to grow if action isn’t taken. Coming Up Short Recognizing a growing problem with infrastructure investment, the last federal transportation authorization bill in 2005 enacted by the U.S. Congress established two independent commissions to address transportation policy and funding: the National Transportation Policy and Revenue Study Commission and the National Transportation Infrastructure Finance Commission. Both commissions identified huge shortfalls in transportation funding at virtually every level of government. Assuming no improvement from current conditions over the next 25 years, the finance commission forecasted average federal needs for capital transportation investments at $78 billion per year and total investment at all government levels at $172 billion per year. Assuming reasonable improvements in the system, including capacity expansion, the finance commission estimates rose to $100 billion per year in federal dollars and $215 billion per year at all levels of government. The policy commission estimated even higher amounts will be needed. Forecasts of revenue from current federal sources are expected to meet just 41 percent of needs without improvements to the system, and only 33 percent of the amount needed to improve the system. Similar shortfalls are shown at all levels of government. In short, the two commissions indicated that transportation funding needs to be increased between 175 and 240 percent over the next 25 years to maintain and improve transportation infrastructure. Inflation Brings Gas Tax Deflation Are these estimates realistic? A quick look at recent trends in the U.S. Highway Trust Fund (HTF) show they are. The HTF is the primary source of dedicated funding for transportation at the federal level. It was established with the advent of the federal gas tax in 1956 as a means to fund the interstate highway system. The current federal gas tax is $0.184 per gallon—slightly higher for diesel—and has not been increased in almost 20 years. This chart shows recent HTF trends and forecasts provided by the American Association of State Highway and Transportation Officials (AASHTO). Revenue into the HTF had historically been close to outlays, but since 2008, outlays have significantly exceeded revenues. The HTF essentially went broke in 2008 and has required significant transfers of funding from the U.S. General Fund in each of the last 3 years. By 2015, just 3 years away, federal funding needs are expected to exceed revenues by $17 billion assuming no increase is made to the federal gas tax. Over the long term, there have been increases in both the federal and state gas tax levels, but they have not kept up with inflation. As this chart shows, the total gas tax —including the federal and average state taxes—rose from $0.115 per gallon in 1963 to about $0.39 per gallon in 2009. After adjusting for inflation, the 2009 tax is equivalent to just $0.056 in 1963 dollars, a decrease of 50 percent in purchasing power in spite of several rate increases over 46 years. But the real demand for transportation investment comes from vehicle miles of travel, not gallons of fuel consumed. Over the years, we have seen significant improvements in fuel efficiency, which further erode the effective funding capacity of the per-gallon tax. Fleet fuel efficiency standards for the future have been aggressively increased, which will further reduce the funding capacity by another 45 percent by 2016. Hybrid and electric vehicles are great for reducing greenhouse gas emissions and our dependency on foreign oil, but they will have a major negative impact on transportation funding. The Cost of Falling Behind The U.S. transportation system is aging rapidly and is in bad need of reconstruction and rehabilitation. Much of the interstate highway system is more than 50 years old, and reconstruction and expansion will cost 10 to 20 times its original cost. There is a real cost to this underinvestment in transportation—a price paid every day by sitting in traffic, paying more for goods, and deteriorating competitiveness in an increasingly global economy. The American Society of Civil Engineers (ASCE) recently issued a report, entitled “Failure to Act,” which attempted to quantify the economic impact of underinvestment in infrastructure. It estimated in 2010, the cost to businesses and households was nearly $130 billion, including increased operating costs, safety issues and travel time that delays. It also projected that this will increase to more than $500 billion per year by2040, with a cumulative economic cost over the next 30 years of $3 trillion if current transportation investment levels continue. These ASCE estimates may well be conservative. In a recent report, Building America’s Future— a bipartisan coalition of elected officials dedicated to increasing infrastructure investment—puts the annual cost of urban congestion alone at $115 billion, noting that Americans waste 4.8 billion hours per year sitting in traffic. If the costs of delays to freight movement are factored in, congestion costs reach $200 billion per year—about 1.6 percent of the U.S. gross domestic product. Without significant increases in investment, at levels which will not only maintain but increase capacity, we can look forward to exponential growth in congestion in U.S. cities. Global Perspective Today, we see an increasingly global economy with a rapidly changing, competitive landscape. Never has mobility and transportation efficiency been more important to stay competitive in world markets. Thankfully, the United States has always led the world in transportation investment and innovations. At least until now. According to Building America’s Future, U.S. infrastructure was ranked first globally by the World Economic Forum’s 2005 index. In 2010, that number dropped to 15th. It is clear that the United States is facing an uphill battle to improve funding systems and bridge the widening gap between its current transportation system and the worldwide norm. In our next series installment, we will explore how much investment is actually being made in this vital system.
Infrastructure investment boosts long-term growth
Boushey, 11 (Heather, Senior Economist at American Progress, 9/22/2011, “Now Is the Time to Fix Our Broken Infrastructure: American Jobs Act Will Put Millions to Work, )
Investing in infrastructure creates jobs and yields lasting benefits for the economy, including increasing growth in the long run. Upgrading roads, bridges, and other basic infrastructure creates jobs now by putting people to work earning good, middle-class incomes, which expands the consumer base for businesses. These kinds of investments also pave the way for long-term economic growth by lowering the cost of doing business and making U.S. companies more competitive. There is ample empirical evidence that investment in infrastructure creates jobs. In particular, investments made over the past couple of years have saved or created millions of U.S. jobs. Increased investments in infrastructure by the Department of Transportation and other agencies due to the American Recovery and Reinvestment Act saved or created 1.1 million jobs in the construction industry and 400,000 jobs in manufacturing by March 2011, according to San Francisco Federal Reserve Bank economist Daniel Wilson.[1] Although infrastructure spending began with government dollars, these investments created jobs throughout the economy, mostly in the private sector.[2] Infrastructure projects have created jobs in communities nationwide. Recovery funds improved drinking and wastewater systems, fixed bridges and roads, and rehabilitated airports and shipyards across the nation. Some examples of high-impact infrastructure projects that have proceeded as a result of Recovery Act funding include: An expansion of a kilometer-long tunnel in Oakland, California, that connects two busy communities through a mountain.[3] An expansion and rehabilitation of the I-76/Vare Avenue Bridge in Philadelphia and 141 other bridge upgrades that supported nearly 4,000 jobs in Pennsylvania in July 2011.[4] The construction of new railway lines to serve the city of Pharr, Texas, as well as other infrastructure projects in that state that have saved or created more than 149,000 jobs through the end of 2010.[5] Infrastructure investments are an especially cost-effective way to boost job creation with scarce government funds. Economists James Feyrer and Bruce Sacerdote found for example that at the peak of the Recovery Act’s effect, 12.3 jobs were created for every $100,000 spent by the Department of Transportation and the Department of Energy—much of which was for infrastructure.[6] These two agencies spent $24.7 billion in Recovery dollars through September 2010, 82 percent of which was transportation spending. This implies a total of more than 3 million jobs created or saved. The value of infrastructure spending Analysis of all fiscal stimulus policies shows a higher “multiplier” from infrastructure spending than other kinds of government spending, such as tax cuts, meaning that infrastructure dollars flow through the economy and create more jobs than other kinds of spending. Economist Mark Zandi found, for example, that every dollar of government spending boosts the economy by $1.44, whereas every dollar spent on a refundable lump-sum tax rebate adds $1.22 to the economy.[7]
US slowing down causes double dip
Rahman ‘11 (Ashfaqur former Ambassador and Chairman of the Centre for Foreign Affairs Studies.. “Another global recession?”. August 21. )
Several developments, especially in Europe and the US, fan this fear. First, the US recovery from the last recession has been fragile. Its economy is much more susceptible to geopolitical shocks. Second there is a rise in fuel prices. The political instability in the Middle East is far from over. This is causing risks for the country and the international economy. Third, the global food prices in July this year is markedly higher than a year ago, almost 35% more. Commodities such as maize (up 84%), sugar (up 62%), wheat (up 55%), soybean oil (up 47%) have seen spike in their prices. Crude oil prices have also risen by 45%, affecting production costs. In the US, even though its debt ceiling has been raised and the country can now continue to borrow, credit agencies have downgraded its credit rating and therefore its stock markets have started to flounder. World Bank President Zoellick recently said: "There was a convergence of some events in Europe and the US that has led many market participants to lose confidence in economic leadership of the key countries." He added: "Those events, combined with other fragilities in the nature of recovery, have pushed US into a new danger zone." Employment in the US has, therefore, come near to a grinding halt. Prices of homes there continue to slide. Consumer and business spending is slowing remarkably. So, when the giant consumer economy slows down, there would be less demand for goods she buys from abroad, even from countries like Bangladesh. This would lead to decline in exports from such countries to the US. Then these economies would start to slide too, leading to factory closures and unemployment on a large scale. There would be less money available for economic development activities. Adding to the woes of the US economy are the travails of European economies. There, countries like Greece and Portugal, which are heavily indebted, have already received a first round of bailout. But this is not working. A second bailout has been given to Greece. But these countries remain in deep economic trouble. Bigger economies like Spain and Italy are also on the verge of bankruptcy. More sound economies like France and Germany are unwilling to provide money through the European Central Bank to bail them out. A proposal to issue Euro bonds to be funded by all the countries of the Euro Zone has also not met with approval. A creeping fear of the leaders of such big economies is that their electorate is not likely to agree to fund bankruptcies in other countries through the taxes they pay. Inevitably, they are saying that these weaker economies must restrain expenditures and thereby check indebtedness and live within their means. Thus, with fresh international bailouts not in the horizon and with possibilities of a debt default by countries like Greece, there is a likelihood of a ripple going through the world's financial system. Now what is recession and especially one with a global dimension ? There is no commonly accepted definition of a recession or for that matter of a global recession. The International Monetary Fund (IMF) regards periods when global growth is less than 3% to be a global recession. During this period, global per capita output growth is zero or negative and unemployment and bankruptcies are on the rise. Recession within a country implies that there is a business cycle contraction. It occurs when "there is a widespread drop in spending following an adverse supply shock or the bursting of an economic bubble." The most common indicator is "two down quarters of GDP." That is, when GDP of a country does not increase for six months. When recession occurs there is a slowdown in economic activity. Overall consumption, investment, government spending and net exports fall. Economic drivers such as employment, household savings, corporate investments, interest rates are on the wane. Interestingly, recession can be of several types. Each type may be literally of distinctive shapes. Thus V-shaped, or a short and sharp contraction, is common. It is usually followed by a rapid and sustained recovery. A U-shaped slump is a prolonged recession. The W-shaped slowdown of the economy is a double dip recession. There is also an L-shaped recession when, in 8 out of 9 three-monthly quarters, the economy is spiraling downward. So what type of recession can the world expect in the next quarter? Experts say that it could be a W-shaped one, known as a double dip type. But let us try to understand why the world is likely to face another recession, when it has just emerged from the last one, the Great Recession in 2010. Do not forget that this recession had begun in 2007 with the "mortgage and the derivative" scandal when the real estate and property bubble burst. Today, many say that the last recession had never ended. Despite official data that shows recovery, it was only a modest recovery. So, when the recession hit the US in 2007 it was the Great Recession I. The US government fought it by stimulating their economy with large bailouts. But this time, for the Great Recession II, which we may be entering, there is a completely different response. Politicians are squabbling over how much to cut spending. Therefore, we may be in a new double dip or W-shaped recession.
Scenario 3 is Net Savings
Infrastructural crisis is looming—costs are projected to rise by 351%
ASCE 11 (American Society of Civil Engineers, Failure to Act The economic impact of current Investment trends In surface Transportation infrastructure, )
The nation’s surface transportation infrastructure includes the critical highways, bridges, railroads, and transit systems that enable people and goods to access the markets, services, and inputs of production essential to America’s economic vitality. For many years, the nation’s surface transportation infrastructure has been deteriorating. Yet because this deterioration has been diffused throughout the nation, and has occurred gradually over time, its true costs and economic impacts are not always immediately apparent. In practice, the transportation funding that is appropriated is spent on a mixture of system expansion and preservation projects. Although these allocations have often been sufficient to avoid the imminent failure of key facilities, the continued deterioration leaves a significant and mounting burden on the U.S. economy . This burden will be explored further in this report. Deteriorating conditions and performance impose costs on American households and businesses in a number of ways. Facilities in poor condition lead to increases in operating costs for trucks, cars, and rail vehicles. Additional costs include damage to vehicles from deteriorated roadway surfaces, imposition of both additional miles traveled, time expended to avoid unusable or heavily congested roadways or due to the breakdown of transit vehicles, and the added cost of repairing facilities after they have deteriorated as opposed to preserving them in good condition. In addition, increased congestion decreases the reliability of transportation facilities, meaning that travelers are forced to allot more time for trips to assure on-time arrivals (and for freight vehicles, on-time delivery). Moreover, it increases environmental and safety costs by exposing more travelers to substandard travel conditions and requiring vehicles to operate at less efficient levels. As conditions continue to deteriorate over time, they will increasingly detract from the ability of American households and businesses to be productive and prosperous at work and at home. This report is about the effect that surface transportation deficiencies have, and will continue to have, on U.S. economic performance. For the purpose of this report, the term “deficiency” is defined as the extent to which roads, bridges, and transit services fall below standards defined by the U.S. Department of Transportation as “minimum tolerable conditions” (for roads and bridges) and “state of good repair” for transit 1 . These standards are substantially lower than ideal conditions, such as “free-flow2 ,” that are used by some researchers as the basis for highway analysis. This report is about the effect these deficiencies have, and will continue to have, on U.S. economic performance. In 2010, it was estimated that deficiencies in America’s surface transportation systems cost households and businesses nearly $130 billion. This included approximately $97 billion in vehicle operating costs, $32 billion in travel time delays, $1.2 billion in safety costs and $590 million in environmental costs. In 2040, America’s projected infrastructure deficiencies in a trends extended scenario are expected to cost the national economy more than 400,000 jobs. Approximately 1.3 million more jobs could exist in key knowledge-based and technology-related economic sectors if sufficient transportation infrastructure were maintained. These losses are balanced against almost 900,000 additional jobs projected in traditionally lower-paying service sectors of the economy that would benefit by deficient transportation (such as auto repair services) or by declining productivity in domestic service related sectors (such as truck driving and retail trade). If present trends continue, by 2020 the annual costs imposed on the U.S. economy by deteriorating infrastructure will increase by 82% to $210 billion, and by 2040 the costs will have increased by 351% to $520 billion (with cumulative costs mounting to $912 billion and $2.9 trillion by 2020 and 2040, respectively). Table 1 summarizes the economic and societal costs of today’s deficiencies, and how the present values of these costs are expected to accumulate by 2040. Table 2 provides a summary of impacts these costs have on economic performance today, and how these impacts are expected to increase over time. The avoidable transportation costs that hinder the nation’s economy are imposed primarily by pavement and bridge conditions, highway congestion, and transit and train vehicle conditions that are operating well below minimum tolerable levels for the level of traffic they carry. If the nation’s infrastructure were free of deficient conditions in pavement, bridges, transit vehicles, and track and transit facilities, Americans would earn more personal income and industry would be more productive, as demonstrated by the gross domestic product (value added) that will be lost if surface transportation infrastructure is not brought up to a standard of “minimum tolerable conditions.” As of 2010, the loss of GDP approached $125 billion due to deficient surface transportation infrastructure. The expected losses in GDP and personal income through 2040 are displayed in Table 2. Across the U.S., regions are affected differently by deficient and deteriorating infrastructure. The most affected regions are those with the largest concentrations of urban areas, because urban highways, bridges and transit systems are in worse condition today than rural facilities. Peak commuting patterns also place larger burdens on urban capacities. However, because the nation is so dependent on the Interstate Highway System, impacts on interstate performance in some regions or area types are felt throughout the nation. Nationally, for highways and transit, 630 million vehicle hours traveled were lost due to congestion in 2010. This total is expected to triple to 1.8 billion hours by 2020 and further increase to 6.2 billion hours in 2040. 3 These vehicle hours understate person hours and underscore the severity of the loss in productivity. The specific economic implications of the further deterioration of the U.S. national surface transportation system are as follows: « Deficient surface transportation infrastructure will cost Americans nearly $3 trillion by 2040, as shown in Table 1, which represents more than $1.1 trillion in added business expenses and nearly $1.9 trillion from household budgets. « This cost to business will reduce the productivity and competitiveness of American firms relative to global competitors. Increased cumulative cost to businesses will reach $430 billion by 2020. Businesses will have to divert increasing portions of earned income to pay for transportation delays and vehicle repairs, draining money that would otherwise be invested in innovation and expansion. « Households will be forced to forgo discretionary purchases such as vacations, cultural events, educational opportunities, and restaurant meals, reduce health related purchases along with other expenditures that affect quality of life, in order to pay transportation costs that could be avoided if infrastructure were built to sufficient levels. Increased cumulative costs to households will be $482 billion in 2020. « The U.S. will lose jobs in high value, high-paying services and manufacturing industries. Overall, this will result in employee income in 2040 that is $252 billion less than would be the case in a transportation-sufficient economy. In general three distinct forces are projected to affect employment: n First, a negative impact is due to larger costs of transportation services in terms of time expended and vehicle costs. These costs absorb money from businesses and households that would otherwise be directed to investment, innovation and “quality of life purchases.” Thus, not only will business and personal income be lower, but more of that income will need to be diverted to transportation related costs. This dynamic will create lower demand in key economic sectors associated with business investments for expansion and research and development, and in consumer sectors. n Second, the impact of declining business productivity, due to inefficient surface transportation, tends to push up employment, even if income is declining. Productivity deteriorates with infrastructure degradation, so more resources are wasted in each sector. In other words, it may take two jobs to complete the tasks that one job could handle without delays due to worsening surface transportation infrastructure. n Third, related to productivity effects, degrading surface transportation conditions will generate jobs to address problems created by worsening conditions in sectors such as transportation services and automobile repair services.6 American Society of Civil Engineers « Overall job losses are mitigated by more people working for less money and less productively due to the diminished effectiveness of the U.S. surface transportation system. Recasting the 2020 and 2040 initial job impacts based on income and productivity lost reduces worker effectiveness by an additional 27% (another 234,000 jobs). By 2040, this drain on wages and productivity implies an additional 115% effect if income and productivity were stable (another 470,000 jobs). « By 2040 the cost of infrastructure deficiencies are expected to result in the U.S. losing more than $72 billion in foreign exports in comparison with the level of exports from a transportation-sufficient U.S. economy. These exports are lost due to lost productivity and the higher costs of American goods and services, relative to competing product prices from around the globe.
The National Infrastructure Bank is the best way to solve—if we don’t act now, costs will rise dramatically
Rohatyn, 10 (Felix G. Rohatyn, special adviser to the chairman and CEO of Lazard Frères & Co. LLC, 9/15/2010 , “The Case for an Infrastructure Bank; We need projects that meet national economic objectives, not local political ones,” )
President Obama has proposed a program to renew and expand America's infrastructure. Central to the president's plan is the creation of a permanent, national infrastructure bank that could leverage private capital for projects of regional and national significance. Hopefully members of Congress will make jobs and the economy their priority and support its establishment. A national infrastructure bank could begin to reverse federal policies that treat infrastructure as a way to give states and localities resources for projects that meet local political objectives rather than national economic ones. The bank would evaluate prospective infrastructure projects on consistent terms. It would be able to negotiate with state or local sponsors of a project what their cost shares should be. The bank also could help groups of states come together for regional projects such as high-speed rail and better freight management. Such consolidation would improve project selection. The bank also could ensure that states and localities consider all other options—from wetlands preservation to implementing tolls—before structural options are funded. It would create an avenue for private investors to put risk capital into new projects and bless their involvement with the bank's own participation. In short, it would treat infrastructure like a long-term investment, not an expense. The American Society of Civil Engineers periodically estimates the cost of bringing our infrastructure to an acceptable level—it now exceeds $2 trillion. This is a staggering sum, but the infrastructure bank could make strides to meet it by issuing its own bonds of up to 50 years maturity and, with a conservative gearing, could initially raise $200 billion to $300 billion and become self-financing over time. The legislation that embodies the concept of an infrastructure bank already exists in a bill that Rep. Rosa DeLauro (D., Conn.) has introduced in the House and that Sen. Chris Dodd (D., Conn.) and former Republican Sen. Chuck Hagel from Nebraska have introduced in the Senate. In addition, Pennsylvania Gov. Ed Rendell has encouraged the rebuilding of America through an infrastructure bank. As he points out, a functioning national infrastructure is not optional—it is necessary to our economic future, global competitiveness and ability to create millions of jobs over the long term. A number of alternatives have been suggested, including the creation of state infrastructure banks. By investing significantly in infrastructure we would act in the tradition of American leaders whose bold programs shaped our progress. President Lincoln transformed the country by beginning a transcontinental railroad during a time of war. FDR's GI Bill allowed millions of Americans to attend college and become the source of our technological and intellectual power. President Eisenhower built the interstate highway system, creating millions of jobs and a suburban economy still basic to the U.S. Renewing our country's infrastructure will have similar impact. The infrastructure bank is an idea whose time has come.
Spending now is best due to low interest rates – no risk of crowd out due to preexisting unemployment
Avent 12 (Ryan Avent is The Economist's economics correspondent. He covers the field of academic economics, with a focus on developments in macroeconomic, Mar 28th 2012, A good time for infrastructure investment,
)
The Treasury has just published a white paper full of reasons to favour additional investment. Even if you are sceptical of the utility of fiscal stimulus qua stimulus, now seems like a very good time to undertake much more investment than normal. As the Treasury paper points out, very low interest rates and high unemployment mean that the odds of crowding out private spending and investment are much lower than normal. Cheaper than normal capital and labour also imply that taxpayers will receive a better deal on spending than would typically be the case. The cost-benefit calculus on infrastructure investment has shifted toward doing more of it, or at least squeezing more expected investment into the present period. Other research, like the new Brookings paper by Brad DeLong and Larry Summers, also indicates that the bar for greater investment should be lower. Given the potential that unemployment will become increasingly persistent as time goes on, the value of government spending that reduces joblessness—even temporarily—is higher than may be appreciated. Any projects that seemed like good ideas in general, and there are a lot of them, look like really, really good ideas now. And yet Congress has struggled mightily to keep even existing spending going. The nation's primary transportation-funding law expired in 2009. Normally a wholesale replacement or reauthorisation would follow that expiration; Congress has instead repeatedly extended the old law while bickering over how to come up with money to replace the increasingly meagre take from the nation's petrol tax. The latest extension is set to expire, and legislators are arguing over what to do next. They might extend the measure again—for 60 to 90 days. Or they might stonewall themselves into a temporary shutdown of all federally funded projects. Inaction is absurd and embarrassing, especially since funding is the primary (though not the only) source of disagreement and the costs of borrowing and unemployment (and the likelihood of a decent return on infrastructure investment) indicate that just borrowing the money to spend on new roads and rails would be a reasonable course of action. If ever there should have been a policy so obviously sensible as to attract bipartisan support, more money for infrastructure was it. Right now, when it comes to partisan politics, sensibility's got nothing to do with it.
The Impact
Contention 2 is the Impact
All three scenarios risk an economic collapse
That causes a power vacuum, spurring terrorism and great power war
Royal 10 – Jedediah Royal, Director of Cooperative Threat Reduction at the U.S. Department of Defense, 2010, “Economic Integration, Economic Signaling and the Problem of Economic Crises,” in Economics of War and Peace: Economic, Legal and Political Perspectives, ed. Goldsmith and Brauer, p. 213-215
Less intuitive is how periods of economic decline may increase the likelihood of external conflict. Political science literature has contributed a moderate degree of attention to the impact of economic decline and the security and defense behavior of interdependent states. Research in this vein has been considered at systemic, dyadic and national levels. Several notable contributions follow. First, on the systemic level, Pollins (2008) advances Modelski and Thompson’s (1996) work on leadership cycle theory, finding that rhythms in the global economy are associated with the rise and fall of a pre-eminent power and the often bloody transition from one pre-eminent leader to the next. As such, exogenous shocks such as economic crisis could usher in a redistribution of relative power (see also Gilpin, 1981) that leads to uncertainty about power balances, increasing the risk of miscalculation (Fearon, 1995). Alternatively, even a relatively certain redistribution of power could lead to a permissive environment for conflict as a rising power may seek to challenge a declining power (Werner, 1999). Seperately, Pollins (1996) also shows that global economic cycles combined with parallel leadership cycles impact the likelihood of conflict among major, medium and small powers, although he suggests that the causes and connections between global economic conditions and security conditions remain unknown. Second, on a dyadic level, Copeland’s (1996, 2000) theory of trade expectations suggests that ‘future expectation of trade’ is a significant variable in understanding economic conditions and security behavious of states. He argues that interdependent states are likely to gain pacific benefits from trade so long as they have an optimistic view of future trade relations, However, if the expectations of future trade decline, particularly for difficult to replace items such as energy resources, the likelihood for conflict increases, as states will be inclined to use force to gain access to those resources. Crisis could potentially be the trigger for decreased trade expectations either on its own or because it triggers protectionist moves by interdependent states. Third, others have considered the link between economic decline and external armed conflict at a national level. Blomberg and Hess (2002) find a strong correlation between internal conflict and external conflict, particularly during periods of economic downturn. They write, The linkages between internal and external conflict and prosperity are strong and mutually reinforcing. Economic conflict tends to spawn internal conflict, which in turn returns the favor. Moreover, the presence of a recession tends to amplify the extent to which international and external conflict self-reinforce each other. (Blomberg & Hess, 2002. P. 89) Economic decline has been linked with an increase in the likelihood of terrorism (Blomberg, Hess, & Weerapana, 2004), which has the capacity to spill across borders and lead to external tensions. Furthermore, crises generally reduce the popularity of a sitting government. ‘Diversionary theory’ suggests that, when facing unpopularity arising from economic decline, sitting governments have increase incentives to fabricate external military conflicts to create a ‘rally around the flag’ effect. Wang (1996), DeRouen (1995), and Blomberg, Hess, and Thacker (2006) find supporting evidence showing that economic decline and use of force are at least indirectly correlated. Gelpi (1997), Miller (1999), and Kisangani and Pickering (2009) suggest that the tendency towards diversionary tactics are greater for democratic states than autocratic states, due to the fact that democratic leaders are generally more susceptible to being removed from office due to lack of domestic support. DeRouen (2000) has provided evidence showing that periods of weak economic performance in the United States, and thus weak Presidential popularity, are statistically linked to an increase in the use of force. In summary, recent economic scholarship positively correlated economic integration with an increase in the frequency of economic crises, whereas political science scholarship links economic decline with external conflict at systemic, dyadic and national levels. This implied connection between integration, crisis and armed conflict has not featured prominently in the economic-security debate and deserves more attention.
Solvency
Contention 3 is Solvency
NIB avoids partisan gridlock and solves infrastructure development
Tyson 11 (Laura Tyson, Professor at the Haas School of Business of UC-Berkeley, PhD in Economics from MIT, BA Summa Cum Laude in Economics at Smith College, former Chair of the US President’s Council of Economic Advisers, served as the Director of the National Economic Council, Harvard Business Review, “A Better Stimulus Plan for the U.S. Economy,” 2011, )
Although stimulus spending is a politically contentious issue, America is now in urgent need of a national infrastructure bank to help finance transformative projects of national importance. During the coming year I will work with the Obama administration; Senator John Kerry, Representative Rosa DeLauro, and other members of Congress; governors; mayors; and business leaders on legislation to establish and provide the capital for such an institution. I will also foster public support for its creation through speeches, interviews, and opinion columns like this one. Unlike most other forms of stimulus, infrastructure spending benefits the economy in two ways: First, it creates jobs—which, because those jobs put money in consumers' pockets, spurs demand. Analysis by the Congressional Budget Office indicates that infrastructure spending is a cost-effective demand stimulus as measured by the number of jobs created per dollar of budgetary expenditure. Second, the resulting infrastructure enhancement supports supply and growth over time. By contrast, underinvestment not only hobbles U.S. competitiveness but also affects America's national security as vulnerabilities go unaddressed. In its 2009 report on the state of the nation's infrastructure, the American Society of Civil Engineers gave the U.S. a near-failing grade of D. Perhaps that should not be surprising, given that real infrastructure spending today is about the same as it was in 1968, when the economy was smaller by a third. A 2008 CBO study concluded, for example, that a 74% increase in annual spending on transportation infrastructure alone would be economically justifiable. That calculation leaves out additional infrastructure spending needed for other key public goals such as water delivery and sanitation. Realizing the highest possible return on infrastructure investments depends on funding the projects with the biggest impact and financing them in the most advantageous way. Properly designed and governed, a national infrastructure bank would overcome weaknesses in the current selection of projects by removing funding decisions from the politically volatile appropriations process. A common complaint today is that projects are often funded on the basis of politics rather than efficiency. Investments would instead be selected after independent and transparent cost-benefit analysis by objective experts. The bank would provide the most appropriate form of financing for each project, drawing on a flexible set of tools such as direct loans, loan guarantees, grants, and interest subsidies for Build America Bonds. It should be given the authority to form partnerships with private investors, which would increase funding for infrastructure investments and foster efficiency in project selection, operation, and maintenance. That would enable the bank to tap into the significant pools of long-term private capital in pension funds and dedicated infrastructure equity funds looking for such investment opportunities. Crafting the law to achieve these goals is a serious and challenging undertaking, particularly in view of large budget deficits and a contentious political atmosphere. But I believe they are worthy of the political and legislative effort required to realize them. The U.S. must invest considerably more in its infrastructure to secure its competitiveness and deliver rising standards of living. This effort would also put millions of Americans to work in meaningful jobs. The time has come to make it happen.
Public private partnerships effectively spur infrastructure and economic growth
Likosky et al. 11 ( Michael Likosky: senior fellow at NYU’s Institute for Public Knowledge, directs the Center on Law & Public Finance at the Social Science Research Council, Josh Ishimatsu, senior fellow at the Center on Law & Public Finance. Joyce L. Miller is senior fellow at the Center on Law & Public Finance and a board member of the New York State Empire State Development Corporation, June 2011, “RETHINKING 21ST - CENTURY GOVERNMENT: PUBLIC-PRIVATE PARTNERSHIPS AND THE NATIONAL INFRASTRUCTURE BANK, )
In an era of severe budgetary constraints, how can the federal government ensure that America is investing in what is needed to promote economic competitiveness, broad-based opportunity, and energy security? Increasingly, public-private partnerships enjoy broad support as the answer to this question, across party lines and political divisions. Partnership-driven projects are pursued today in wide-ranging areas, including education, transportation, technology, oil and gas, clean energy, mineral extraction, and manufacturing. Well-considered partnerships compliment, strengthen, and reinforce those existing meritorious approaches carried out through traditional means. They represent a fundamentally distinct way for government to address complex challenges, with federal agencies playing a catalytic role rather than a directive one. A National Infrastructure Bank can provide the requisite capacity to implement public-private partnerships. RETHINKING THE FUNCTION OF GOVERNMENT America is at a standstill. Federal, state, and local governments are facing overburdened public balance sheets while enormous sums sit in limbo in pension funds and in the accounts of what the McKinsey Global Institute has called the new global power brokers: Asian sovereign funds, petrodollar accounts, private equity funds, and hedge funds. 1 It is why President Obama posed this question to his Economic Recovery Advisory Board in 2009: Obviously we’re entering into an era of greater fiscal restraint as we move out of deep recession into a recovery. And the question I’ve had is people still got a lot of capital on the sidelines there that are looking for a good return. Is there a way to channel that private capital into partnering with the public sector to get some of this infrastructure built? 2 Unless we can shepherd this money into our productive economy, the country will have to forego much-needed projects for lack of financing. Public-private partnerships involve federal agencies coinvesting alongside state and local governments, private firms, and nonprofits. Having partnerships within a government’s toolbox not only brings a sizable new source of capital into the market, it also allows public officials to match assets with the most appropriate and cost-effective means of financing. If a class of existing and new projects can be financed from private sources, then we can begin to decrease our debt burden while also investing and growing our economy. Scarce public funds are then freed up to be spent on essential services and those projects best financed through traditional means. Because the success of partnerships depends upon collaborations between government and private firms that may under other circumstances be viewed as raising conflicts of interest, a rethinking of the function of government is essential. In a recent opinion piece in the Wall Street Journal, the president announced an executive order, Improving Regulation and Regulatory Review, 3 which “requires that federal agencies ensure that regulations protect our safety, health and environment while promoting economic growth.” 4 The piece, entitled “Toward a 21st-Century Regulatory System,” “ Federal, state, and local governments are facing overburdened public balance sheets while enormous sums sit in limbo. ”5 was accompanied by an evocative drawing of a regulator wielding an oversized pair of scissors busily cutting through a sea of red tape. While widely viewed as an effort to curry favor with American businesses, this presidential outreach can also be read as an indication that the federal government will support—and encourage—divergent groups working together to cut through outmoded, counterproductive, or unnecessarily burdensome regulation. Public-private partnerships are especially suited to fulfilling the order’s directives and can serve as amodel for our twenty-first-century federal agencies. If coming together as a team—public and private, Republican and Democrat, progressive and Tea Party—is a precondition not only to winning the future but also to solving today’s seemingly intractable problems, then we must take the task at hand seriously. Diverse groups must appreciate the unique and valuable resources and perspectives that those who are their combatants in other contexts bring to the team. Government agencies, more accustomed to acting as referee—setting down basic rules of the game and constraining behavior deemed contrary to the public interest—must find ways of coaching this unruly bunch, not from the sidelines but as a vital player.
National Infrastructure bank doubles investments in infrastructure
Anderson 11 (Norman, the president and CEO of CG/LA Infrastructure, “The Case For The Kerry-Hutchison Infrastructure Bank”, March 25, )
As a small business owner who helps people think through infrastructure issues, I’m struck by the extraordinary opportunity here. We’re all aware of the need: A national infrastructure bank that uses federal borrowing authority to leverage private investment for roads, bridges, water systems and power grids is the only way for the U.S. to increase infrastructure investments in tight fiscal times. And the technical opportunity is irrefutable. Why not raise money for infrastructure at a time of historically low borrowing costs? What’s more, every major economy in the world has an infrastructure bank, so we should have one, too. Need is not the issue. Opportunity is. We need a model for smart government. Forget the weirdly inefficient, old-style European model. Re-engineering an old public sector is nearly impossible, and no one has the patience for it anyway. Think about a national infrastructure bank as an exercise in creating smart government, in an area that is strategically important for the future of our country. Doubling Annual Investment A high-functioning infrastructure bank would have three characteristics, shaping its overall role of doubling our annual investment in infrastructure, from $150 billion a year to $300 billion. First, the role of the infrastructure bank is catalytic rather than managerial. Rather than creating a large bureaucracy, the bank would assemble a corps of focused professionals: engineers, financiers, economists and what I term strategic leaders — people who get things done, driven by a vision to make this country more competitive. Their job will be to set projects in motion, then to make sure that those projects meet or exceed guidelines. Monitor, not manage; act strategically, not operationally. Move fast, don’t get bogged down, get the job done. The result will be an elite, rapid, infinitely smaller and infinitely more qualified leadership team than what we have today, an instructive model for other infrastructure related agencies at every level of government. Energize Private Sector Second, the function of the infrastructure bank is to guide and energize the private sector. An infrastructure bank goes into the guts of the process — project selection — and gets at the frightening issue of cost. Our costs are often twice that of our European brothers for urban mass transit projects, 10 times those of China. The bank’s day-to-day business will be to invest in ventures and networks of ventures that serve for 20, 30, 40 even 50 years, providing a competitive return throughout that period. In this sense the bank will be a welcome, violent change agent, smashing open three areas in the infrastructure project-creation process that are costing this country a fortune: – It takes more than 10 years on average for a project to move through the approval process, a period that would need to be reduced to three years for projects to be bankable. – At least 50 percent of large U.S. projects suffer cost overruns in the 30 percent-or-greater range. This would be eliminated through bank leadership. – The selection of projects tends to be willy-nilly, based on political interests. A bank ideally would be a model of focus, restricting its attention to projects that generate competitiveness. Results Oriented Lastly, the infrastructure bank will be results oriented and transparent: your bank, investing in your public assets. The bank will be a great experiment in the Facebook Age, bringing in funds from all over the world to build our strategic infrastructure. The very nature of the smart-government model is to set goals and report performance. This new institution will go beyond that, creating knowledge, developing metrics and pioneering ways of communicating: from project approvals, to performance reporting to championing new technology. Maybe the Kerry/Hutchison proposal is the opening salvo in a bipartisan effort to build smart government. Thinking about an American infrastructure bank in this way makes an attractive experiment that we have to explore. Creating a model in an area critical to our economic future is a strategic option we can’t ignore. Recognizing that the bank would double our infrastructure investment and increase the efficiency of each dollar spent is a good deal for every citizen.
Only federal action solves
Halleman ‘11 (Brendan, Business graduate with analytical and program management experience across a range of transportation and infrastructure issues; Head of Communications & Media Relations at International Road Federation “Establishing a National Infrastructure Bank - examining precedents and potential”, October 2011, )
The merits of establishing a National Infrastructure Bank are once again being debated in the wake of President Obama’s speech to a joint session of the 112th United States Congress and the subsequent introduction of the American Jobs Act 1 . A review of the Jobs Act offers a vivid illustration of how far the debate has moved under the Obama Administration. Earlier White House budgets had proposed allocating USD 4 billion as seed funding to a National Infrastructure Innovation and Finance Fund tasked with supporting individual projects as well as “broader activities of significance”. Offering grants, loans and long term loan guarantees to eligible projects, the resulting entity would not have constituted an infrastructure bank in the generally accepted sense of the term. Nor would the Fund have been an autonomous entity, making mere “investment recommendations” to the Secretary of Transportation2 . Despite a number of important alterations, the Jobs Act contains the key provisions of a bipartisan Senate bill introduced in March 20113 establishing an American Infrastructure Financing Authority (AIFA). Endowed with annual infusions of USD 10 billion (rising to USD 20 billion in the third year), the Authority’s main goal is to facilitate economically viable transportation, energy and water infrastructure projects capable of mobilizing significant levels of State and private sector investment. The Authority thus established: ( is set up as a distinct, self-supporting entity headed by a Board of Directors requiring Senate confirmation ( offers loans & credit guarantees to large scale projects with anticipated costs in excess of USD 100,000,000 ( extends eligible recipients to corporations, partnerships, trusts, States and other governmental entities ( subjects loans to credit risk assessments and investment-grade rating (BBB-/ Baa3 or higher) ( conditions loans to a full evaluation of project economic, financial, technical and environmental benefits ( caps Federal loans at 50% of anticipated project costs ( requires dedicated revenue sources from recipient projects, such as tolls or user fees ( sets and collects loan fees to cover its administrative and operational costs (with leftover receipts transferred to the Treasury) Particularly striking are the layers of risk assessment contained in the BUILD Act. These translate into a dedicated risk governance structure with the appointment of a Chief Risk Officer and annual external risk audits of AIFA’s project portfolio. At project level, applicants are required to provide a preliminary rating opinion letter and, if the loan or loan guarantee is approved, the Authority’s associated fees are modulated to reflect project risk. Lastly, as a Government-owned corporation, AIFA is explicitly held on the Federal balance sheet and is not able to borrow debt in the capital markets in its own name (although it may reoffer part of its loan book into the capital markets, if deemed in the taxpayers’ interest). Rationale As a percentage of GDP, the United States currently invests 25% less on transportation infrastructure than comparable OECD economies 4 . There is broad agreement that absent a massive and sustained infusion of capital in infrastructure, the backlog of investment in new and existing transportation assets will hurt productivity gains and ripple economy-wide5 The establishment of AIFA is predicated on a number of market considerations Dwindling demand for municipal bonds, resulting in significantly decreased capacity to invest at the State and local level. This scenario is confirmed by recent Federal Reserve data 6 indicating a sharp drop in the municipal bond market for the first two quarters of 2011 despite near-identical ten-year yields, a trend that can partly be explained by record-level outflows prior to the winding down of the Build America Bonds program on 31 December 20107 . Considering that roughly 75% of municipal bond proceeds go towards capital spending on infrastructure by states and localities 8 , this shortfall amounts to USD 135 billion for the first six months of 2011 alone. Insufficient levels of private sector capital flowing in infrastructure investments. Despite the relatively stable cash flows typically generated by infrastructure assets, less than 10% of investment in transportation infrastructure came from capital markets in 2007 8 . By some estimates 9 , the total equity capital available to invest in global infrastructure stands at over USD 202 billion and investor appetite remains strong in 2011. Federal underwriting may take enough of the risk away for bonds to achieve investment grade rating on complex infrastructure programs, particularly if they protect senior-level equity against first loss positions and offer other creditor-friendly incentives. For instance, the planned bill already includes a “cash sweep” provision earmarking excess project revenues to prepaying the principal at no penalty to the obligor. Convincing evidence across economic sectors that Federal credit assistance stretches public dollars further 10 . The Transportation Infrastructure Finance and Innovation Act (TIFIA) already empowers the Department of Transportation to provide credit assistance, such as full-faith-and-credit guarantees as well as fixed rate loans, to qualified surface transportation projects of national and regional significance. It is designed to offer more advantageous terms and fill market gaps by cushioning against revenue risks (such as tolls and user fees) in the ramp up phase of large infrastructure projects. A typical project profile would combine equity investment, investment-grade toll bonds, state gas tax revenues and TIFIA credit assistance to a limit of 33%. TIFIA credit assistance is scored by the Office of Management and Budget at just 10%, representing loan default risk. In theory, a Federal outlay of just USD 33 million could therefore leverage up to USD 1 billion in infrastructure funding 11 . To date, 21 projects have received USD 7.7 billion in credit assistance for USD 29.0 billion in estimated total project cost 12. 32 States (and Puerto Rico) currently operate State Infrastructure Banks (SIBs) offering an interesting case study for the American Infrastructure Financing Authority. Moreover the BUILD Act explicitly authorizes the Authority to loan to “political subdivisions and any other instrumentalities of a State”, such as the SIBs. SIBs were formally authorized nationwide in 2005 through a provision of the SAFETEA-LU Act 13 to offer preferential credit assistance to eligible and economically viable surface transportation capital projects. A provision of the Act also authorizes multistate Banks, although such cooperative arrangements have yet to be established. SIBs operate primarily as revolving loan funds using initial capitalization (Federal and state matching funds) and ongoing funding (generally a portion of state-levied taxes) to provide subordinated loans whose repayments are recycled into new projects loans. Where bonds are issued by SIBs as collateral to leverage even greater investment capacity, these can be secured by user revenues, general State revenues or backed against a portion of federal highway revenues. As of December 2010, State Infrastructure Banks had entered into 712 loan agreements with a total value of over USD 6.5 billion12. While SAFETEA-LU provided a basic framework for establishing SIBs, each State has tailored the size, structure and focus of its Bank to meet specific policy objectives. The following table14 illustrates the scales of SIBS at the opposite end of the spectrum. These State-driven arrangements warrant a number of observations: The more active SIB States are those that have increased the initial capitalization of their banks through a combination of bonds and sustained State funding. South Carolina’s Transportation Infrastructure Bank receives annual amounts provided by State law that include truck registration fees, vehicle registration fees, one-cent of gas tax equivalent, and a portion of the electric power tax. Significantly, all SIBs have benefited from the ability to recycle loan repayments – including interest and fees – into new infrastructure projects, a facility currently not available to the American Infrastructure Financing Authority under the terms of the BUILD Act. More than 87 percent of all loans from such banks made through 2008 were concentrated in just five States: South Carolina, Arizona, Florida, Texas and Ohio 14 . As a case in point, South Carolina’s Transportation Infrastructure Bank has provided more financial assistance for transportation projects than the other 32 banks combined. Most State banks have issued fewer than ten loans, the vast majority of which fall in the USD 1-10 million size bracket 14 . This suggests that not all States presently have experience, or the ability, to deal with capital markets for large-scale funding. States are, by and large, left to define specific selection criteria for meritorious projects, the SIB’s share of the project as well as the loan fee it will charge. Kansas, Ohio, Georgia, Florida and Virginia have established SIBs without Federal-aid money and are therefore not bound by the same Federal regulations as other banks. California’s Infrastructure and Economic Development Bank extends the scope of eligible projects to include water supply, flood control measures, as well as educational facilities. While adapted to local circumstances, this patchwork of State regulations can also constitute an entry barrier for private equity partners and multistate arrangements. Given the structure of their tax base, SIBs are vulnerable to short term economy swings as well as the longer term inadequacy of current user-based funding mechanisms. SIBs borrow against future State and highway income. Many States are already reporting declining gas tax revenues and, on current projections, the Highway Trust Fund will see a cumulative funding gap of USD 115 billion between 2011 and 2021 18 . It is notable that Arizona’s Highway Extension and Expansion Loan Program is currently no longer taking applications citing “state budget issues”.
=== SOLVENCY ===
Generic
National Infrastructure bank doubles investments in infrastructure
Anderson 11 (Norman, the president and CEO of CG/LA Infrastructure, “The Case For The Kerry-Hutchison Infrastructure Bank”, March 25, )
As a small business owner who helps people think through infrastructure issues, I’m struck by the extraordinary opportunity here. We’re all aware of the need: A national infrastructure bank that uses federal borrowing authority to leverage private investment for roads, bridges, water systems and power grids is the only way for the U.S. to increase infrastructure investments in tight fiscal times. And the technical opportunity is irrefutable. Why not raise money for infrastructure at a time of historically low borrowing costs? What’s more, every major economy in the world has an infrastructure bank, so we should have one, too. Need is not the issue. Opportunity is. We need a model for smart government. Forget the weirdly inefficient, old-style European model. Re-engineering an old public sector is nearly impossible, and no one has the patience for it anyway. Think about a national infrastructure bank as an exercise in creating smart government, in an area that is strategically important for the future of our country. Doubling Annual Investment A high-functioning infrastructure bank would have three characteristics, shaping its overall role of doubling our annual investment in infrastructure, from $150 billion a year to $300 billion. First, the role of the infrastructure bank is catalytic rather than managerial. Rather than creating a large bureaucracy, the bank would assemble a corps of focused professionals: engineers, financiers, economists and what I term strategic leaders — people who get things done, driven by a vision to make this country more competitive. Their job will be to set projects in motion, then to make sure that those projects meet or exceed guidelines. Monitor, not manage; act strategically, not operationally. Move fast, don’t get bogged down, get the job done. The result will be an elite, rapid, infinitely smaller and infinitely more qualified leadership team than what we have today, an instructive model for other infrastructure related agencies at every level of government. Energize Private Sector Second, the function of the infrastructure bank is to guide and energize the private sector. An infrastructure bank goes into the guts of the process — project selection — and gets at the frightening issue of cost. Our costs are often twice that of our European brothers for urban mass transit projects, 10 times those of China. The bank’s day-to-day business will be to invest in ventures and networks of ventures that serve for 20, 30, 40 even 50 years, providing a competitive return throughout that period. In this sense the bank will be a welcome, violent change agent, smashing open three areas in the infrastructure project-creation process that are costing this country a fortune: – It takes more than 10 years on average for a project to move through the approval process, a period that would need to be reduced to three years for projects to be bankable. – At least 50 percent of large U.S. projects suffer cost overruns in the 30 percent-or-greater range. This would be eliminated through bank leadership. – The selection of projects tends to be willy-nilly, based on political interests. A bank ideally would be a model of focus, restricting its attention to projects that generate competitiveness. Results Oriented Lastly, the infrastructure bank will be results oriented and transparent: your bank, investing in your public assets. The bank will be a great experiment in the Facebook Age, bringing in funds from all over the world to build our strategic infrastructure. The very nature of the smart-government model is to set goals and report performance. This new institution will go beyond that, creating knowledge, developing metrics and pioneering ways of communicating: from project approvals, to performance reporting to championing new technology. Maybe the Kerry/Hutchison proposal is the opening salvo in a bipartisan effort to build smart government. Thinking about an American infrastructure bank in this way makes an attractive experiment that we have to explore. Creating a model in an area critical to our economic future is a strategic option we can’t ignore. Recognizing that the bank would double our infrastructure investment and increase the efficiency of each dollar spent is a good deal for every citizen.
National infrastructure bank facilitates a range of projects totaling half a trillion in investment
Lemov, 12 (Penelope Lemov is a GOVERNING correspondent, 3/1/2012, “A Bank for Infrastructure Funding; Legislation moving through Congress could help states and localities finance public works projects,” )
The $5.25 billion Panama Canal expansion could be a gold mine for U.S. ports along the Gulf and the East Coast.. But first, they have a few upgrades to make if they expect to compete for the anticipated surge in trade traffic. So where will the money come from to ready these ports? And what about money to finance other major infrastructure needs? Michael Likosky, director of the Center on Law and Public Finance at New York University, sees a national infrastructure bank as one answer. As bipartisan legislation to create such a bank inches its way through Congress, I tuned into a briefing via telephone by Likosky, sponsored by RBC Capital Markets, on how such a bank might work. What follows is an edited transcript of his remarks. How the bank will work: The bank starts with the initial capitalization of $10 billion, then moves to self-sufficiency, and does loans and loan guarantees in the sectors of water, transportation and energy. It is a multi-sector bank, designed to finance multi-sector projects so you can package water, transportation and energy together. How the bank differs from the Transportation Infrastructure Finance and Innovation Act (TIFIA): The TIFIA program has generally been for large marquis projects. To date, it has been a 10- to 12-state program. The states that have needs for TIFIA loans generally are high population states that can sustain it. The infrastructure bank has been conceived as a 50-state bank, and so it has a much broader reach. It is going to be more about volume and less about doing a cluster of projects. That said, the two are complementary in that a TIFIA project can pick up support from the infrastructure bank at the same time. Including another federal agency or federal program in a TIFIA package makes the package more attractive to investors, particularly if a water or energy component gets added. Like TIFIA, the state bank is for transportation only. The program's been around since the Clinton administration and has never taken off as a national program. That said, an expanded state infrastructure bank program could use national infrastructure bank programs to enhance its own financing. The number of projects a national infrastructure bank could support: The estimates have been around $500 billion of deal flow [or, in other words, $500 billion in business or investment opportunities]. That's a conservative estimate, particularly at a time when there's a lot of uncertainty in Europe. The U.S. is considered a jurisdiction of opportunity. So we're likely to see an infrastructure bank leverage a lot more money than some of the estimates. When you provide a loan or a loan guarantee, and the risk assessment of the project is taken into consideration, the federal government's only going to withhold a certain amount of what it lends. So if it's a $340 million loan, that might only require withholding $34 million. With the export/import bank and international banks in the U.S., the experience has been that the amount withheld becomes smaller and smaller. Prioritizing projects: A national infrastructure bank's purpose is to help increase state and local deal flow and private-sector deal flow. The national bank itself isn't going to be a place that has a list of priority projects. This is not a top-down institution. So what we end up with is our state and local governments beginning to move toward priority lists of projects. In many states this is happening; there is starting to be a priority list of what types of projects would be particular candidates for public-private partnerships. As the transportation bill has moved forward, we're getting a clearer idea of what gaps are going to be left in the marketplace where an infrastructure bank is going to become particularly useful. A concrete example of a priority project that would be an infrastructure bank candidate is the expansion of the port in Spartanburg, S.C., so it can handle the larger Panama Canal ships. We're talking about a range of different sectors that are involved, both freight rail, intermodal freight rail and dredging the port, but we're also talking about other types of port build-up manufacturing. The idea is to ramp up manufacturing in the ports at the same time that the expansion happens. What the infrastructure bank would aim to do is increase the pie of available capital with the recognition that we have to achieve fairly high growth rates -- 6 percent -- in a fairly sustained way in order to handle the employment crisis. So in those areas where there's the greatest amount of economic growth possible, that's where the infrastructure bank comes in as especially useful. Bank project financing vs. traditional tax-exempt project financing: I see them as enhancing the tax-exempt bond market by bringing in -- as the Build America Bonds did -- a new class of investors: pensions, sovereigns and insurers that don't always have the appetite or the tax profile for the tax-exempt. On another front, the bank is an enhancer of the tax-exempt bond market in that there's a slice of projects today that are more amenable to public-private partnerships or require a tax-exempt, private-activity bond enhancer or some sort of additional type of revenue source. For instance, in New York, Gov. Andrew Cuomo is talking about reinvesting in Buffalo. There's going to be a certain amount of tax-exempt bond usage to regrow Buffalo, but there's also going to be a movement to bring in other sources of financing. The tax-exempt bond market and the infrastructure bank will reinforce one another. Facilitating public-private partnerships: The infrastructure bank is coming in to handle two main risks associated with public-private partnerships. [The main one] is closing risk. In the U.S. public-private partnership market today, it is very hard and very expensive to get to close with a project. What an infrastructure bank will do is decrease the likelihood of closure of a project because there will be an additional federal champion involved, additional federal underwriting and higher underwriting standards. The bank also has a best practices unit in it, so there'll be some technical assistance to state and local governments that often run into problems closing projects because there's not the capacity to assess bids. That's another aspect that the federal bank is meant to support.
Infrastructure bank solves new project development – Reduces cost and is nonpartisan
Thomasson 11 (Scott Thomasson: economic and domestic policy director of the progress policy institute, OCTOBER 12, 2011, “Hearing before the subcommittee on Highways and transit “National Infrastructure Bank: More Bureaucracy and Red Tape”” )
As the unavoidable costs of repairing and maintaining our nation’s infrastructure climb into the trillions of dollars, the time has come for a clear-eyed look at how a national bank might be one piece of a multi-pronged approach to making the investments we need. Doing that means we need to put aside polarizing rhetoric from both sides and talk frankly about what a national infrastructure bank is, and what it is not. The driving motivation behind the national infrastructure bank is twofold. First, the financing offered by the bank would provide an additional tool for reducing the costs of new projects and attracting private capital to share in the risks and expenses of these investments. The bank would bean optional tool available to states and local governments and for federally-sponsored projects like Next Gen Air Traffic Control. Second, the bank’s evaluation and financing of projects would be a transparent and predictable process, staffed by professional finance experts and guided by clearly defined, merit-based criteria. This would ensure that at least some portion of our public investment decisions would focus on projects that will generate economic benefits and enhance competitiveness at a national or regional level. Many of the arguments for a national infrastructure bank are the same as those made in favor of state banks, and even for existing credit programs like TIFIA, both of which have been supported by members of this Committee on both sides. The objection to creating a national bank as somehow inferior to supporting state infrastructure banks seems to rest on the claim that a national bank would impose new burdens on states and shift decision making from state officials to Washington bureaucrats. Neither of these objections is accurate. In spite of the suggestion built into the title of today’s hearing, my hope is that the members of the Subcommittee will be open to considering the ways in which a national infrastructure bank could actually reduce red tape for states, and possibly even shrink the regulatory footprint of federal bureaucracy in the landscape of project finance activity nation wide. If properly implemented, an independent bank could actually reduce regulatory burdens imposed by existing federal programs, by establishing a project selection and financing process that is focused on the economic merits of investments, rather than the myriad regulatory and policy goals pursued by different bureaucratic silos in executive branch departments. Whether every existing federal mandate and regulation should be attached to infrastructure bank financing is a policy choice to be debated for any bank legislation, but it is also a collateral issue that need not disqualify the bank as a financing option.
NIB key—long and short term economic growth
(US Department of Treasury ’12, US Department of Treasury, A New Economic Analysis of Infrastructure Investment, 3/23/2012, )
Our analysis indicates that further infrastructure investments would be highly beneficial for the U.S. economy in both the short and long term. First, estimates of economically justifiable investment indicate that American transportation infrastructure is not keeping pace with the needs of our economy. Second, because of high unemployment in sectors such as construction that were especially hard hit by the bursting of the housing bubble, there are underutilized resources that can be used to build infrastructure. Moreover, states and municipalities typically fund a significant portion of infrastructure spending, but are currently strapped for cash; the Federal government has a constructive role to play by stepping up to address the anticipated shortfall and providing more efficient financing mechanisms, such as Build America Bonds. The third key finding is that investing in infrastructure benefits the middle class most of all. Finally, there is considerable support for greater infrastructure investment among American consumers and businesses. The President’s plan addresses a significant and longstanding need for greater infrastructure investment in the United States. Targeted investments in America’s transportation infrastructure would generate both short-term and long-term economic benefits. However, transforming and rehabilitating our nation’s transportation infrastructure system will require not only greater investment but also a more efficient use of resources, because simply increasing funding does not guarantee economic benefits. This idea is embodied in the President’s proposal to reform our nation’s transportation policy, as well as to establish a National Infrastructure Bank, which would leverage private and other non-Federal government resources to make wise investments in projects of regional and national significance.
NIB comparatively o/ws all alternatives
(Thomasson ’11 Scott Thomasson, Economic and Domestic Policy Director, Progressive Policy Institute, “The National Infrastructure Bank: Separating Myths from Realities”, Scribd, 10/12/2011)
Both the federal government and state authorities have already taken important steps toward achieving some of the goals of a national infrastructure bank. Innovative financing programs like TIFIA, the Railroad Rehabilitation and Investment Financing Program (“RRIF”), and the Department of Energy’s 1703 and 1705 loan guarantee programs have brought powerful changes to the way we approach infrastructure projects, by shifting a portion of the government’s role from spending (grants and direct funding) to investment (credit assistance, loans, and loan guarantees). And thanks to incentives created by Congress in past transportation legislation, states have created their own infrastructure banks to take advantage of new approaches to project finance and planning. As this Committee has recognized, these existing approaches are helpful responses to the enormous investment challenges we face, and they have moved us in the right direction to bring us closer to the modern financing practices used around the world for infrastructure projects. But even when looked at together, these programs have been unable to achieve the full potential we have to mobilize public and private investment in this country. The TIFIA program is oversubscribed with more project applications than it can process and finance, and it is limited by a small staff structure that would likely prove inadequate to handle the large program expansion recently proposed by this Committee. RRIF has failed to deploy most of the loan authority it already has. The DOE loan guarantee program has faced many challenges, most recently highlighted by the Solyndra bankruptcy. And state infrastructure banks have had a mixed track record, due in part to insufficient capitalizations and leveraging power. Given the interest the Committee has expressed in dramatically expanding the TIFIA program and opportunities for state infrastructure banks, it is timely to ask whether these programs can be improved by simply throwing more money at them, or whether an additional credit platform is needed to boost their effectiveness. This question is underscored by the recent news surrounding the Department of Energy’s loan guarantee to Solyndra, which suggests we should be wary of believing an existing program can deliver on the promises of a massive expansion in loan approvals before the necessary staff and expertise are in place. Throwing more money at the TIFIA program without an enhanced organizational structure will run the same risks of questionable underwriting decisions that the Solyndra critics have argued against. And expanding TIFIA’s resources is likely to create more bureaucracy and red tape than a properly structured infrastructure bank. An independent and professionally staffed infrastructure bank is the best response to the increasing need for expanded federal credit programs and for ensuring prudent financial management of those programs. A properly structured national bank achieves this first and foremost by replacing politically driven decision making with a more transparent and merit-based evaluation process overseen by a bipartisan and expert board of directors. This feature of the bank becomes even more important as the federal government moves toward financing larger, big-ticket projects that are beyond the scale of anything existing programs have taken on before. But unlike the DOE approach that has been characterized as “picking winners,” a national bank would rely on the same bottom-up approach of state and local project sponsorship currently used by TIFIA. Because that approach is purely voluntary and would not mandate specific project finance structures, the bank would empower states, rather than tying their hands with red tape. There are also advantages a national bank could offer to state infrastructure banks to expand their investment options and lower their borrowing costs. A national bank could assist states in financing large, expensive projects that are beyond the scale of state bank capitalization or lending power. A national bank would also be better able to evaluate and finance projects of regional and national significance—those that produce clear economic benefits to the country, but which otherwise would not benefit any one state enough to justify bearing the cost alone. And a properly structured national bank would have much lower borrowing costs than state banks, particularly with U.S. Treasury rates at historically low levels, as they are now. Those savings could be passed through to states by partnering with state banks to finance projects selected and preapproved by the states themselves. By improving the economics of such projects, the national bank would also make them more attractive to investors, making more private capital available to states to leverage scarce taxpayer dollars.
An infrastructure bank ensures sufficient funds are allocated
Puentes, 11 ( Robert Puentes: Senior Fellow at Brookings, 4/5/2011, “Infrastructure Investment and U.S. Competitiveness,” )
Yet while we know America's infrastructure needs are substantial, we have not been able to pull together the resources to make the requisite investments. And when we do, we often fail to make infrastructure investments in an economy-enhancing way. This is why the proposal for a national infrastructure bank is so important. If designed and implemented appropriately, it would be a targeted mechanism to deal with critical new investments on a merit basis, while adhering to market forces and leveraging the private capital we know is ready to invest here in the United States. Building the next economy will require deliberate and purposeful action, across all levels of government, in collaboration with the private and nonprofit sectors. Infrastructure is a big piece of that.
Best way to solve the economy
(Stumo ’11, Michael Stumo, CEO of Coalition for a Prosperous America, author of A Food and Agriculture Policy for the United States, MS in law, “Re: Innovation Strategy RFI as sent to the Department of Commerce, 3/31/2011, )
Infrastructure is the backbone of our economy. America dedicated 2% of its GDP to infrastructure in the 1960’s, but only 1.1% by 2006, a decline of 43%. The American Society of Civil Engineers (ASCE) estimates we have a $2.2 trillion backlog to maintain present levels of service. China spent 9% of its GDP on infrastructure in 2009. Europe’s infrastructure bank spent $350 billion on projects from 2005 to 2009.4 The U.S. should create a national capital budget as the core of its infrastructure strategy. Most states have a capital budget separate from an operational budget. The national capital budget would be able to develop a plan to set priorities, financing and time schedules. The creation and maintenance of infrastructure would employ millions of people and support our economic growth. The multiplier effect of infrastructure investments is high. For every 100 jobs created to build roads, bridges or other infrastructure, another 62 jobs are created in other industries.5 A national infrastructure bank should be investigated to finance long term projects at low borrowing rates. Foreign investment could be channeled to the bank instead of that foreign investment buying direct assets. Payback would be long term and inexpensive, and in several cases could be achieved through user fees, for water and sewer projects, for example. Procurement should be vigorously targeted to U.S. suppliers.
NIB solves—Europe proves
(Hardt ’10, Alexander C. Hardt, degree in International Economics from Georgetown University and former writer for the Chicago Tribune and the Los Angeles Times, “Everything You Wanted to Know About National Infrastructure Banks But Were Afraid to Ask”, The New Republic, 9/9/10, )
President Obama’s new plan to create an infrastructure bank didn’t get a lot of attention this week. And a lot of the attention it did get was from Republicans dismissing it as wasteful spending. That’s too bad. The Europeans already have a similar institution, called the European Investment Bank (EIB), and it’s been highly successful. Instead of ignoring or dismissing the concept, it might be worth examining how and why that bank works—and whether Obama’s version would work the same way. Founded in 1958, the EIB is owned by the 27 member states of the EU. The bank makes large, direct loans (generally at least $10 million) to projects that improve infrastructure, clean energy, health or education. Would-be borrowers, who come from both the private and public sectors, must make a comprehensive proposal detailing the project’s feasibility, its ability to repay the loans, a list of other funding sources and its value in fulfilling EU policy objectives. A panel of experts then determines whether the project should receive EIB financing, which can pay for up to half of a project’s cost. The money generally comes from private investors, although the countries that own the EIB have contributed a small portion of the bank’s approximate $300 billion in capital. Thanks to its government ownership and sound finances, the bank’s bonds receive high ratings, which allow them to raise money at very low interest rates. The EIB doesn’t give grants—all the money it disburses has to be repaid with interest—but it does offer borrowers substantial benefits. The EIB “functions as a bank, but it does not seek to maximize profits,” says Emilia Istrate, an expert on infrastructure financing at the Brookings Institution. “It does not function like a commercial bank.” As a result, borrowers pay low interest rates, close to the EIB’s cost of raising the money. The bank also provides some technical assistance. Basing the system on carefully selected loans rather than grants makes the arrangement sustainable. “The rate of reimbursement is high,” Istrate says, adding that the bank is always profitable. “They’ve never had a problem in terms of the bottom line.” The EIB’s record is impressive. Over 50 years after its founding, the bank is still going strong, helping to fund development projects across the continent. A relatively small government investment attracted much larger amounts of private money, and the combination has helped fund high-speed rail in Spain, an expressway in Poland and electrical wires in Hungary, among many other projects. In 2009 alone, the EIB loaned out over $65 billion. This system of combining public and private money could work in a narrower American infrastructure-focused bank, too. And that seems to be what Obama has in mind, very roughly, although he hasn’t yet provided many details. (Some big questions: Would the bank limit itself to loans, or would it also make grants? If the latter, what would its funding source be?)
Long term
Will boost long-term investment on infrastructure
Indiviglio, 10 (Daniel Indiviglio, associate editor at The Atlantic until 2011, 9/15/2010, “Would a National Infrastructure Bank Help?” )
At this point, many people, including former Fed Chair Alan Greenspan, argue that the stimulus spending wasn't administered as effectively as it might have been. For such an enormous amount of spending, more jobs were expected to be created. And while some, including President Obama, have proposed more stimulus spending, any further expenditures must be more effective. The question is even less whether more infrastructure jobs might be good for the economy than whether the government can be trusted to administer the associated spending. Felix Rohatyn, special advisor to the CEO of Lazard Frères & Co. LLC suggests something that might help in a Wall Street Journal op-ed today: why not create a national infrastructure bank? At first, this might sound like a wacky socialist concept -- a bank created to spend taxpayer money on infrastructure projects. But it's a pretty practical proposal. Its purpose would be to circumvent politics so that taxpayer money could be more effectively spent on projects, instead of squandered as it so often is by Congress. Here's how Rohatyn explains it: A national infrastructure bank could begin to reverse federal policies that treat infrastructure as a way to give states and localities resources for projects that meet local political objectives rather than national economic ones. The bank would evaluate prospective infrastructure projects on consistent terms. It would be able to negotiate with state or local sponsors of a project what their cost shares should be. The bank also could help groups of states come together for regional projects such as high-speed rail and better freight management. Such consolidation would improve project selection. This is an important point. If Rep. Smithers of some state wants his vote contingent on his district getting a $125 million bridge to nowhere that will mostly pad the pockets of his biggest political supporters, then he often will get it. But if there was a bank in place to evaluate projects in terms of their economic effectiveness, then such pork barrel spending will be harder to get through. A national infrastructure bank could change the way federal funds are spent on infrastructure. For example, instead of creating a $100 billion "infrastructure spending" package full of nonsense, Congress would provide $100 billion for the infrastructure bank to spend as its financial analysis dictates. It would evaluate the various projects that states say are necessary and pick those which would create the most jobs and do the most to strengthen the nation's infrastructure while controlling costs. Rohatyn goes on: The bank also could ensure that states and localities consider all other options--from wetlands preservation to implementing tolls--before structural options are funded. It would create an avenue for private investors to put risk capital into new projects and bless their involvement with the bank's own participation. In short, it would treat infrastructure like a long-term investment, not an expense. In other words, it might also help make even valuable infrastructure projects cost taxpayers less if there are ways for private investors to be involved. Of course, they will also care more about economic viability than the average politician would.
The bank is a prerequisite to economic benefits of all infrastructure projects
Peterson, 84 (George E. Peterson, senior fellow at the Urban Institute where he directed the Urban Institute's Public Finance Center for 10 years, recipient of Stone Award for intergovernmental research from the American Society for Public Administration, Chapter 3 in Royce Hanson’s Perspectives on urban infrastructure, 1984, Google Books)
One institution that meets these requirements is a federal infrastructure bank linked to a series of state infrastructure banks. These banks would make below-market loans for infrastructure repairs and perhaps other infrastructure investments. Upon repayment of the loans. the funds would be recycled to other capital projects. One of the attractions of an infrastructure bank is that it represents a long- term commitment to dealing with the capital infrastructure dilemma. It is an implicit guarantee of permanent attention to public capital needs. Once a bank has been created and endowed with a professional staff, it is unlikely to disappear. Loans will have to be repaid and the bank will have to be there to receive them. If the initial legislation establishes a revolving fund, so that loans that are repaid are recycled to new infrastructure users, a second generation of lending activity can be ensured. Permanence, visibility, and professionalism are the critical arguments in favor of an infrastructure bank. It is not that below—market loans to support public capital spending represent a magical or costless source of financing, but rather that an infrastructure bank is a tangible, long-term commitment, more difficult to disavow than a new federal block grant program. What of the financing requirements of such a bank'? To have an impact on infrastructure conditions, it would have to consolidate some existing categorical grant programs and have an additional capitalization of $10-520 billion. That represents a large amount of new federal borrowing, given today's budget conditions. The argument for a new institution of this type would be more persuasive if state and local governments would volunteer to surrender some of their current borrowing capacity in exchange for this new financing vehicle. If infrastructure finance is a priority, these governments might consider or be required to consider offsetting reductions in the volume of tax—exempt debt issued to support middle- income housing mortgages or industrial development. It would be a mistake to think of the infrastructure problem as one of dollars alone. It is also a problem of institutions. There is little to be gained from boosting investment in the nation’s public capital stock unless we can also be certain that, once this investment is carried out, ordinary repairs and maintenance will not again he deferred. It is essential that federal policy allow local discretion in deciding how any new infrastructure dollars are spent. It is entirely appropriate, however, to have in place the institutions that can guarantee capital preservation. An infrastructure bank, for example. should make loans to a water or sewer system only on condition that the system charge full-cost pricing for its services. User fees should include amounts needed to sustain a long-term capital repair and replacement strategy. At present, too many water systems are disinvesting in their assets simply because they do not have the political will or ability to charge full-cost fees. The bank may also want to make a condition of loans that the local government have in operation a system of capital assessment and capital budgeting that meets professional standards as established by the bank. These conditions are no more onerous than those a private bank would require of a private borrower. They help ensure that the loan can be repaid and that the public funds used to subsidize loan rates will serve their public purpose. In fact, the ability to exert institutional leverage of this sort is one of the principal advantages of a bank structure. Paradoxically, the least essential contribution an infrastructure bank may make is the actual financing of the next generation of capital formation. More critical is the leverage it can exert on the nation's institutional capacity to plan and manage capital facilities. Recent history speaks eloquently that one covenant to a subsidized loan agreement is worth a thousand exhortations in planning articles.
Solves Current dev.
The Bank will accelerate current investment
Puentes, 10 ( Robert: senior fellow with the Brookings Institution’s Metropolitan Policy Program, 5/13/2010, “Hearing on Infrastructure Banks,” )
From time to time, collapsed bridges, failed dams, and ruptured water pipes remind us of the need for increased investment in the maintenance of U.S. infrastructure. Overall, we know that the condition of our infrastructure is generally declining, especially in metropolitan areas. There is also growing concern that the infrastructure that exists today is woefully obsolete, geared more for a prior generation than for the challenges of the 21st century. The federal government spends about $65 billion each year on infrastructure—transportation, energy, water and environmental protection [1]. While the figure is not negligible, the investment in infrastructure is only 2.2 percent of total federal spending. More than three-quarters of this spending consists of transportation grants to state and local governments ($50.4 billion) [2]. While most of the attention has been on increasing funding for projects, there are also renewed calls to improve the way the federal government invests in infrastructure. Today, the federal government generally does not select projects on a merit basis, is biased against maintenance, and involves little long term planning. In this context, there is interest in a new federal entity for funding and financing infrastructure projects through a national infrastructure bank. Mr. Chairman, I believe that while a national infrastructure bank is not a panacea, if appropriately designed and with sufficient political autonomy, it could improve both the efficiency and effectiveness of future federal infrastructure projects of national and regional importance [3]. Background A national infrastructure bank (NIB) is a targeted mechanism of financing infrastructure. A development bank in essence, an NIB would have to balance the rate-of-return priorities of a bank with the policy goals of a federal agency. The creation of such a special financing entity for infrastructure has been discussed in policy circles for at least 20 years. Across the Atlantic, the European Investment Bank (EIB) has been functioning successfully for the last 50 years, playing a major role in connecting the European Union across national borders. The EIB has nearly $300 billion in subscribed capital by all the 27 European Union member countries. In 2009, the EIB disbursed over $70 billion, mainly on transportation, energy and global loans [4]. While not trying to maximize profit, EIB functions as a bank, not as a grant-making mechanism. The EIB raises funds from capital markets and lends them at higher rates, keeping its operations financially sustainable. It offers debt instruments, such as loans and debt guarantees, and technical assistance. While it may take different forms, NIB proposals in the U.S. generally envisage an entity that improves the federal investment process in infrastructure assets that meet some measure of significance and accelerates the investments in such projects [5]. The focus is on multi-jurisdictional or multi-modal projects with regional or national impact.
NIB key—accelerates investments
(Mallet, Maguire, & Kosar ’11, William J. Mallett, Congressional Research Service Specialist in Transportation Policy, Steven Maguire, Congressional Research Service Specialist in Public Finance, Kevin R. Kosar, Congressional Research Service Analyst in American National Government, “National Infrastructure Bank: Overview and Current Legislation”, 12/14/2011, )
Once established, a national infrastructure bank might help accelerate worthwhile infrastructure projects, particularly large projects that can be slowed by funding and financing problems due to the degree of risk. These large projects might also be too large for financing from a state infrastructure bank or from a state revolving loan fund.44 Moreover, even with a combination of grants, municipal bonds, and private equity, mega-projects often need another source of funding to complete a financial package. Financing is also sometimes needed to bridge the gap between when funding is needed for construction and when the project generates revenues.
Solves Partisan gridlock
NIB avoids partisan gridlock and solves infrastructure development
Tyson 11 (Laura Tyson, Professor at the Haas School of Business of UC-Berkeley, PhD in Economics from MIT, BA Summa Cum Laude in Economics at Smith College, former Chair of the US President’s Council of Economic Advisers, served as the Director of the National Economic Council, Harvard Business Review, “A Better Stimulus Plan for the U.S. Economy,” 2011, )
Although stimulus spending is a politically contentious issue, America is now in urgent need of a national infrastructure bank to help finance transformative projects of national importance. During the coming year I will work with the Obama administration; Senator John Kerry, Representative Rosa DeLauro, and other members of Congress; governors; mayors; and business leaders on legislation to establish and provide the capital for such an institution. I will also foster public support for its creation through speeches, interviews, and opinion columns like this one. Unlike most other forms of stimulus, infrastructure spending benefits the economy in two ways: First, it creates jobs—which, because those jobs put money in consumers' pockets, spurs demand. Analysis by the Congressional Budget Office indicates that infrastructure spending is a cost-effective demand stimulus as measured by the number of jobs created per dollar of budgetary expenditure. Second, the resulting infrastructure enhancement supports supply and growth over time. By contrast, underinvestment not only hobbles U.S. competitiveness but also affects America's national security as vulnerabilities go unaddressed. In its 2009 report on the state of the nation's infrastructure, the American Society of Civil Engineers gave the U.S. a near-failing grade of D. Perhaps that should not be surprising, given that real infrastructure spending today is about the same as it was in 1968, when the economy was smaller by a third. A 2008 CBO study concluded, for example, that a 74% increase in annual spending on transportation infrastructure alone would be economically justifiable. That calculation leaves out additional infrastructure spending needed for other key public goals such as water delivery and sanitation. Realizing the highest possible return on infrastructure investments depends on funding the projects with the biggest impact and financing them in the most advantageous way. Properly designed and governed, a national infrastructure bank would overcome weaknesses in the current selection of projects by removing funding decisions from the politically volatile appropriations process. A common complaint today is that projects are often funded on the basis of politics rather than efficiency. Investments would instead be selected after independent and transparent cost-benefit analysis by objective experts. The bank would provide the most appropriate form of financing for each project, drawing on a flexible set of tools such as direct loans, loan guarantees, grants, and interest subsidies for Build America Bonds. It should be given the authority to form partnerships with private investors, which would increase funding for infrastructure investments and foster efficiency in project selection, operation, and maintenance. That would enable the bank to tap into the significant pools of long-term private capital in pension funds and dedicated infrastructure equity funds looking for such investment opportunities. Crafting the law to achieve these goals is a serious and challenging undertaking, particularly in view of large budget deficits and a contentious political atmosphere. But I believe they are worthy of the political and legislative effort required to realize them. The U.S. must invest considerably more in its infrastructure to secure its competitiveness and deliver rising standards of living. This effort would also put millions of Americans to work in meaningful jobs. The time has come to make it happen.
Solves existing shortfalls
The NIB solves existing infrastructure shortfalls though federal oversight and improved evaluation critiria
Istrate and Puentes 9 (Emilia Istrate: senior research analyst and associate fellow with the Metropolitan Infrastructure Initiative specializing in transportation financing, and Robert Puentes: Senior Fellow and Director of the Metropolitan Infrastructure Initiative, December 2009, “Investing for Success Examining a Federal Capital Budget and a National Infrastructure Bank”, Brookings Institute, )
A properly designed NIB is an attractive alternative for a new type of federal investment policy. In theory, an independent entity, insulated from congressional influence, would be able to select infrastructure projects on a merit basis. The federal investment through this entity would be distributed through criteria-based competition. It would be able to focus on projects neglected in the current system, such as multi-jurisdictional projects of regional or national significance. An NIB may introduce a federal investment process that requires and rewards performance, with clear accountability from both recipients and the federal government. These advantages are described below. Better selection process. At its heart, an NIB is about better selection of infrastructure projects. The bank would lend or grant money on a project basis, after some type of a BCA. In addition, the projects would be of national or regional significance, transcending state and local boundaries. The bank would consider different types of infrastructure projects, breaking down the modal barriers. This would be a giant step from the current federal funding for infrastructure, most of which is disbursed as federal aid transportation grants to states in a siloed manner. Multi-jurisdictional projects are neglected in the current federal investment process in surface transportation, due to the insufficient institutional coordination among state and local governments that are the main decisionmakers in transportation. 102 The NIB would provide a mechanism to catalyze local and state government cooperation and could result in higher rates of return compared to the localized infrastructure projects. An NIB would need to articulate a clear set of metropolitan and national impact criteria for project selection. Impact may be assessed based on estimated metropolitan multipliers of the project. This criterion would allow the bank to focus on the outcomes of the projects and not get entangled in sector specific standards. Clear evaluation criteria would go a long way, forcing the applicants, be it states, metros or other entities, to have a baseline of performance. This change, by itself, would be a major improvement for the federal investment process, given that a major share of the federal infrastructure money goes to the states on a formula basis, without performance criteria. Keeping the recipients accountable. An NIB would have more control over the selection and execution of projects than the current transportation grants within broad program structures. It would be able to enforce its selection criteria, make sure that the projects are more in line with its objectives and have oversight of the outcomes of the projects. The new infrastructure entity should require repayment of principal and interest from applicants. This would bring more fiscal discipline and commitment from the recipients to the outcomes of the project. The extensive use of loans by an NIB contributes to the distinction between a bank and another federal agency. The interest rates charged to the state and local recipients of NIB loans might be set to repay slowly the initial injections of federal capital, while still maintaining a sufficient capital base. 103 Some experts argue that an NIB would be able to be sustainable and effective only if it is truly a “bank”. 104 Correcting the maintenance bias. The mere establishment of an NIB would not correct for the problem of deferred maintenance. 105 However, through the selection process, the bank could address the current maintenance bias in the federal investment process. For example, the bank could impose maintenance requirements to recipients including adequately funded maintenance reserve accounts and periodic inspections of asset integrity. Better delivery of infrastructure projects. An NIB could require that projects be delivered with the delivery mechanism offering best-value to the taxpayer and end user. The design-bid-build public finance model has been the most commonly used project delivery method in the transportation sector in the United States. 106 Until very recently, there has been little experimentation with other delivery contracting types. Evidence from other federal states, such as Australia, shows that private delivery saves money on infrastructure projects. 107 Filling the capital structure of infrastructure projects. Although the United States has the deepest capital markets in the world, they are not always providing the full array of investment capital needed —especially for large infrastructure projects with certain credit profiles. 108 This has been even more obvious during the current recession, with the disruptions in the capital markets. An NIB could help by providing more flexible subordinate debt for big infrastructure projects. Generally Multi-state/large scale
NIB key—reforms sector, encourages green policies
(Baily, Katz, & West ’11, Martin Baily, economist at Brookings Institute and phD in economics, Bruce Katz, vice president at the Brookings Institution and founding Director of the Brookings Metropolitan Policy Program, Darrell West, Vice president and director of Governance Studies and founding director of the Center for Technology Innovation at Brookings and phD in Political Science, “Growing Through Innovation: Building a Long-Term Strategy for Growth through Innovation”, 05/2011, )
The federal government also should create a National Infrastructure Bank that would select and finance large, multi-modal and multi-juris- dictional infrastructure projects on a merit basis. At its heart, the infrastructure bank idea is about better decision-making. The bank would lend or grant money to individual projects after reason- able benefit/cost analysis. To be eligible, projects would have to be of national or regional sig- nificance, a standard that could incorporate the priority of lowering carbon emissions. The bank would consider different types of infrastructure projects, including electrical grid and broadband. This would be a giant step from current federal infrastructure funding, most of which is disbursed as transportation grants to states. Over the long term, an even greater commitment to R&D is needed for clean energy technology. A Green Bank could underwrite needed investments in energy efficiency, environmental protection and future green jobs. Using loans and loan guar- antees, this bank would seek to help the United States and other countries make the transition to a low-carbon economy. It would do so by financing smart energy grid technologies, renewable energy and carbon abatement programs.33 Private-sector companies should seek out oppor- tunities to make targeted investments in clean energy and infrastructure. A recent McKinsey survey of executives and investors found that more than 75 percent of environmental, social and governance initiatives were profitable over the long term.34
Large scale
Transportation Infrastructure bank solves large-scale projects
Schulz, 10 (John D. Schulz, Transportation journalist for more than 20 years, 5/19/2010, “Has the time come for a U.S. Infrastructure Bank?” )
Still, a U.S. transportation infrastructure bank “has the potential to play a powerful role to meet the unmet transportation needs while providing new jobs and economic stimulus,” he said. Infrastructure banks are commonplace in other countries, especially in Europe where they are supported by dedicated funding sources. They make low-interest loans directly to localities for infrastructure projects. Supporters say they eliminate time and red tape from the funding process. Their appeal may be catching on in this country. Already, some in Congress are calling for their creation. Infrastructure banks could also be used to expand telecommunications, broadband capacity, wastewater distribution facilities, and improving other U.S. projects’ needs. In fact, President Barack Obama’s proposed 2011 budget includes $4 billion to create a national infrastructure bank to provide a source of funding for infrastructure needs. This comes at a time when many experts are saying that the U.S. must start thinking outside the box of traditional funding. “This is something holding up a major surface transportation bill,” Mineta said. “We can’t have these two-month, three-month, or five-month extensions. The critical factor in moving that surface transportation bill forward is how is it going to be funded.” Robert Poole, director of transportation policy at the Los Angeles-based Reason Foundation, a libertarian-leaning think tank, said the nation suffers from both insufficient and poorly targeted infrastructure investments. “Multi-state projects are particularly hard to fund under the current system,” Poole said. “Large, billion-dollar, multi-state, multi-modal projects would be particularly attractive to funding through infrastructure bank funding.” But Poole is opposed to using general U.S. funds for transport projects. Rather, he said, they should be funded by user funds, not federal grants. All projects should be merit-based, which could be difficult in a town where all 538 members of Congress are used to bringing home some bacon to their districts and states. “There may be a niche market role for a narrow transportation-only infrastructure bank,” Poole said. “But a broader infrastructure bank may be too ambitious to try and achieve a multi-modal, grant-and-loan-based bank, which I think might fail,” he added. Bryan Grote, co-founder of Mercator Advisors, a financial advisory firm that works with sponsors of infrastructure projects, said the bank’s appeal would be to more effectively utilize revenue into commercially viable projects. “Designing the bank would be difficult, but implementing it would be a major challenge,” Grote said. “It probably can be a useful step. But it’s important that it be given the expertise and backing to ensure this entity is doing a better job in providing assistance in a better way. The primary problem is a lack of revenue, not a lack of access to capital markets.” Michael Lind, policy director of economic growth programs for the New America Foundation, said the idea of an infrastructure bank is not new. The U.S. Chamber of Commerce recently unearthed a document from 1983 calling for such an idea for alleviating congestion at West Coast ports and Midwestern railroad hubs. Those bottlenecks remain today. “If there are a relatively small number of mega-projects that everybody agrees need to be built, why not just do it?” Lind asked. “Wouldn’t it make sense to do that as a grant, and the American people are taxed to pay for it?”
Evaluation and oversight
Bank seeds out bad projects and overcome multi-actor project barriers
CBO, 7/12 (Congressional Budget Office, nonpartisan analysis for the US Congress, “Infrastructure Banks and Surface Transportation,” )
An infrastructure bank could play a limited role in enhancing investment in surface transportation projects by doing the following: Providing new federal subsidies (in the form of loans or loan guarantees) to a limited number of large projects, and Allowing the benefits of potential projects to be more readily compared in a competitive selection process. A potential advantage of such a bank is that it could encourage sponsors of projects to charge users for the benefits they receive, which would mean that the subsidies to such projects could be a small percentage of total costs. A second potential advantage is that the selection process could overcome certain barriers to the financing of multijurisdictional or multimodal projects.
Public-Private
NIB would create the necessary public-private capital for short term growth
Wasik 11
(John, columnist for Reuters and author of The Cul-de-Sac Syndrome: Turning Around the Unsustainable American Dream, August 5th, 2011, “Job creation: Fixing America with an infrastructure bank”, )
The U.S. needs a new approach to economic triage. The June jobs report was nothing short of dismal as employment growth hit a wall with only 18,000 new jobs coming on the market. Crumbling infrastructure will cost the U.S. economy nearly 1 million jobs and shave $3.1 trillion from gross domestic product by 2020, the Society of Civil Engineers estimates. What about the budget? Isn’t there a disconnect between the current passion for cutting the federal deficit and spending money to fix America? There’s little question that putting people to work will help the economy. Working people pay income, sales and property taxes, which flow back into communities. The steadily employed buy homes, vehicles and appliances. Increased tax revenue in turn reduces the deficit. The iBank may be able to accomplish what a decade of personal income and estate-tax cuts didn’t: Provide the necessary public-private capital to revive the economy. Not even Harry Potter can make magic work on the U.S. economy without some significant infrastructure investment.
Public-private capital from NIB is critical to solving the outsourcing of jobs
Robin 11
(Matty, University of Central Florida, Economics and Political Science, August, 2011, “Deconstructing the Crisis in Construction”, )
Stewart proclaimed that the outsourcing of construction jobs is impossible, but unfortunately, we do not inhabit that universe. American policymakers need to enact policies that will increase the number of jobs in the construction sector, not outsource them. The best method for achieving this goal is to create the proposed infrastructure bank, because more resources allocated to economic infrastructure will increase the overall number of construction jobs. According to the Bureau of Labor Statistics, the U.S. construction sector contained 7.7 million jobs in January 2007. By January 2010, the number of construction jobs in the country had plummeted 29% to 5.5 million — roughly 61,000 jobs were lost per month from January 2007 to January 2010. The number of construction jobs in the country today has leveled off near the 2010 figure. Construction sheds jobs at a faster pace than state and local government, which lost around 23,000 jobs per month between August 2009 and August 2011. The crisis in construction stresses the importance of creating more construction jobs, but policymakers seem content with outsourcing construction jobs. Foreign Policy contributor Clyde Prestowitz wrote about California’s plan to outsource the construction of the San Francisco-Oakland Bay Bridge. Apparently, Shanghai Zhenhua Heavy Industries Company possesses the ability to complete the arduous project and the ability to complete it at a low cost. However, outsourcing the Bay Bridge project has failed to produce any cost savings. The National Steel Bridge Alliance (NSBA), discussed the problems in their July 2011 newsletter. The Chinese firms incurred cost overruns of $5.2 billion and currently find themselves three years behind their own schedule. The financial strain is only tightened by the cost of outsourcing around 2,500 manufacturing jobs, as the workers pay taxes and receive less public assistance like unemployment insurance and food stamps. California has also used public money to send 250 trainers to China, which increases the human capital of Chinese workers. Many regard the performance of the Chinese engineers and construction workers building the bridge as substandard. Mactech Engineering and Constructing, the firm hired by the California Department of Transportation (CalTrans) to inspect the Bay Bridge construction, found numerous problems with the bridge, including various welded panels that tested poorly. Despite catching numerous safety hazards, Mactech’s contract was not renewed after it expired in December 2008. CalTrans stated it deemed Mactech’s standards for testing welded panels too strict. But when did it become a punishable offense to have strict standards for public safety? America does not need to outsource construction jobs to China so they can create a substandard bridge. America’s infrastructure continues to crumble while our construction workers remain unemployed. President Barack Obama laid out his new stimulus plan, which includes an infrastructure bank. The $10 billion bank lowers the cost for private investors to endow in infrastructure projects. The infrastructure projects include: highways, sewage, airports, rail, etc. Senators John Kerry (D-Mass.) and Kay Bailey Hutchinson (R-Texas) sponsored the legislation, while AFL-CIO and the Chamber of Commerce both support it. America’s infrastructure desperately needs real actions and real solutions.The American Society of Civil Engineers’ 2009 Report Card of America’s Infrastructure specified the need to spend around $400 billion per year in infrastructure spending over the next five years in order to fix America’s infrastructure. Although Obama’s plan allocates only $10 billion towards the infrastructure bank, it may attract a great deal of private capital. White House official Gene Sperling said, “I think 10-1 is actually conservative … I think many people think – including some on our jobs council, and some of our business leaders – that you could get 20-1 bang for your buck.” Instead of outsourcing construction jobs, Congress needs to pass this sensible idea so we can begin to rebuild our crumbling infrastructure and end the jobs crisis in construction.
Sustainable competitiveness can only be gained by private capital generated through a NIB
Puentes 11
(Robert, Senior Fellow at the Brookings institution, April 5th, 2011, “Infrastructure Investment and U.S. Competitiveness” )
Infrastructure is central to U.S. prosperity and global competitiveness. It matters because state-of-the-art transportation, telecommunications, and energy networks--the connective tissue of the nation--are critical to moving goods, ideas, and workers quickly and efficiently and providing a safe, secure, and competitive climate for business operations. But for too long, the nation's infrastructure policies have been kept separate and apart from the larger conversation about the U.S. economy. The benefits of infrastructure are frequently framed around short-term goals about job creation. While the focus on employment growth is certainly understandable, it is not the best way to target and deploy infrastructure dollars. And it means so-called "shovel ready projects" are all we can do while long-term investments in the smart grid, high-speed rail, and modern ports are stuck at the starting gate. So in addition to the focus on job growth in the short term, we need to rebalance the American economy for the long term on several key elements: higher exports, to take advantage of rising global demand; low-carbon technology, to lead the clean-energy revolution; innovation, to spur growth through ideas and their deployment; and greater opportunity, to reverse the troubling, decades-long rise in inequality. Infrastructure is fundamental to each of those elements. Yet while we know America's infrastructure needs are substantial, we have not been able to pull together the resources to make the requisite investments. And when we do, we often fail to make infrastructure investments in an economy-enhancing way. This is why the proposal for a national infrastructure bank is so important. If designed and implemented appropriately, it would be a targeted mechanism to deal with critical new investments on a merit basis, while adhering to market forces and leveraging the private capital we know is ready to invest here in the United States. Building the next economy will require deliberate and purposeful action, across all levels of government, in collaboration with the private and nonprofit sectors. Infrastructure is a big piece of that.
NIB key—spurs private investment
(Kerry ’11, John Kerry, US Senator on the Committee on Commerce, Science and Transportation and Committee on Finance, graduate of Boston Law College, “A national infrastructure bank would tap the private sector, protect taxpayers”, 10/31/11, )
Furthermore, our legislation requires that our applicants not only have a strong financial base, but that the projects are able to repay the loans through dedicated revenue streams. We want and expect these loans to get paid back. The safeguards in the bill are essential to protect taxpayers from being left holding the bill for politically inspired projects that don't make good business sense. Our infrastructure bank approach could leverage up to $640 billion in new infrastructure investment over the next 10 years, from capital now sitting on the sidelines. The projects this infrastructure bank could support would strengthen our competitiveness, be good for businesses, and could help lower our staggering 9.1 percent unemployment rate. For too long we've underbuilt and underinvested, and too much of what we have done has been uninformed by any long-term strategic plan. Inadequate infrastructure undermines the productivity and efficiency of American workers and businesses. For example, the U.S. economy loses $80 billion dollars a year due to energy blackouts because of outdated transmission and grid infrastructure. In 2008, it was estimated that we had to make an annual investment of $225 billion for the next 50 years to legitimately meet our transportation needs. Right now, we aren't even close to that - and Washington's budget mess means we must find creative ways to do more with less. A national infrastructure bank is a perfect example of how we can do this - by helping put private investment to work. There are a few significant differences between our legislation and the president's proposal - and, not surprisingly, as a Democrat and a Republican, we disagree about some of these issues on the basis of long-held principles. We're committed to solving these differences because we're focused on the big picture: A well-designed, bipartisan infrastructure bank that will spur energy, water, roads and rail development, create millions of American jobs in the next decade, and make our country more competitive globally.
NIB key to private investment
(US Department of Treasury ’12, US Department of Treasury, A New Economic Analysis of Infrastructure Investment, 3/23/2012, )
One way to address the need for more infrastructure investment is to attract more private capital for direct investment in transportation infrastructure. There is currently very little direct private investment in our nation’s highway and transit systems. The lack of private investment in infrastructure is in large part due to the current method of funding infrastructure, which lacks effective mechanisms to attract and repay direct private investment in specific infrastructure projects. In addition, the private benefit for investors is less than the benefit for society as a whole because of positive externalities from infrastructure. A National Infrastructure Bank could address these problems by directly funding selected projects through a variety of means. The establishment of a National Infrastructure Bank would create the conditions for greater private sector co-investment in infrastructure projects.
NIB solves growth—combines public-private funds
(Crebo-Rediker & Rediker ’8, Heidi Crebo-Rediker, Chief Economist of the US Department of State, former Co-Director of the Global Strategic Finance Initiative and Douglas Rediker, member of the Executive Board of the International Monetary Fund, Financing America’s Infrastructure: Putting Global Capital To Work, 2008, )
The good news is that while the federal govern- ment struggles to find funds to address its spending. central bank reserves, global pension funds, and sovereign wealth funds.2 Rather than focus on these large pools of global capital as a threat, we should view them as an opportunity. So, while we have enormous infrastructure financing needs, there are also enormous pools of capital available2
needs there is abundant private capital for infra- structure investment. An estimated $400 billion in global funds are available for equity investment in infrastructure, and the funds available to support the debt component amount to several trillion dollars if we include global or investment. The trick is to bring the two together in a commercial, sustainable, and politi- cally acceptable way.
The U.S. municipal bond markets have func- tioned well for many years, channeling private cap- ital into financing certain elements of U.S. infra- structure. But current budgetary constraints and other market conditions mean that municipal finance is no longer adequate to meet the challenge of financing the scale of investment needed. And our current financing structures are unable to take advantage of the large pools of capital that are available for infrastructure financing. We recommend two initiatives to help finance U.S. infrastructure needs beyond direct government grants. First, we suggest the enactment of legislation and the development of regulations to facilitate the origination and issuance of public sector covered bonds in the United States, which will provide a market-based, efficient, and secure mechanism to attract capital for infrastructure investment. Second, along the lines of a proposal by Congresswoman Rosa DeLauro (D-CT) last year,3 we recommend that the federal government consider the creation of a new, government-owned and -capitalized infra- structure financing entity—a National Infrastructure Finance Enterprise—that would pool, package, and sell existing and future public infrastructure securi- ties in the capital markets. The proposed entity would also seek to develop an in-house capability to originate infrastructure loans and would be able to fund itself through the international capital markets.4 We believe that the entity should be capi- talized at a far higher level than proposed in the DeLauro bill. Further, its scope should extend beyond that of the National Infrastructure Bank as currently proposed by Senators Christopher Dodd (D-CT) and Chuck Hagel (R-NE).5
Solves Congestion
NIB would solve growing congestion through reduced costs and decreased delays
McConaghy and Kessler 11
(Ryan, Deputy Director of the Third Way Economic Program, Jim, Vice President for Policy at Third Way, January 2011, “A National Infrastructure Bank”, )
As a bank, the NIB would inject accountability into the infrastructure investment process. Since the bank would offer loans and loan guarantees using a combination of public and private capital, it would have the opportunity to move away from the traditional design-bid-build model and toward project delivery mechanisms that would deliver better value to taxpayers and investors.35 By operating on principles more closely tied to return on investment and financial discipline, the NIB would help to prevent the types cost escalation and project delays that have foiled the ARC Tunnel.
USFG key - Private sector
Federal investment in NIB is key to getting the private sector on board
McConaghy and Kessler 11
(Ryan, Deputy Director of the Third Way Economic Program, Jim, Vice President for Policy at Third Way, January 2011, “A National Infrastructure Bank”, )
The NIB would magnify the impact of federal funds by leveraging them through partnerships with private entities and other actors, providing taxpayers with more infrastructure bang for their public buck. Estimates have placed the amount of private capital readily available for infrastructure development at $400 billion, 40 and as of 2007, sovereign wealth funds—another potential source of capital—were estimated to control over $3 trillion in assets with the potential to control $12 trillion by 2012.41 While these and other institutional funds have experienced declines as a result of the economic downturn, they will continue to be important sources of large, long-term investment resources. By offering loan guarantees to induce larger private investments or issuing debt instruments and securities, the NIB could tap these vast pools of private capital to generate investments much larger than its initial capitalization. In doing so, it could also lower the cost of borrowing for municipalities by lowering interest on municipal bonds for state and local governments by 50 to 100 basis points. The NIB would also be poised to help taxpayers take full advantage of historically low borrowing costs. In 2010, the yield on 10-year U.S. Treasuries reached a historic low of 3.22%, as compared to a rate of 6.03% in 2000 and a peak rate of 13.92% in 1981. Prior to the Great Recession, this rate had not dipped below 4% since 1962.43 By allowing government and private actors to access financing at historically low rates, the NIB would help to capitalize on a once-in-a-lifetime window to make enduring infrastructure investments
USFG key—spurs the private sector
(McConaghy & Kessler 11, “Ryan McConaghy, Deputy Director of the Economic Program at Third Way, Jim Kessler, Vice President for Policy at Third Way, A National Infrastructure Bank”, Infrastructure, The Schwartz Initiative on American Economic Policy, 01/2011, )
The NIB will harness private capital to help government pay for new projects.
The NIB would magnify the impact of federal funds by leveraging them through partnerships with private entities and other actors, providing taxpayers with more infrastructure bang for their public buck. Estimates have placed the amount of private capital readily available for infrastructure development at $400 billion,40 and as of 2007, sovereign wealth funds—another potential source of capital—were estimated to control over $3 trillion in assets with the potential to control $12 trillion by 2012.41 While these and other institutional funds have experienced declines as a result of the economic downturn, they will continue to be important sources of large, long-term investment resources. By offering loan guarantees to induce larger private investments or issuing debt instruments and securities, the NIB could tap these vast pools of private capital to generate investments much larger than its initial capitalization. In doing so, it could also lower the cost of borrowing for municipalities by lowering interest on munici- pal bonds for state and local governments by 50 to 100 basis points.42 The NIB would also be poised to help taxpayers take full advantage of histor- ically low borrowing costs. In 2010, the yield on 10-year U.S. Treasuries reached a historic low of 3.22%, as compared to a rate of 6.03% in 2000 and a peak rate of 13.92% in 1981. Prior to the Great Recession, this rate had not dipped below 4% since 1962.43 By allowing government and private actors to access financing at historically low rates, the NIB would help to capitalize on a once-in-a-lifetime window to make enduring infrastructure investments.
USFG key—a national strategy reforms the system
(McConaghy & Kessler 11, “Ryan McConaghy, Deputy Director of the Economic Program at Third Way, Jim Kessler, Vice President for Policy at Third Way, A National Infrastructure Bank”, Infrastructure, The Schwartz Initiative on American Economic Policy, 01/2011, )
The NIB will reform the system to cut waste, and emphasize merit and need.
As a bank, the NIB would inject accountability into the infrastructure invest- ment process. Since the bank would offer loans and loan guarantees using a combination of public and private capital, it would have the opportunity to move away from the traditional design-bid-build model and toward project delivery mechanisms that would deliver better value to taxpayers and investors.35 By operating on principles more closely tied to return on investment and financial discipline, the NIB would help to prevent the types cost escalation and project delays that have foiled the ARC Tunnel.
America’s infrastructure policy has been significantly hampered by the lack of a national strategy rooted in clear, overarching objectives used to evaluate the merit of specific projects. The politicization and lack of coordination of the pro- cess has weakened public faith in the ability of government to effectively meet infrastructure challenges. In polling, 94% of respondents expressed concern about America’s infrastructure and over 80% supported increased federal and state investment. However, 61% indicated that improved accountability should be the top policy goal and only 22% felt that the federal government was effec- tive in addressing infrastructure challenges.36 As a stand-alone entity, the NIB would address these concerns by selecting projects for funding across sectors based on broadly demonstrated need and ability to meet defined policy goals, such as economic benefit, energy independence, improved health and safety, efficiency, and return on investment.
Solves credit crisis
NIB key—overcomes credit crisis
(Auerback ‘9, Marshall Auerback, global portfolio strategist for RAB Capital plc and a Fellow with the Economists for Peace and Security, Time for a “New Deal”, Lyndon B. Johnson School of Public Affairs, 2009, “new-deal”/)
Another obstacle to improving America’s infrastructure is the current credit crisis. Municipal bonds have been sold by hedge funds and others seeking liquidity, so yields are up substantially year-over-year. This sharply increases the cost of financing large public work projects. Banks are increasingly unwilling to lend despite the large influx of capital, so world trade in commodities needed to build infrastructure is freezing up. The Baltic Dry Index, a measure of shipping costs, has dropped 95% this year alone as few firms in the maritime sector can find funding. Here again, as Federal government borrowing costs are close to zero, it is logical for the state to interpose itself as a credit intermediary, possibly via Obama’s proposed National Infrastructure Bank.
New infrastructure investment would at least build jobs and wealth, even though it would increase the deficit in the short term. Obama seems quite willing to borrow money and increase government spending, and the alternatives seem much worse than repairing infrastructure. In fact, in the absence of sufficient fiscal activism, President Obama may well find himself renewing another FDR innovation: Works Progress Administration in 2010 to combat an economy sliding back into recession.
Solves innovation
NIB key—innovation
(US Department of Transportation ’12 US Department of Transportation, “National Infrastructure Bank”, 2012, )
The I-Bank is necessary because the U.S. transportation infrastructure, much of which was built decades ago, is aging and in need of repair, and also because demand for transportation capacity continues to grow with the economy while our transportation networks continue to suffer declining performance. This program will promote innovative, multi-modal approaches to moving people and goods that deliver the greatest amount of benefits to system users relative to costs. Incorporating the Department’s infrastructure credit programs into the bank reflects an acknowledgement that the Federal Government needs to take a more active role in supporting major transportation projects through a combination of well-targeted grants and flexible credit assistance that is structured to deliver successful projects. The Department’s experience is that competitive national programs can facilitate creative and innovative approaches that drive significant inter-jurisdictional coordination and leverage substantial non-Federal co-investment to deliver major transportation investments.
Bonds
NIB bonds would provide sufficient funds for large scale projects
Mele, 10 (Jim Mele, Editor-In-Chief of Fleet Owner Nationally recognized journalist, author and editor over a dozen years’ experience covering transportation as a newspaper reporter and magazine staff writer., “Don't bank on it,” January 1 2010, )
Traffic congestion is a sexy topic for the general media - everyone relates to pictures of stopped cars and trucks stretching to the horizon. And with unemployment over 10%, job creation is certainly a hot topic in the press. But utter the word "infrastructure" and all eyes glaze over. So it comes as no surprise that no major media outlet noticed when Congress rejected one of the most innovative ideas for funding a long-term solution to our infrastructure problems. The proposal for creation of a national infrastructure bank was first introduced in the Senate in 2007. It went nowhere. Although it's taken on slightly different names, it's cropped up every year since and been rejected every time. The latest rejection came just last month when the Senate removed it from the fiscal 2010 budget bill it approved. So what is this idea that refuses to go away, yet attracts little support or attention beyond a few special interest policy groups? Without getting into the complex Federal budgetary processes, a national infrastructure bank, or NIB among the policy wonks, would be a development bank that would issue bonds and use the proceeds to fund major infrastructure projects. In general terms, creation of a NIB would have two major advantages. First, it would remove Federal infrastructure funding from the six-year reauthorization cycle which is causing so many delays and problems right now. Also, moving those investment decisions outside the Congressional authorization process would eliminate the hodgepodge of pork-barrel projects larded into reauthorization bills needed to attract votes, but adding little to national transportation efficiency. Instead, a NIB could fund projects based on overall merit and bring accountability to infrastructure investment. Today, the Federal government collects fuel taxes to fund highway and other infrastructure projects, but it actually has little control over those projects. More than three-quarters of those funds are distributed as grants to states or local governments. Yet the Federal government has little direct control over the projects funded or how they might fit into national goals such as congestion reduction. Worse, the current highway funding mechanism actually discourages preventive maintenance. That money can only be used for major maintenance projects, in effect giving states an incentive to ignore preventive maintenance until the situation deteriorates enough to qualify for Federal funds. Insulated from Congressional influences, a NIB could choose infrastructure projects based on merit, focusing on those that cross state lines and other jurisdictional barriers to satisfy regional and national transportation needs. Such power to choose projects would also allow it to enforce performance standards and give us clearer accountability for the way our infrastructure money is spent. The European Investment Bank has filled just such a role for over fifty years, helping build an effective transportation network that spans many national borders. It could work here, as well.
Grants > Loans
Formula/(loan)-based approach results in suboptimal economic improvement – conflicting goals
Bradley et. al., ‘11
[Bill Bradley: Princeton, Oxford, Sirius Satellite Radio, corporate director/partner at investment bank Allen and Company, Tom Ridge: 1st Secretary of Homeland Security, 1st Homeland Security Advisor, 43rd Governor of PA, US H.O.R., Harvard and Dickson School of Law, David Walker: US Comptroller General, Founder and CEO of Comeback America Initiative, independent party, 2011, Road to Recovery: Transforming America’s Transportation, Rockefeller Foundation, Oak Foundation, Carnegie Endowment for International Peace ]
Complex, Inefficient, and Ineffective Funding Distribution ¶ The funding mechanism for most transportation programs can be described ¶ as either formula (apportioned) or discretionary (grant) distribution. This ¶ distinction is signiϐicant. Formula programs make funds available to the ¶ states based on formulas set forth in the authorizing legislation. Discretionary programs are designed to allocate funds by competitive processes.¶ 19¶ A recent U.S. Treasury economic analysis of infrastructure investment ¶ found that the formula-based approach to distributing federal funds ¶ “virtually ensures that the distribution of investment in infrastructure is ¶ suboptimal from the standpoint of raising the productive capacity of the ¶ economy.”¶ 20¶ Formula-based funding reduces the ability to make adjustments to funding even when higher-order priorities emerge. For the 108 ¶ surface transportation programs, more than $200 billion was allocated to ¶ states and regions based on funding formulas. In sheer program shares, ¶ this represents nearly 40 percent of the total authorized under SAFETEALU (see ϐigure 2.2), relinquishing control of a significant portion of federal ¶ funding to the states.¶ Most highway, mass transit, and safety grant funds are distributed ¶ through formulas that have only an indirect relationship to needs, and ¶ many have no relationship to performance or outcomes.¶ 21¶ The funding ¶ formulas for core highways programs are loosely based upon metrics ¶ intended to determine state funding needs (see appendix 2.3). Often, the ¶ formulas distort states’ funding decisions by automatically rewarding ¶ states for goals in programs that may conϐlict with goals in another ¶ program or plan. For example, the funding formula for the Interstate ¶ Maintenance Program rewards states for increasing lane miles and ¶ vehicle miles traveled by allocating federal funds based on growth in ¶ these two indicators, even though reductions in these indicators are ¶ the goals of other federal programs and may be the goals of a state’s ¶ long-range plans.
Grants enable greater transparency and unrestricted financing
Bulow and Rogoff, ‘05
[Jeremy Bulow: Richard Stepp Professor of Economics at Stanford, Visiting Professor of Economics at Yale school of management and economics, research fellow at the World Bank, National Fellow-Hoover Institution, director of Bureau of Economics, Federal Trade Commission, Ph. D economics at MIT and Kenneth Rogoff: Thomas D. Cabot Professor of Public Policy and Professor of Economics at Harvard, May 2005, JSTOR, The American Economic Review Vol. 95 No.2, published by the American Economic Association ]
We have already highlighted how grants give¶ much greater transparency by unbundling market¶ rate loans, grants or subsidies, and technical assistance.¶ Empirical estimates suggest that the subsidies¶ inherent in middle-income country loans are¶ potentially quite large (see Bulow et al., 1992).¶ With grants, any implicit loan subsidies would be made explicit and, in principle, aid could be channeled¶ more fairly and efficiently.¶ Another reason for moving to grants is to¶ minimize “loan pushing.” Multilateral development¶ banks sometimes have their own internal¶ pressures to pump out loans, inducing politically¶ fragile developing countries to take on¶ unwanted debt. This can happen for example,¶ when a multilateral offers to make a loan to a¶ state government, which will then politically¶ pressure the federal government into ratifying¶ and guaranteeing the multilateral’s “cheap”¶ debt.¶ Grants eliminate the needless tying of a¶ project’s financing to the amount of subsidy¶ provided. At the end of 2004, China possessed¶ over $500 billion in reserves. If the World Bank¶ wishes to support new schools or hospitals why¶ should this only be possible if the Chinese agree¶ to borrow money?¶ The replacement of official loans with grants¶ will not eliminate the pressure to bail out private¶ creditors during debt crises, but at least the¶ nature of any such transaction will become¶ more transparent.
Excessive loans cause debt crises that outweigh the temporary benefits
Bulow and Rogoff, ‘05
[Jeremy Bulow: Richard Stepp Professor of Economics at Stanford, Visiting Professor of Economics at Yale school of management and economics, research fellow at the World Bank, National Fellow-Hoover Institution, director of Bureau of Economics, Federal Trade Commission, Ph. D economics at MIT and Kenneth Rogoff: Thomas D. Cabot Professor of Public Policy and Professor of Economics at Harvard, May 2005, JSTOR, The American Economic Review Vol. 95 No.2, published by the American Economic Association ]
Another argument for loans is that multilateral¶ development banks have a superior enforcement¶ technology that helps international¶ debt markets to function more efficiently. Thus¶ loans allow financially strapped governments,¶ including in middle-income countries, to borrow¶ more than they could otherwise. We will¶ argue that this benefit, too, is an illusion. In¶ those cases when official lending does expand a¶ developing country government’s borrowing¶ capacity, it effectively enables the government¶ to commit the country to repayment levels beyond¶ that supported by domestic political consensus,¶ creating moral hazard for shortsighted¶ rulers. In theory, better credit access to finance,¶ say, public infrastructure projects can be highly¶ beneficial. In practice, however, the increased¶ risk of debt crisis all too often outweighs any gain¶ ordinary citizens might enjoy from the loans.¶ Furthermore, moral hazard on the part of¶ lenders, who may be able to induce rich countries¶ into subsidizing the bailout of troubled¶ middle-income borrowers, may mean that aggregate¶ lending is excessive even if multilaterals¶ merely displace equivalent private debt.¶ We do not argue for eliminating assistance to¶ middle-income countries. On the contrary, we¶ would favor expanding aid in general, albeit in¶ far greater proportion to the world’s poorest¶ countries. Note that in principle, any country¶ with market access could use grant flows to help¶ defray interest rate costs on loans if it so chose,¶ but development banks would never need to¶ assume a “bad cop” role in enforcing debt.
GRANTS
NIB would employ grants to spur large scale projects ( ALSO A PLAN POPULAR CARD )
Stiles 11 (Andrew, Writer on national review online, Obama’s Stimulus Dilemma, AUGUST 16, 2011,
This is the cornerstone of Obama’s plan to “rebuild” the country, literally, through the creation of a National Infrastructure Innovation and Finance Fund, which would “directly provide resources for projects through grants, loans, or a blend of both.” The idea would be to leverage public funds (about $5 billion per year) in order to attract significant private-sector investment in infrastructure (up to $640 billion) over the next decade. Obama predicted this would “put 100,000 folks to work right now . . . rebuilding our roads and our bridges and our vital infrastructure all across the country.” It is an idea that enjoys support across party and ideological lines. Legislation to establish the infrastructure bank is sponsored by Sens. John Kerry (D., Mass.) and Kay Bailey Hutchison (R., Texas), and it has the approval of such odd counterparts as Thomas J. Donohue, president of the U.S. Chamber of Commerce, and Richard Trumka, president of the AFL-CIO. However, as Conn Carroll of the Washington Examiner accurately points out, the proposal is likely to amount to little more than “just another stimulus boondoggle.”
Grants offer states large sums of money to complete infrastructure
Ehrlich 12 (Everett, Everett Ehrlich is the president of ESC Company, a Washington, DC based economics consulting firm. 03/21/2012,A National Infrastructure Bank: A Road Guide to the Destination, )
In a nutshell, Rohatyn and I propose that we collapse all of the federal “modal” transportation programs into the Bank. Any entity – whether state, local, or federal – would have standing to come to the Bank with a proposal requiring federal assistance. The Bank would be able to negotiate the level and form of such assistance based on the particulars of each project proposal. It could offer cash participation or loan guarantees, underwriting or credit subsidies, or financing for a subordinated fund to assure creditors. Any project requiring federal resources above some dollar threshold (on a credit scoring basis) would have to be approved by the Bank. Additionally, we imagine that some part of the funding for existing modal programs would be converted into block grants sent directly to the states and large cities to be spent on projects too small for the Bank’s oversight. Such grants could also be used for those programs desired by the states that do not pass muster on terms proposed by the Bank.
GENERAL MIX
NIB combines financial tools to ensure a successful public private partnership ( THIS CARD ALSO TALKS ABOUT LOW BORROW COST NOW )
McConaghy and Kessler 11 (Ryan McConaghy, Deputy Director at the Schwartz Initiative on Economic Policy, Jim Kessler, Senior VP at Third Way, January 2011, “A National Infrastructure Bank”, )
In order to provide innovative, merit-based financing to meet America’s emerging infrastructure needs, Third Way supports the creation of a National Infrastructure Bank (NIB). The NIB would be a stand-alone entity capitalized with federal funds, and would be able to use those funds through loans, guarantees, and other financial tools to leverage private financing for projects. As such, the NIB would be poised to seize the opportunity presented by historically low borrowing costs in order to generate the greatest benefit for the lowest taxpayer cost. Projects would be selected by the bank’s independent, bipartisan leadership based on merit and demonstrated need. Evaluation criteria may include economic benefit, job creation, energy independence, congestion relief, regional benefit, and other public good considerations. Potential sectors for investment could include the full range or any combination of rail, road, transit, ports, dams, air travel, clean water, power grid, broadband, and others. The NIB will reform the system to cut waste, and emphasize merit and need. As a bank, the NIB would inject accountability into the infrastructure investment process. Since the bank would offer loans and loan guarantees using a combination of public and private capital, it would have the opportunity to move away from the traditional design-bid-build model and toward project delivery mechanisms that would deliver better value to taxpayers and investors.35 By operating on principles more closely tied to return on investment and financial discipline, the NIB would help to prevent the types cost escalation and project delays that have foiled the ARC Tunnel.
NIB would employ a flexible set of financial tools to ensure success
Schor 09 (Elana, writer for Street blogs citing administration's summary of its infrastructure bank plan, Thursday, July 2, 2009, Obama Administration’s Transportation Goals: Read Them Here, )
Financing mechanisms: Combination of grants and credit products. A flexible set of financing tools would allow the Bank to provide the most appropriate form of financing to a given project. The Administration would allow the Bank to offer a combination of grants and credit products like direct loans and loan guarantees. The Administration does not support Bank authority to borrow independently from private capital markets, since Treasury is the sole entity that borrows on behalf of the federal government and can do so more cheaply and efficiently than any other entity.
=== INHERENCY ===
No Investment now
Public and private infrastructure investment is declining significantly
Nutting, 12 (Rex, MarketWatch's international commentary editor, 6/1/2012, “Investments in the future have dried up; Commentary: Infrastructure spending down 20% since recession began,” )
WASHINGTON (MarketWatch) – When I was growing up in the 1960s and 1970s, the legacy of the Great Depression was everywhere: Dams, bridges, roads, airports, courthouses and even picnic areas and hiking trails. Leaders of that dire time — Democrats and Republicans — took advantage of the Depression to put millions of Americans back to work, building the infrastructure that we still rely on today. They had lemons, and they made lemonade. This time, however, we’re not so fortunate. Instead of picking up the shovel and getting to work, we’ve thrown the shovel aside, complaining that we just can’t afford to repair what Hoover, FDR, Eisenhower, and LBJ built, much less invest in the infrastructure than our grandchildren will need. The fact is, we’re investing less than we were before the recession hit more than four years ago, not just in government money but in private money, as well. Here are the facts, according to the Bureau of Economic Analysis: Government investments (in structures and in equipment) ramped up between 2007 and 2010, only to fall back to 2005 levels by early 2012. The trajectory for private-sector investments was the opposite — a collapse followed by a modest rebound — but they arrived in the same place: back at 2005 levels, some 6% lower than when the recession began. Looking just at investments in structures (such as buildings, roads, mines, utilities and factories), private companies are investing no more today (in inflation-adjusted terms) than they were in late 1978, according to data from the BEA. All together, public- and private-sector investments in structures are down about 20% compared with 2007, in inflation-adjusted terms. In 2007, we spent $684 billion on structures; in 2011, we spent $550 billion. Even before the recession arrived, we were underinvesting. Investments in infrastructure as a share of the economy had declined by 20% compared with 1960, according to a study by the Congressional Research Service. One widely cited estimate from civil engineers put the infrastructure gap at more than $2 trillion.
SQUO TI investment not enough to spur job growth
Natter, ‘09
[Ari Natter, BloomberBNA reporter, 1/26/2009, Traffic World ]
The economic stimulus package, it turns out, isn"t quite shovel ready.
Lawmakers and lobbyists disappointed with the amount of transportation infrastructure funding included in the House proposal are fighting for more funds.¶ "At this point real infrastructure investment is somewhere around 7.5 percent of this package, and I for one as a member of this committee do not believe that is adequate," said House Highways and Transit Subcommittee Chair Peter A. DeFazio, D-Ore.¶ DeFazio was one of several members of the House Transportation and Infrastructure Committee who vowed to "mobilize" for a larger share of funding for transportation infrastructure and other construction projects, and publicly considered withholding their votes until more transportation dollars are added to the stimulus package.¶ "I"m not happy with the tax cuts and many other parts of the proposal and I don"t think I"m alone in questioning whether I will support it given the inadequate amount of money," he said.¶ As released by the House Appropriations Committee, the $825 billion package recommends spending about $63 billion on infrastructure within the T & I committee"s jurisdiction - roughly $44 billion in transportation projects - as well as $275 billion in tax cuts.¶ The T & I committee"s chair, Rep. James L. Oberstar, D-Minn., previously identified and recommended $85 billion in transportation and other infrastructure spending.¶ "That has been whittled back," Oberstar said during a Jan. 15 committee meeting.¶ Among the transportation spending outlined in the package is $30 billion for highways and bridges, $10 billion for rail and mass transit, $4.5 billion to the U.S. Army Corps of Engineers for inland waterways and other projects and $3 billion for airport improvement projects.¶ Oberstar blamed the low infrastructure figures on the Congressional Budget Office and the Office of Management and Budget, who he said doubted the ability of many of the construction projects to be under way within 90 days, a stipulation Oberstar had outlined for 50 percent of the projects.¶ "The Congressional Budget Office and OMB said "That money can"t be spent out that fast,"" Oberstar said. "Where are they getting that information? From the current Federal Highway Administration that is leaving town. They have no interest in giving solid information and they are just dead wrong."¶ Rep. John L. Mica, R-Fla., the ranking Republican on the T & I committee, called for bipartisanship to convince House leadership to provide more infrastructure funding.¶ "We need your backing on this for both sides of the aisle," Mica said. "Our side of the aisle will work with your side of the aisle to get it done."¶ Oberstar said the committee would examine the issue further at a Jan. 22 hearing.¶ Lawmakers were not alone in criticizing the amount of funding for transportation infrastructure.¶ "We are not going to put enough people back to work if we don"t focus on the kind of infrastructure spending that creates jobs," Leo Gerard, president of the United Steelworkers Union told reporters during a conference call Jan. 16.¶ "We think it falls short on the amount of money that should be put into infrastructure," he said.¶ The Associated General Contractors called the proposal "encouraging" but said in a statement that "more can be done."¶ The tax breaks - seen by many as an attempt to gain Republican support for the package - had led some to question whether that funding would be coming at the expense of spending in other areas.¶ "I think there is a danger that the infrastructure work gets pushed back in the interest of things that might stimulate the economy an awful lot quicker," New York Mayor Michael Bloomberg said during a conference with reporters call Jan. 8
Squo funding fails
Status quo financing fails—bank key to solve
Posner, 08 (Michael Posner, CongressDaily staffwriter, 6/11/2008, CongressDaily AM)
Investment experts and lawmakers told the House Transportation and Infrastructure Committee Tuesday that the nation's infrastructure is in crisis and a new way of financing decaying roads, bridges, transit system and ports is needed. The panel held its second hearing on infrastructure financing, which the American Society of Civil Engineers has said will require $1.6 trillion over the next five years. The current financing system, which includes gasoline taxes for highways and state financing, is insufficient, officials said. "The way we currently fund infrastructure in this country is flawed," testified Bernard Schwartz, CEO of BLS Investments. Schwartz, Everett Ehrlich, executive director of the Center for Strategic and International Studies' Commission on Public Infrastructure, and Felix Rohatyn of Lehman Brothers backed a public-private enterprise centered on a federal infrastructure bank to issue securities. But Rudolph Penner of the Urban Institute, a one-time CBO director, frowned on any federal bank modeled on Fannie Mae, a government sponsored enterprise, which he said has squeezed out a lot of private activity. "The Congress should think long and hard before it creates another one (GSE)," Penner said. Mark Florian, managing director and head of infrastructure banking at Goldman Sachs, said "the nation's transportation system is in a crisis because current funding sources and financing tools are insufficient" to maintain and improve the system. He gave cautious backing of a federal financing bank, if it can "get projects done better, faster and cheaper." He added, however, that while an infrastructure bank can be an important part of the financing solution "we need more revenue as part of the solution as well." Also testifying were Reps. Rosa DeLauro, D-Conn., Earl Blumenauer, D-Ore., Keith Ellison, D-Minn., and Ken Calvert, R-Calif. Ellison backed a federal bank with an initial $60 billion in tax credit bonds in a bill he co-sponsored with House Financial Services Chairman Barney Frank. Delauro called for a National Infrastructure Development Corporation and a subsidiary insurance corporation to make loans and issue debt and equity securities.
Only bank financing solves—more responsible spending and avoids policy churn
Ehrlich, 3/21 (Everett Ehrlich, President of ESC Company, economics consulting firm, 3/21/2012, “A National Infrastructure Bank: A Road Guide to the Destination,” Progressive Policy Institute, )
The current mix results from one of two selection processes. The first is devolution to the states (for example the cost-sharing grants delivered by the Highway Trust Fund), and the second is selection by Federal agencies (e.g., the Corps of Engineers). At worst, these processes lead to politically motivated outcomes, either because state governments favor some projects for wholly non-economic reasons, or because the Congress can muscle the selection process from the federal agencies. The most recent transportation authorization bill, passed in 2005, made the word “earmark” famous by incorporating a stunning $24 billion of them – the price of having a law passed. Insofar as we have given the task of project selection to the political process, it would be surprising if this kind of event didn’t happen, not that it sometimes does. Politicized project selection is one of several problems associated with the current process. But it is one of the reasons why a National Infrastructure Bank is so important and so urgently needed: not just because a bank might be able to lever federal dollars, but because it can use the existing dollars more wisely and obtain a higher public return. What follows, then, is a description of the role a National Infrastructure Bank could play, taken from the perspective of the specific problems in the current process it might solve. This perspective also allows us to evaluate the administration’s proposal. In a nutshell, Rohatyn and I propose that we collapse all of the federal “modal” transportation programs into the Bank. Any entity – whether state, local, or federal – would have standing to come to the Bank with a proposal requiring federal assistance. The Bank would be able to negotiate the level and form of such assistance based on the particulars of each project proposal. It could offer cash participation or loan guarantees, underwriting or credit subsidies, or financing for a subordinated fund to assure creditors. Any project requiring federal resources above some dollar threshold (on a credit scoring basis) would have to be approved by the Bank. Additionally, we imagine that some part of the funding for existing modal programs would be converted into block grants sent directly to the states and large cities to be spent on projects too small for the Bank’s oversight. Such grants could also be used for those programs desired by the states that do not pass muster on terms proposed by the Bank.
Current funding methods are ineffective – corrupt bureaucracy and lack of accountability
McConaghy and Kessler 11
(Ryan, Deputy Director of the Third Way Economic Program, Jim, Vice President for Policy at Third Way, January 2011, “A National Infrastructure Bank”, )
The current system for funding projects is subject to inefficiency and bureaucratic complication. Funding for infrastructure improvements is divided unevenly among federal, state, local, and private actors based on sector.24 Even in instances where the federal government provides funding, it has often ceded or delegated project selection and oversight responsibilities to state, local, and other recipients, weakening linkages to federal program goals and efforts to ensure accountability. Federal efforts are also hampered by organization and funding allocations based strictly on specific types of transportation, as opposed to a system-wide approach, which create inefficiencies that hinder collaboration and effective investment. Complicating matters even further are the emergence of multi-state “mega regions,” which have common needs that require multijurisdictional planning and decision making ability.
Politics and state budget shortfalls make other funding mechanisms impossible
McConaghy and Kessler 11
(Ryan, Deputy Director of the Third Way Economic Program, Jim, Vice President for Policy at Third Way, January 2011, “A National Infrastructure Bank”, )
Infrastructure funding has also become significantly politicized. Congressional earmarking in multi-year transportation bills has skyrocketed from 10 projects in the STAA of 1982 to over 6,300 projects in the most recent bill (SAFETEA-LU).28 Even under a working system, the infrastructure improvements necessary to foster growth will require substantial investment. The American Society of Civil Engineers estimates that it would require $2.2 trillion over the next five years to bring our overall infrastructure up to par.29 However, sources of funding for infrastructure improvements are under significant strain and may not be suficient.30 The Highway Trust Fund has already experienced serious solvency challenges, and inadequate revenues could lead to a $400 billion funding shortfall from 2010 to 2015.31 The nuances of state and local governments, which are responsible for almost three-quarters of public infrastructure spending, have been severely impaired. At least 46 states have budget shortfalls in the current fiscal year, and it is likely that state financial woes will continue in the near future.33 In a recent survey by the National Association of Counties, 47% of respondents indicated more severe budget shortfalls than anticipated, 82% said that shortfalls will continue into the next year, and 54% reported delaying capital investments to cope.
=== UNIQUNESS ===
TI Declining
All sectors of American transportation infrastructure are falling apart
The Economist 11 (Life in the slow lane, Americans are gloomy about their economy’s ability to produce. Are they right to be? We look at two areas of concern, transport infrastructure and innovation, Apr 28th 2011, )
America, despite its wealth and strength, often seems to be falling apart. American cities have suffered a rash of recent infrastructure calamities, from the failure of the New Orleans levees to the collapse of a highway bridge in Minneapolis, to a fatal crash on Washington, DC’s (generally impressive) metro system. But just as striking are the common shortcomings. America’s civil engineers routinely give its transport structures poor marks, rating roads, rails and bridges as deficient or functionally obsolete. And according to a World Economic Forum study America’s infrastructure has got worse, by comparison with other countries, over the past decade. In the WEF 2010 league table America now ranks 23rd for overall infrastructure quality, between Spain and Chile. Its roads, railways, ports and air-transport infrastructure are all judged mediocre against networks in northern Europe. America is known for its huge highways, but with few exceptions (London among them) American traffic congestion is worse than western Europe’s. Average delays in America’s largest cities exceed those in cities like Berlin and Copenhagen. Americans spend considerably more time commuting than most Europeans; only Hungarians and Romanians take longer to get to work (see chart 1). More time on lower quality roads also makes for a deadlier transport network. With some 15 deaths a year for every 100,000 people, the road fatality rate in America is 60% above the OECD average; 33,000 Americans were killed on roads in 2010. There is little relief for the weary traveller on America’s rail system. The absence of true high-speed rail is a continuing embarrassment to the nation’s rail enthusiasts. America’s fastest and most reliable line, the north-eastern corridor’s Acela, averages a sluggish 70 miles per hour between Washington and Boston. The French TGV from Paris to Lyon, by contrast, runs at an average speed of 140mph. America’s trains aren’t just slow; they are late. Where European passenger service is punctual around 90% of the time, American short-haul service achieves just a 77% punctuality rating. Long-distance trains are even less reliable. The Amtrak alternative Air travel is no relief. Airport delays at hubs like Chicago and Atlanta are as bad as any in Europe. Air travel still relies on a ground-based tracking system from the 1950s, which forces planes to use inefficient routes in order to stay in contact with controllers. The system’s imprecision obliges controllers to keep more distance between air traffic, reducing the number of planes that can fly in the available space. And this is not the system’s only bottleneck. Overbooked airports frequently lead to runway congestion, forcing travellers to spend long hours stranded on the tarmac while they wait to take off or disembark. Meanwhile, security and immigration procedures in American airports drive travellers to the brink of rebellion. And worse looms. The country’s already stressed infrastructure must handle a growing load in decades to come, thanks to America’s distinctly non-European demographics. The Census Bureau expects the population to grow by 40% over the next four decades, equivalent to the entire population of Japan. All this is puzzling. America’s economy remains the world’s largest; its citizens are among the world’s richest. The government is not constitutionally opposed to grand public works. The country stitched its continental expanse together through two centuries of ambitious earthmoving. Almost from the beginning of the republic the federal government encouraged the building of critical canals and roadways. In the 19th century Congress provided funding for a transcontinental railway linking the east and west coasts. And between 1956 and 1992 America constructed the interstate system, among the largest public-works projects in history, which criss-crossed the continent with nearly 50,000 miles of motorways. But modern America is stingier. Total public spending on transport and water infrastructure has fallen steadily since the 1960s and now stands at 2.4% of GDP. Europe, by contrast, invests 5% of GDP in its infrastructure, while China is racing into the future at 9%. America’s spending as a share of GDP has not come close to European levels for over 50 years. Over that time funds for both capital investments and operations and maintenance have steadily dropped (see chart 2). Although America still builds roads with enthusiasm, according to the OECD’s International Transport Forum, it spends considerably less than Europe on maintaining them. In 2006 America spent more than twice as much per person as Britain on new construction; but Britain spent 23% more per person maintaining its roads. America’s dependence on its cars is reinforced by a shortage of alternative forms of transport. Europe’s large economies and Japan routinely spend more than America on rail investments, in absolute not just relative terms, despite much smaller populations and land areas. America spends more building airports than Europe but its underdeveloped rail network shunts more short-haul traffic onto planes, leaving many of its airports perpetually overburdened. Plans to upgrade air-traffic-control technology to a modern satellite-guided system have faced repeated delays. The current plan is now threatened by proposed cuts to the budget of the Federal Aviation Administration. The Congressional Budget Office estimates that America needs to spend $20 billion more a year just to maintain its infrastructure at the present, inadequate, levels. Up to $80 billion a year in additional spending could be spent on projects which would show positive economic returns. Other reports go further. In 2005 Congress established the National Surface Transportation Policy and Revenue Study Commission. In 2008 the commission reckoned that America needed at least $255 billion per year in transport spending over the next half-century to keep the system in good repair and make the needed upgrades. Current spending falls 60% short of that amount.
State funding for transportation is failing now
Katz 12 ( Justin Katz, May 7, 2012, Transportation Infrastructure: Making a High Priority Low,
)
In today’s Providence Journal, Bruce Landis traces the local implications of Washington, D.C’s current partisan wrestling match over transportation funding. This paragraph is of particular relevance to Rhode Islanders (especially those who think the state needs to make some real changes to the way the state conducts itself: Because the state does not use any of its own money to finance its highway projects, Rhode Island’s program is entirely dependent on federal money and particularly vulnerable to disruption. (The state borrows the 20-percent local share of project costs that it must contribute. That appears on the ballot every two years in the transportation bond issue.) The obvious question is why the state would take one of its primary functions — something that only the most resolute libertarians would deny as under its purview and about which there is almost universal agreement about its importance to everything from economic development to public safety — and leave it entirely to borrowing and federal aid. The almost-as-obvious answer is that the very importance of such spending makes it an easy sell to voters when it comes time for ballot approval of more borrowing, and the federal aid keeps the dollars borrowed within tolerable bounds. (If the state left its most corrupt, unnecessary, and/or controversial spending for debt votes, much less would be approved.) It’s difficult to think of a better word for such a practice than “mismanagement,” and such practices provide examples for anybody who wonders why so many people distrust government to the point of considering it a scheme perpetrated against the people it is ostensibly meant to represent.
US transportation infrastructure in decline while the rest of the world is advancing
Rendell and Smith ‘11
[Ed. Rendell, former Democrat governor of Pennsylvania from 2003 to 2011 & Scott Smith Republican mayor of Mesa, Ariz., and vice chairman of the U.S. Conference of Mayors. Both are members of Building America's Future Educational Fund, 8/11/2011, WSJ (A.13) ]
During this time of economic uncertainty and record federal deficits, many question why America should invest aggressively in infrastructure. The answer is simple: Whether it involves highways, railways, ports, aviation or any other sector, infrastructure is an economic driver that is essential for the long-term creation of quality American jobs.¶ Unfortunately, our position as the world leader in infrastructure has begun to erode after years of misdirected federal priorities. When it comes to transportation, Washington has been on autopilot for the last half-century. Instead of tackling the hard choices facing our nation and embracing innovations, federal transportation policy still largely adheres to an agenda set by President Eisenhower.¶ As a result, American citizens and businesses are wasting time, money and fuel. According to the Texas Transportation Institute, in 2009 Americans wasted 4.8 billion hours sitting in traffic at a cost of $115 billion and 3.9 billion wasted gallons of gas. Meanwhile, nations around the world are investing in cutting-edge infrastructure to make their transportation networks more efficient, more sustainable and more competitive than ours. These investments have put them on a cycle of economic growth that will improve their standard of living and improve their citizens' quality of life.¶ Building America's Future Educational Fund, a national and bipartisan coalition of state and local elected officials, of which we are members, recently issued a report on the subject, "Falling Apart and Falling Behind." It offers a sobering assessment of transportation-infrastructure investments in the U.S. as compared to the visionary investments being made by our global economic competitors.¶ As recently as 2005, the World Economic Forum ranked the U.S. No. 1 in infrastructure economic competitiveness. Today, the U.S. is ranked 15th. This is not a surprise considering that the U.S. spends only 1.7% of its gross domestic product on transportation infrastructure while Canada spends 4% and China spends 9%. Even as the global recession has forced cutbacks in government spending, other countries continue to invest significantly more than the U.S. to expand and update their transportation networks.¶ China has invested $3.3 trillion since 2000, for example, and recently announced another $105.2 billion for 23 new infrastructure projects. Brazil has invested $240 billion since 2008, with another $340 billion committed for the next three years. The result? China is now home to six of the world's 10 busiest ports -- while the U.S. isn't home to one. Brazil's Acu Superport is larger than the island of Manhattan, with state-of-the-art highway, pipeline and conveyor-belt capacity to ease the transfer of raw materials onto ships heading to China.
ASCE reports a below average US TI system
Business Monitor, ‘11
[Business Monitor International, United States Infrastructure Report Q4 2011 & 5-year Industry Forecast, September 2011, ABI/Inform Trade Industry pdf.]
¶ The 2009 report by The American Society of Civil Engineers (ASCE) shone a spotlight onto the poor¶ existing state of US infrastructure. With the US a leading global economy, its aging and outdated¶ infrastructure poses a threat to the continued competitiveness of the country. The report highlights just¶ how much needs to be done and more importantly, how expensive it is going to be to do it.¶ The 2009 ‘Report Card for America’s Infrastructure’ assigns the country’s infrastructure a cumulative D¶ grade – defined as ‘poor’ – with the ASCE noting that the total investment needed to bring infrastructure¶ up to scratch over a five-year period is US$2.2trn. This would come from all levels of government and¶ the private sector.¶ The grade is no better than the one achieved in the 2005 report card, as there has been little change within¶ the individual categories, with roads, transit and aviation achieving a slightly poorer score than in the¶ previous report. Furthermore, the investment needed has increased by more than half a trillion dollars¶ from the US$1.6trn recommended four years ago.¶ The report notes that more than 25% of bridges in the US are structurally deficient or functionally¶ obsolete, that America’s drinking water systems face an annual shortfall of US$11bn to replace ageing¶ infrastructure and that more than US$200bn is needed until 2035 to accommodate anticipated growth in¶ rail travel. Furthermore, current spending on highways falls short by US$116bn per year.¶ The ailing state of infrastructure in the US is a serious issue, and the ASCE press release noted that¶ ‘decades of underfunding and inattention have jeopardised the ability of our nation’s infrastructure to¶ support our economy and facilitate our way of life’. Of late, in light of tragic illustrations of the¶ inefficiency of the nation’s infrastructure (for example, Hurricane Katrina) and, more recently, the federal¶ stimulus package, the topic has received increased attention.
SQUO TI network slowing down, stunting growth and competitiveness
Shane, ‘05
[Jeffrey N. Shane, Under Secretary for Transportation, 11/3/2005, US Chamber of Commerce/Transportation Department Documents and Publications ]
The scope of the challenge¶ The challenge in the United States is serious and calls for further private sector engagement in improving the physical capacity of the supply chain.¶ In the near-term, expect continued growth in demand for port throughput - around 10 percent a year - as well as an increase in new vessel capacity as carriers respond to growing demand. The intermodal network will continue to experience lack of capacity and erratic service reliability, and intermodal congestion will continue to get worse. There is no light at the end of the tunnel. We expect LA/Long Beach to remain the primary west coast trade gateway, though there will be some diversion to other ports. And we assume that growing capacity constraints will slow the ability of the transportation network to recover from any adverse events.¶ In the mid-term, we expect that supply chain velocity will continue to slow. Shippers and importers will rethink and adjust their supply chains, but much of their capital investment has been made and resources have already been committed - and unfortunately not necessarily in places where they will need to be going forward. In time, higher costs will begin to flow through to consumers and the U.S economy.¶ Given this forecast, the consequences of inaction are significant:¶ * Infrastructure congestion at freight gateways is not temporary - the challenges will become greater and be with the U.S. for years.¶ * Similar challenges outside the U.S. will exacerbate the problems in the U.S.¶ * Market growth is currently far outpacing infrastructure development and will continue to do so.¶ * Transport and supply chain costs will continue to increase and flow through to U.S. consumers.¶ * The U.S. is exposed to a potential breakdown in the flow of commerce that would have a significant impact on the U.S. economy.¶ A collaborative public-private approach to freight system productivity¶ SAFETEA-LU provided some of the tools we need, but there is still much to be done, and there are many differences of opinion on what is wrong and how to fix it.¶ Historically the response of the Department of Transportation to transportation challenges has been to step forward with a big open checkbook. But the days of big spending are quickly coming to an end. Looking forward, projected Highway Trust Fund revenues are unlikely to be sufficient to meet our Nation's transportation infrastructure funding needs, and the Federal budgetary landscape does not look particularly promising in the years ahead. Every one of the programs within the Department of Transportation falls within the category of Federal "discretionary funding," so we're looking forward to the likelihood of flat budgets during good years and declining budgets during bad years.¶ The bottom line is that we won't simply be able to buy our way out of our problems. Recognizing this, DOT is working creatively and innovatively to broaden the set of policy tools at our disposal and to develop new approaches for meeting transportation challenges. The private sector obviously has a big role to play in all of this, and as we go forward we plan to reach out to our private partners - including the Chamber - to further engage in our responses.¶ So, first, what are the elements of a collaborative public private approach to freight system productivity? I know that earlier today, Sam Crane gave you an update on the activities of the Marine Transportation System National Advisory Council (MTSNAC), and I further understand that MTSNAC intends to deliver a White Paper to Secretary Mineta. We look forward to that Report and applaud MTSNAC for preparing it. Sam also briefed you on another effort on which my office is collaborating with the Transportation Research Board -- the TRB Freight Industry Roundtable. In that Roundtable we are seeking industry comment and guidance on an emerging freight policy to guide the Department's future collaborative efforts on improving freight capacity and freight velocity at our gateways.¶ DOT's policy response will focus on seven objectives:¶ * Improve the operations of the existing freight transportation system.¶ * Improve the physical capacity of the freight transportation system.¶ * Expand the use of pricing to cover costs of maintenance and expansion, manage capacity, and address equity issues...there has to be a reasoned discussion about user fees to improve freight systems, especially at our ports.¶ * Consider regulatory and institutional changes to improve freight transportation performance.¶ * Proactively identify and address emerging transportation needs.¶ * Maximize the safety and security of the freight transportation system.¶ * Mitigate and better manage environmental consequences of freight transportation.¶ My question to this group is: Are we on the right track? Are these seven policy platforms responsive to challenges you experience in moving your products to market? We hope to hear feedback from you.¶ I can't stress enough how much we value the input from the U.S. Chamber, MTSNAC, and the anticipated guidance from the TRB Freight Industry Roundtable. Frankly, the Department needs your voices and your help in three ways.¶ 1. We need you to keep telling the freight story to the Department, Capitol Hill, Executive Branch leadership, and your local business communities.¶ 2. Private sector input into our National Freight Policy development process is critical, and far outweighs our role of facilitation and promotion. We welcome your feedback and look forward to working with you to further refine this policy.¶ 3. Most importantly, we need the Chamber's membership to work with the Department to take advantage of SAFETEA-LU's new tools for financing transportation infrastructure. We have a freight implementation team ready to discuss these programs with your companies.¶ Highways, ports, rail yards, airports and border crossings have profound significance for your bottom line costs for distribution; and they have national strategic significance for the Nation's continued leadership as the world's largest global trader. I started by suggesting that we have indeed reached a tipping point in how we manage, plan, and finance the transportation capital plant. This strikes me as being particularly true for the nation's intermodal freight system. As Gladwell writes, we are indeed at the moment of critical mass, the threshold, the boiling point, a place where the unexpected becomes expected, where radical change is more than possibility. Future generations will judge us to a large extent based on whether we respond effectively to this historic challenge.
Current infrastructure won’t be able to handle inevitable congestion
McConaghy and Kessler 11
(Ryan, Deputy Director of the Third Way Economic Program, Jim, Vice President for Policy at Third Way, January 2011, “A National Infrastructure Bank”, )
The safety risks and economic costs associated with the deterioration of America’s infrastructure are increasingly apparent across multiple sectors. The American Society of Civil Engineers has awarded the nation’s overall infrastructure a grade of D. Since 1990, demand for electricity has increased by about 25% but construction of new transmission has decreased by 30%. Over about the last 25 years, the number of miles traveled by cars and trucks approximately doubled but America’s highway lane miles increased by only 4.4%. Over 25% of America’s bridges are descent and about 25% of its bus and rail assets are in marginal or poor condition. America’s broadband penetration rate ranks only 14th among OECD countries. As America’s population and economic activity increases, the stress on its infrastructure will only grow. The number of trucks operating daily on each mile of the Interstate Highway system is expected to jump from 10,500 to 22,700 by 2035, while freight volumes will have increased by 70% over 1998 levels. It is also expected that transit ridership will double by 2030 and that the number of commercial air passengers will increase by 36% from 2006 to 2015. Total electricity use is projected to increase by 1148 billion kWh from 2008 to 2035.12 In order to cope, America’s infrastructure will need a significant upgrade.
If left unattended, this gap will crush American competitiveness on a global scale
McConaghy and Kessler 11
(Ryan, Deputy Director of the Third Way Economic Program, Jim, Vice President for Policy at Third Way, January 2011, “A National Infrastructure Bank”, )
The infrastructure gap also hinders America’s global competitiveness. Logistics costs for American business are on the rise, but similar costs in countries like Germany, Spain, and France are set to decrease. And while America’s infrastructure spending struggles to keep pace, 19 several main global competitors are poised to make significant infrastructure enhancements. China leads the world with a projected $9 trillion in infrastructure investments slated for the next ten years, followed by India, Russia, and Brazil.20 In a recent survey, 90% of business executives around the world indicated that the quality and availability of infrastructure plays a key role in determining where they do business. If America is going to remain on strong economic footing compared to its competitors, it must address its infrastructure challenges.
Econ Declining
Double Dip by 2013 without action now – don’t trust neg authors, empirics prove they suck at predicting dips
Rasmus 12 (Jack, Jack Rasmus Ph.D in Political Economy and currently teaches economics and politics at St. Mary’s College and Santa Clara University in California is the author of the just-released book, "Obama's Economy: Recovery for the Few," Thursday, 05 January 2012, Economic Predictions for 2012 to 2013,
A striking fact of the past four years is that the world's 10,000 or so economists have overwhelmingly failed to predict the three major economic developments of this period, 2007-2011. First, only a handful predicted the financial crash of 2007-08 and subsequent deep global contraction that I have called an "Epic" recession, to distinguish it from normal recessions (and also from depressions). Second, the 10,000 have failed to predict the current protracted economic stagnation that has occurred since 2008 as well; instead, nearly all mainstream economists in recent years forecast a sharp "V"-shaped sustained economic recovery since 2008-09 that has yet to take place. Third, at year end 2011, they once again failed to see the sharp and even deeper retrenchment of the US and global economies that is coming, no later than 2013 - and possibly even earlier should the eurozone currency and banking system crash in 2012, which appears increasingly likely. In contrast to mainstream economists, the methodology applied to the US and global economy used by this writer to predict the US and global economies the past four years (as outlined in my book, "Epic Recession: Prelude to Global Depression") has relatively accurately forecast the course of economic events. Based on that same methodology, this writer has recently predicted a double-dip recession in the US no later than early 2013, a major financial crisis in the eurozone and a slowing of the global economy once again. This double dip in the US and global slowdown in 2012-13 is treated in more detail in this writer's forthcoming book available in 2012, Obama's Economy: Recovery for the Few." In the meantime, here are this writer's predictions for 2012-13 for the US, euro and global economy. Predictions for 2012 to 2013 1. The US will experience a double-dip recession in early 2013. Or, in the event of another banking crisis in Europe, perhaps - though less likely - earlier in 2012. Despite a continual hyping of economic reports by the media and business press in recent months, there is no recovery underway for jobs, housing or state and local government finances. Job growth has been stuck throughout 2011 at around 80,000 to 100,000 a month per the Labor Department's monthly data. The broader measure of unemployment, the U-6 rate, has been consistently in the 16 percent range, or about 25 million to 26 million for the past year. State and local governments continue to lay off workers in the 20,000 range every month. Little effective stimulus will be forthcoming from the federal government in 2012, despite the election year, and further deficit cutting is even possible in 2012. The first quarter of 2012 will record a significant slowing of gross domestic product (GDP) growth once again. Should the eurozone debt crisis escalate once more in the second quarter of 2012, the US economy will weaken further in the second quarter. It may even slip into recession if the euro crisis is particularly severe. More likely, however, is the scenario of an emerging double-dip recession in early 2013, when deficit cutting by Congress and the administration intensifies.
Double Dip is still a great risk – optimistic economists use flawed methods
Rickards 12 (James Rickards is a hedge fund manager in New York City and the author of Currency Wars: The Making of the Next Global Crisis, Why We Should Still Be Worried about a Double-Dip Recession, Feb 2011, )
The late summer and fall of 2011 was filled with fears of a double-dip recession in the United States coming hard on the heels of the 2007-2009 recession, frequently referred to as the Great Recession. With improved economic news lately including lower unemployment, lower initial claims, higher growth, and higher stock prices, this recession talk has died down. That's why Lakshman Achuthan, the highly respected head of the Economic Cycle Research Institute, caused a stir last week when he repeated his earlier claim that a recession later this year was almost inevitable despite the better news. Achuthan makes the point that improved news on the employment front is a lagging indicator from the end of the last recession and doesn't reveal what's ahead. He adds that higher asset prices in stocks and housing are the expected result of Federal Reserve money printing and don't say much about fundamentals. To make his case for a new recession, he focuses more on year-over-year growth in GDP versus the more popular quarter-over-quarter data, and indicators like changes in industrial production and personal income and spending. [See a collection of political cartoons on the economy.] There's another way to view the economic data since 2007 that casts all recession analyses in a different light. The better analytic mode is to bring back a word mainstream economists have abandoned—depression. When you realize the world has been in a depression since 2007 and will remain so indefinitely based on current policies, talk of recession, double-dip, and economic cycles is seen differently. Economists dislike the concept of depression because it has no well-defined statistical meaning unlike recessions that are conventionally dated using well-understood criteria. They also dismiss the word "depression" because it's, well, too depressing. Economists like to think of themselves as master manipulators of fiscal and monetary policy levers fully capable of avoiding depressions by providing the right amount of "stimulus" at just the right time. They tend to look at a single case—the Great Depression of 1929 to 1940—and a single cause—tight money in 1928, and conclude that easy money is the way to ban depressions from the business cycle. The Great Depression featured a double-dip of its own. Within the start and end dates of the Great Depression, there were two recessions, 1929 to 1933, and 1937 to 1938. In the Keynesian-Monetarist telling, the first of these was caused by tight money, the second was caused by a misguided effort by Franklin Delano Roosevelt to balance the budget. Hence economists added fiscal deficits to their tool kit along with easy money as the all-purpose depression busters. Easy money and big deficits are said to cure all ills. President Obama and Fed Chairman Ben Bernanke are following this script to a "T".
Recession coming now – prefer our author
Isidore 12 (Chris Isidore @CNNMoney citing Lakshman Achuthan, co-founder of the Economic Cycle Research Institute and can predict the future, February 24, 2012, A new recession seems inevitable,
)
NEW YORK (CNNMoney) -- While most economists have stopped worrying that the U.S. will fall into a double-dip recession, one influential economist maintains his position that the nation won't be able to avoid a new downturn. Lakshman Achuthan, co-founder of the Economic Cycle Research Institute, said on Friday that his research firm is sticking with the forecast it made in September: A new recession is inevitable, despite improvement in high-profile economic indicators, such as job creation and unemployment, and a stock market rally. ECRI is one of the more widely respected firms on economic recessions, as it has never been wrong when forecasting that a recession would start, or failed to predict a recession well before it was widely accepted. Achuthan predicts the recession will happen even without a new shock to the economy, such as a spike in oil and gas prices or a Greek sovereign debt default sparking a financial meltdown. If those things occur, he says they will simply make an inevitable recession more painful. In fact, Achuthan said data gathered since his September forecast only confirms his view that economic growth has slowed to such a degree that a downturn is now unavoidable, likely by late summer. "Now that we have several months of definitive hard data, this is not a forecast," he said, pointing to key measures that don't receive as much attention from the public or many economists. Specifically, he identifies annual growth in industrial production, real personal income and spending, as well as the year-over-year change in gross domestic product, a broad measure of the nation's economic activity. That GDP reading has been stuck between 1.5% and 1.6% growth for the last three quarters, far less encouraging that the rising quarterly GDP, which is more widely reported. "Basically, growth has flatlined," he said. Some might think that a new downturn would be a so-called double-dip recession, in that it comes before the economy has fully recovered from the jobs lost during the Great Recession. But Achuthan said if the economy falls into recession at this point, it would be a new recession, not a double dip, given the time that has passed since the formal end of the recession in 2009 and the economic growth since then. He said improved consumer confidence and economists' stronger outlook are due to gains in jobs and stocks over the last six months.
50/50 chance of a Recession is coming
Rapoza 12 (Kenneth Rapoza, Forbs contributer, Is World Sliding Into Another Recession? This Guy Thinks So. 6/23/2012, )
Mortgage giant Fannie Mae gives the U.S. economy equal chances for a second recession and recovery by the end of 2012. Podcasting the 2011 October Economic Outlook, titled “Economy at a Crossroads,” the company forecasted that GDP will stay below 2 percent for the remainder of 2011 into next year. “The economy remains very vulnerable to any sort of an external shock,” Richard Koss, the GSE’s director of economics and head of an internal think tank, said in a podcast. “We remain of the point of view that the odds of a recession that starts by the end of next year is something close to fifty-fifty.” Koss cited wary consumers, sluggish housing markets, and a wobbly financial sector, stateside and abroad, as reasons why the economy could double-dip by 2012. Commenting on the outlook in a statement, Doug Duncan, Fannie’s chief economist, said that “the housing market remains very sluggish and consumers’ willingness to dig into their savings to purchase big ticket items is very low.” He went on to say that “leading indicators point to housing sales bouncing near the bottom at least through the end of 2011,” adding that “we expect home prices to show renewed declines after firming for several months.” Koss characterized falling home prices as figures that will head south despite all-time highs for housing affordability, made possible by record-low mortgage rates, which fellow GSE Freddie Mac recently reported falling below 4 percent for 30-year and 15-year fixed-rate loans. He said in the podcast that the potential for more house price declines could capsize the financial sector and measures of consumer confidence across the country – downward indicators that accelerated with Fannie’s release of the September National Housing Survey. He said that Fannie’s outlook for 2012 remains consistent with revisions this year, given “a great amount of policy uncertainty, including the possibility of fiscal tightening… and the expiration of temporary tax cuts.” The outlook arrives amid a bevy of activity in troubled euro zone markets, with The Wall Street Journal reporting that Moody’s Investors Service placed Slovakia under negative review for political fallout over ratification of the bailout package for Greece.
Double dip is coming – infrastructure investment is our best option
Jones 12 (By Nick Jones, Global Director of PwC’s Public Sector Research Centre, Building our way out of a ‘double dip’?, 01 May 2012, )
News of a potential double dip, upon the release of the ONS’ preliminary GDP estimates, surprised some in the light of more positive recent business surveys. But whether or not we are technically back in recession, there is no doubt that poor economic data gives investors pause for thought when considering their investments, a particular concern given the current high levels of cash being hoarded by large businesses. Clearly, confidence among both consumers as well as businesses needs to tip the balance towards a long-lasting recovery. To achieve this, a key role of government is to consider what type of public spending is most needed to support business growth. And most commentators would say that infrastructure spending is one of the key priorities, with the OECD calling for more to be done. The private sector’s ability to generate jobs and income depends heavily on the public sector investing in modern, efficient infrastructure. As we argued in Good Growth, well directed public infrastructure spending in general not only directly creates jobs but also drives economic growth at both national and regional levels by opening up labour and product markets and reducing business costs. Clearly there are some limits: if a government spends its entire budget on infrastructure, funded by punitive taxes or excessive borrowing, then this will not facilitate economic growth. However, hard infrastructure, such as road and rail networks, is always an important factor influencing firms’ decisions of where to locate. And a one-off targeted increase in planned capital spending of, say, £5-10 billion (as discussed in PwC’s latest UK Economic Outlook) would have minimal impact on current structural deficit targets in the medium term, but could make an important contribution to future jobs and growth. It also has important non-economic effects. For instance, transport infrastructure spending improves quality of people’s lives either by making travel more comfortable and safe or by reducing travel time to allow people to spend more time on whatever they want to do. Building houses in areas of high demand makes it easier to move to where jobs are, contributing to improved labour market flexibility, and also improves the health of the population. And modern infrastructure is important to investors as well - even in the world’s strongest economies, such as Germany. For instance, Lars Martin Klieve (City Treasurer of Essen) commented in Taking responsibility: Government and the Global CEO: “In the past, our strong infrastructure attracted investor confidence in Germany increasing our strength, but today it is apparent how our infrastructure is suffering adversely thus also affecting investor confidence in Germany.” So it’s not only businesses and the public who want modern, efficient infrastructure. Investors recognise the important role of infrastructure in the growth story. Government should take this limited window of opportunity to do more to build our way out of recession.
No growth
Growth is stalling now
Coy, 6/1 (Peter, Bloomberg Businessweek's economics editor, 6/1/2012, “The U.S. Economy Slips Below the 'Mendoza Line'” )
The U.S. jobs machine underperformed even the most pessimistic forecasts in May, adding just 69,000 jobs. The lowest estimate of 87 economists surveyed by Bloomberg was 75,000, with a median of 150,000 and an optimistic top estimate of 195,000. The unemployment rate ticked up to 8.2 percent from 8.1 percent in April. The worse-than-mediocre job growth is a big blow to the reelection campaign of President Barack Obama, who has been touting the economy’s gradual recovery from the worst recession since the Great Depression. Even with the latest job gain, the economy has regained only 3.9 million of the 8.8 million jobs that were lost in the deep recession that ended in June 2009. May’s job growth was the smallest increase in a year. The U.S. economy has “slipped back under the Mendoza line,” JPMorgan Chase (JPM) Chief U.S. Economist Michael Feroli said Thursday, before the jobs report came out but after another discouraging report—the news that the U.S. economy grew at an annual rate of just 1.9 percent in the first quarter. The Mendoza line is baseball lingo that has made the jump into business. It’s a reference to Mario Mendoza, a shortstop for Pittsburgh, Seattle, and Texas in the 1970s and 1980s whose batting average (below .200 in five of his nine seasons) has come to stand for the dividing line between mediocrity and badness. Each of the past three years, job growth started strong and then faded. In 2010 there was a peak in March and April; in 2011 the strongest period was February, March, and April; in 2012 it was January and February, when the economy added well over 200,000 jobs.
Growth and employment are declining risking recession
Morici, 6/4 ( Peter, professor at the Smith School of Business, U. of Maryland 6/4/2012, “Depressed by a US jobs stalemate,” )
The US economy added only 69,000 jobs in May – only about half of what is needed to keep up with natural population growth. The unemployment rate rose to 8.2 per cent. In the weakest recovery since the Great Depression, nearly the entire reduction in unemployment since October 2009 has been accomplished through a significant drop in the percentage of adults working or looking for work. Some of these folks returned to the labour market in May; consequently, unemployment ticked up a tenth of a percentage point. Growth slowed to 1.9 per cent in the first quarter from 3 per cent the previous period, and was largely sustained by consumers taking on more car and student loans, business investments in equipment and software, and some inventory build. The housing market is improving and that should lift second quarter residential construction a bit but overall, the economy and jobs growth should remain too slower to genuinely dent unemployment. The May jobs report indicates growth could be even slower in the second quarter, and the economy is dangerously close to stalling and falling into recession. Manufacturing added 13,000 jobs. Other big gainers were health care, wholesale trade, and transportation and warehousing. Construction lost about 28,000 jobs, and other big losers were leisure and hospitality and state and local governments. In other sectors, jobs gains were weak or small numbers of jobs were lost.
Slowing economy – fewer jobs, rising unemployment, Europe and China, Dow Jones Industrial average, and falling consumer confidence
Dewan, ‘12
[Shaila Dewan, reporter, award winner from National Association of Black Journalists, 6/01/2012, NYT ]
For a third year, the economic recovery in the United States is floundering, stoking fears of a global slowdown as the European crisis escalates.¶ Last month, the nation’s employers added the fewest jobs in a year and the unemployment rate actually rose, the Labor Department reported Friday. May was not a fluke either. It was the third consecutive month of disappointing results.¶ The weakening recovery is a serious vulnerability for President Obama as he faces re-election and it provides traction to his Republican rival, Mitt Romney, who says the administration has not done enough to strengthen the economy. Because Washington remains deeply divided over how best to stimulate growth, the report increases the pressure on the Federal Reserve to take further action on its own.¶ The United States gained a net 69,000 jobs in May, for an average of 96,000 over each of the last three months. That is down from a 245,000 gain on average from December through February. The unemployment rate rose to 8.2 percent in May from 8.1 in April, though largely because more people began looking for work. And there was more bad news: job gains that had been reported in March and April were revised downward.¶ Economists can explain away a month or two of dismal numbers, but a three-month run is difficult to ignore. The economy now seems to be following the spring slowdown pattern of the last two years — a bright spot of accelerating growth followed by a slump. The news on Friday even raised mentions of a possibility that dogged last year’s forecasts but did not come to pass: another recession.¶ The report on American jobs added to the global pall that has deepened with Europe’s debt crisis and slowing growth in China and India. Global financial markets, weak in early trading on Friday, sank further on the report. The Dow Jones industrial average lost 2.22 percent, or 274.88 points, wiping out its gains for the year, and the main index of the German stock market closed down 3.4 percent.¶ Yields on United States and German government bonds also slumped as investors bid up the bonds’ prices looking for safety. The 10-year Treasury yield fell to another record low, 1.46 percent, and the German two-year bond fell below zero.¶ Steve Blitz, chief economist of ITG Investment Research, said that the big improvements over the winter were not a true acceleration but simply a catch-up after last year’s dip. The underlying pace of the domestic economy is a slog, driven by manufacturing and restrained by slackening global demand. “The reason why it was never going to build momentum going forward was simply because the rest of the world was slowing down,” he said.¶ Once again, uncertainty became a dominant theme. “Manufacturers are very concerned about Europe because a blowup in Europe means a global slowdown,” said Ellen Zentner, the senior United States economist for Nomura, the financial services firm. “It hasn’t translated into layoffs — businesses are just hiring less.”¶ Charles Ingram, vice president for marketing and sales at Eriez Magnetics, which produces industrial equipment, said the company was still hiring and still getting orders, but watching developments closely. “We’re very diverse, so if one or two industrial markets are down, we’re O.K.,” he said. “But if there’s a general recession, that would be a real problem, and that’s certainly a possibility.”¶ Republicans immediately seized upon the jobs numbers as an opportunity to criticize Mr. Obama’s economic policies.¶ Mr. Romney called the report a “harsh indictment of the president’s handling of the economy” and “devastating news for American workers and American families.”¶ The White House emphasized that the report showed the 27th month of job gains, and called on Congress to pass the president’s numerous job-related proposals.¶ The May jobs report showed gains in health care, transportation and warehousing, and wholesale trade, while construction jobs fell by a seasonally adjusted 28,000. Even some bright spots, like booming auto sales, failed to meet expectations or to bolster manufacturing employment by much — only 12,000 jobs.¶ Once again, government reduced workers, driven by cutbacks at the local level.¶ “In February or March, I thought the labor market had achieved escape velocity,” said Patrick J. O’Keefe, the director of economic research at J. H. Cohn, a consulting firm. “It appears to me now that that was a premature call.”¶ The gloomy news drew attention to the Federal Reserve, which could choose to step up its stimulus campaign. Several members of the Fed’s policy-making committee have said in recent days that they were not inclined to change current policy, but that position has always been contingent on continued growth.¶ The economy needs to grow by about 125,000 jobs each month just to maintain the current unemployment rate.¶ When the Fed committee next meets, in late June, it will face the possibility that the recovery has failed once again to take off.¶ Fears of a global slowdown showed up in other economic data on Friday. Cooling exports dampened the nation’s major manufacturing index, though it remained in positive territory. That news came on the heels of several worrisome reports like falling consumer confidence, an uptick in new claims for unemployment benefits and a downward revision of the country’s overall economic growth in the first quarter, to a 1.9 percent annual rate from 2.2 percent. Income grew slightly between March and April, another government report said, though consumer spending grew a little more — a situation that economists say cannot last.¶ The jobs report is based on two surveys, one of businesses and the other of households. The household survey showed a net gain of 422,000 in the number of people employed, and also an uptick in the percentage of the working-age population who have jobs.¶ But David Rosenberg, the chief economist with Gluskin Sheff, an investment firm, said much of that gain was in part-time work, while the number of full-time workers fell.¶ “Even the good news in this report was bad,” he said.¶ Some analysts said it was too soon to declare a significant slowdown. The recovery’s roller-coaster trajectory may be largely illusory, the product of seasonal adjustment distortions and, this year, the unusually warm winter, Ms. Zentner said.¶ Many economists say the weather effect, which caused some growth to occur earlier in the year than it otherwise would have, should be over by now. Ms. Zentner said, however, that her research showed that historically, May is the month that is most reduced after a warm winter. Seasonal adjustments were also making the winter look better than it was and the spring look worse.¶ “What the seasonal bias has done is it’s made the recovery look like a stop-start recovery,” Ms. Zentner said. “Instead, the pace of the recovery has been very steady — very moderate, and disappointing, but steady.”¶ The number of long-term unemployed, those who have been looking for work for more than half a year, rose by 300,000, even as hundreds of thousands of jobless workers lost their unemployment checks because of cutbacks. The long-term unemployed have the most difficulty finding jobs, and many of them say they have not seen any improvement in the job market.¶ “Nobody has lists and lists of hundreds of available jobs,” said Glen Barry of Carmel, N.Y., who worked for the government at the county level for 25 years as a computer operator and was laid off in December 2010. “A lot of people work a job and a half now. Instead of having four people doing the work, they have two people doing the work.”
Economy slowing down – European troubles, rising gas prices, and job cuts
Leonhardt, ‘12
[David Leonhardt, bureau chief of the times, Pulitzer prize in commentary of economic questions2011, 6/1/2012, NYT ]
Friday’s jobs report was the most important in a while – and it was terrible.¶ When the jobs market weakened in March and April, economists could tell a sensible story about why the weakening wasn’t as severe as it looked. The unusually warm weather had caused people to spend more money than they had planned, pulling forward economic activity – and hiring – into late 2011 and early 2012. The slowdown in March and April seemed as if it might simply be payback, rather than a truly worrisome new trend.¶ But you can’t tell that story anymore. Some combination of problems – Europe’s new troubles, the rise in gas prices from several months ago, the continued cuts in government employment, the continued hangover from the financial crisis – has clearly slowed the economy. You can look at either survey that the Labor Department does, of businesses or households, and you can look at any time period. The message is the same.¶ For the third straight year, the economy has fallen into a spring slump.¶ Over the last three months, the economy has added an average of only 96,000 jobs a month, down from a three-month average of 252,000 in February. The growth of the last three months is the weakest since August. It’s weaker than the three-month growth in most of 2011 and half of 2010.¶ Job growth in the private sector has slowed, while the federal government and local governments are cutting workers. (State governments are no longer cutting, but they are not adding many, either.)¶ What happens now? Don’t expect much action from Congress, despite the talk you will hear on Friday. The jobs numbers will certainly raise the odds of further action by the Federal Reserve, but it’s not clear by how much. Perhaps most important, the decisions of European policy makers loom even larger now.
=== INTERNAL LINKS ===
Stimulus Good – TI specific
Infrastructure spending is the best form of stimulus – jobs, GDP, and productivity
NIA 10 (Northern Ireland Assembly, THE ROLE OF INFRASTRUCTURE INVESTMENT IN STIMULATING ECONOMIC GROWTH DURING A RECESSION WITH EXAMPLES FROM AUSTRALIA AND USA. 21 st January 2010, )
Infrastructure Investments as a Job Creation Tool 6 : ƒ All forms of spending will produce jobs. But infrastructure investment is a highly effective engine of job creation. Thus, infrastructure investment spending will create about 18,000 total jobs for every $1 billion (US) in new investment spending, including direct, indirect and induced jobs. By contrast, a rise in household spending levels generated by a tax cut will create, at most, about 14,000 total jobs per $1 billion (US) in spending. This is 22% less than infrastructure investments. ƒ The main reason infrastructure investments create more jobs than an increase in household consumption is that the share of spending done within the U.S, as opposed to the purchase of imports, is significantly higher with infrastructure investments. Obama’s Stimulus Package: ƒ The President’s FY 2010 budget includes funding of $25 billion (US) over the next five years to capitalise a National Infrastructure Bank to invest in large infrastructure projects that promise significant national or regional economic benefits. Infrastructure Costs Less During a Recession: Harvard economist Edward L. Glaeser 7 supports “spending more right now … because the costs of those investments are lower during a recession, when people are out of work and equipment is underutilised. Moreover, public programs can reduce the human costs of a recession, and perhaps reduce the chance that this current downturn can become a deep and lasting depression” Need for New Economic Focus: According to David Brooks from the New York Times 8 there is need for a long term vision: ƒ “Major highway projects take about 13 years from initiation to completion – too long to counteract any recession. But at least they create a legacy that can improve the economic environment for decades to come”. ƒ “A major infrastructure initiative would create jobs for the less-educated workers who have been hit hardest by the transition to an information economy. It would allow the U.S to return to the fundamentals”. ƒ “Americans now spend 3.5 billion hours a year stuck in traffic, a figure expected to double by 2020. The U.S. population is projected to increase by 50% over the next 42 years. American residential patterns have radically changed. Workplaces have decentralised. Commuting patterns are no longer Providing research and information services to the Northern Ireland Assembly radial, from suburban residences to central cities. Now they are complex weaves across broad mega-regions. Yet the infrastructure system hasn’t adapted”. 3 President’s Economic Recovery Advisory Board (PERAB) 10 : In the USA, the PERAB believes that infrastructure spending by the federal government can boost the growth of output and employment during the extended recovery period. There are several reasons for this belief: Boost for GDP: According to PERAB, macroeconomic models indicate that $1 of infrastructure spending boosts GDP by $1.59. A dollar of government spending on infrastructure has a larger effect on GDP and employment than many other kinds of government spending. Many of the jobs created through infrastructure spending are in the construction industry and related sectors that have sustained the largest job losses (about 25% of the total).
Infrastructure bank prevents double dip recession – inaction drains growth ( GOOD CARD )
Marshall & Thomasson 11 (Will Marshall, president and founder of the Progressive Policy Institute (PPI); found the Democratic Leadership Council, serving as its first policy director; Scott Thomasson - director of economic and domestic policy for the Progressive Policy Institute and manages PPI's Innovative Economy Project and E3 Initiative, “Sperling on “Deferred Maintenance””, October 7, )
It’s hard to imagine a more myopic example of the right’s determination to impose premature austerity on our frail economy. From Lincoln to Teddy Roosevelt to Eisenhower, the Republicans were once a party dedicated to internal nation building. Today’s GOP is gripped by a raging anti-government fever which fails to draw elementary distinctions between consumption and investment, viewing all public spending as equally wasteful. But as the White House’s Gene Sperling said yesterday, Republicans can’t claim credit for fiscal discipline by blocking long overdue repairs of in the nation’s transport, energy and water systems. There’s nothing fiscally responsible about “deferring maintenance” on the U.S. economy. Sperling, chairman of the president’s National Economic Council, spoke at a PPI forum on Capitol Hill on “Infrastructure and Jobs: A Productive Foundation for Economic Growth.” Other featured speakers included Sen. Mark Warner, Rep. Rosa DeLauro, Dan DiMicco, CEO of Nucor Corporation, Daryl Dulaney, CEO of Siemens Industry and Ed Smith, CEO of Ullico Inc., a consortium of union pension funds. Fiscal prudence means foregoing consumption of things you’d like but could do without if you can’t afford them – a cable TV package, in Sperling’s example. But if a water pipe breaks in your home, deferring maintenance can only lead to greater damage and higher repair costs down the road. As speaker after speaker emphasized during yesterday’s forum, that’s precisely what’s happening to the U.S. economy. Thanks to a generation of underinvestment in roads, bridges, waterways, power grids, ports and railways, the United States faces a $2 trillion repair bill. Our inadequate, worn-out infrastructure costs us time and money, lowering the productivity of workers and firms, and discouraging capital investment in the U.S. economy. Deficient infrastructure, Dulaney noted, has forced Siemens to build its own rail spurs to get goods to market. That’s something smaller companies can’t afford to do. They will go to countries – like China, India and Brazil – that are investing heavily in building world-class infrastructure. As Nucor’s DiMicco noted, a large-scale U.S. infrastructure initiative would create lots of jobs while also abetting the revival of manufacturing in America. He urged the Obama administration to think bigger, noting that a $500 billion annual investment in infrastructure (much of the new money would come from private sources rather than government) could generate 15 million jobs. The enormous opportunities to deploy more private capital were echoed from financial leaders in New York, including Jane Garvey, the North American chairman of Meridiam Infrastructure, a private equity fund specializing in infrastructure investment. Garvey warned that what investors need from government programs is more transparent and consistent decision making, based on clear, merit-based criteria, and noted that an independent national infrastructure bank would be the best way to achieve this. Bryan Grote, former head of the Department of Transportation’s TIFIA financing program, which many describe as a forerunner of the bank approach, added that having a dedicated staff of experts in an independent bank is the key to achieving the more rational, predictable project selection that investors need to see to view any government program as a credible partner. Tom Osborne, the head of Americas Infrastructure at UBS Investment Bank, agreed that an independent infrastructure bank like the version proposed by Senators Kerry, Hutchison and Warner, would empower private investors to fund more projects. And contrary to arguments that a national bank would centralize more funding decisions in Washington, Osborne explained that states and local governments would also be more empowered by the bank to pursue new projects with flexible financing options, knowing that the bank will evaluate projects based on its economics, not on the politics of the next election cycle. Adding urgency to the infrastructure push was Fed Chairman Ben Bernanke’s warning this week that the recovery is “close to faltering.” Unlike short-term stimulus spending, money invested in modernizing infrastructure would create lasting jobs by expanding our economy’s productive base. Warning that America stands on the precipice of a “double dip” recession, Sperling said it would be “inexcusable” for Congress to fail to act on the president’s job plan. He cited estimates by independent economic experts that the plan would boost GDP growth in 2012 from 2.4 to 4.2 percent, and generate over three million more jobs.
Infrastructural investment key to reverse downturn
Reddy, ‘09
[Sudeep Reddy, Finance and Federal Reserve writer, 1/8/2009, Wall Street Journal Asia ]
But during this period of financial turmoil, monetary policy has been inadequate. Banks and other creditors remain wary of lending because they're afraid they won't get repaid. The U.S. Federal Reserve lowered its interest-rate target to near zero last month from 5.25% in mid-2007, and is employing other tools to restore growth, but the economy has continued to spiral downward.¶ So, nations are turning again to stimulus spending. Economists say that if governments can get money into the economy quickly, targeting projects that will have the biggest effect, and make sure the spending is temporary, they can avoid inflation and wasteful spending. "We do need a jolt to really cushion the blow of this shock," says Morgan Stanley economist Richard Berner. "We need a stimulus that is temporary but substantial."¶ Mr. Obama says he is planning the largest U.S. public-works program since the 1950s construction of interstate highways. In China, the government plans to pour more money into hard infrastructure such as railways and airports.¶ For any infrastructure investment to succeed as stimulus, nations must ensure people are hired quickly to work to reverse the downturn -- and don't become part of a permanent program
Short term job stimulus through increased financing would greatly increase GPD
McConaghy and Kessler 11
(Ryan, Deputy Director of the Third Way Economic Program, Jim, Vice President for Policy at Third Way, January 2011, “A National Infrastructure Bank”, )
By providing a new and innovative mechanism for project financing, the NIB could help provide funding for projects stalled by monetary constraints. This is particularly true for large scale projects that may be too complicated or costly for traditional means of financing. In the short-term, providing resources for infrastructure investment would have clear, positive impacts for recovery and growth. It has been estimated that every $1 billion in highway investment supports 30,000 jobs,37 and that every dollar invested in infrastructure increases GDP by $1.59.38 It has also been projected that an investment of $10 billion into both broadband and smart grid infrastructure would create 737,000 jobs.39 In the longer-term, infrastructure investments supported by the NIB will allow the U.S. to meet future demand, reduce the waste currently built into the system, and keep pace with competition from global rivals.
Infrastructure stimulus is effective – empirics prove
Blodget 12 ( Henry Blodget is co-founder, CEO and Editor-In Chief of Business Insider a top-ranked Wall Street Internet analyst. Jun. 19, 2012, Yes, It's Time For A Massive Infrastructure Spending Program, ://infrastructure-spending-program-2012-6?op=1)
YES, GOVERNMENT SPENDING DOES WORK--SOME GOVERNMENT SPENDING
The economy is basically composed of three big spending engines —consumers, corporations (investment), and governments. So when the first two weaken, as they have in recent years, the third can help offset this weakness. Specifically, the government can increase its spending to offset the lost consumer and business spending. When governments spend money well, moreover—such as on infrastructure projects that benefit all citizens—the impact of this spending lasts far beyond the years in which the money is spent. Roads, bridges, schools, airports, national broadband networks, and other investments can improve the country for decades. When the government spends money badly, meanwhile--on bailouts and handouts and by perpetuating unsustainable promises of entitlement programs--the money is just wasted. Ever since the 2009 stimulus "failed to fix the economy," the consensus in the US has been that government stimulus doesn't work. There's actually a lot of evidence to suggest that it did work, or at least helped improve the situation (check out these charts). But the theory that government spending "doesn't work" is pervasive. In support of this theory, everyone first points to Japan, where the government has been frantically "stimulating" the economy for two decades now. Then they point to the Great Depression, with its massive public-works programs. But other evidence suggests that the impact of government stimulus, specifically infrastructure stimulus, is being badly misunderstood. Richard Koo Think Japan's stimulus has failed? Look at what it would have done with government intervention (red line). The work of economist Richard Koo, for example, suggests that Japan's stimulus has been vastly more successful than is commonly believed. Far from not working, Koo argues, Japan's government stimulus has kept Japan's economy alive for the past 20 years. Without the stimulus, Koo says, Japan's economy would not have crawled along for the last two decades—it would have collapsed. When the same logic is applied to the US stimulus of 2009-2010, the conclusion is that the stimulus "failed to fix" the US economy, but that it kept the recession from being much worse. In addition to Japan, one of the most often-repeated examples cited by those who say stimulus doesn't work is the US experience in the Great Depression. To see that stimulus doesn't work, they say, all you need to do is look at the huge public-works programs of the 1930s, which failed to pull the US permanently out of the Depression. What finally got the US out of the Depression, these folks continue, was World War 2. World War 2: The biggest Keynesian stimulus ever. But what was World War 2 if not a gigantic government stimulus? That's exactly what World War 2 was. It put the US government deeply in debt, vastly deeper in debt than we are today. But it got our production engine humming again. And it set the stage for decades of impressive growth, during which we eventually worked off the World War 2 debt. So there's a lot of evidence to suggest that the current consensus that stimulus "doesn't work" is flat-out wrong. In fact, the evidence suggests, stimulus can keep the economy from collapsing while the private sector heals itself. And this, in turn, suggests that ruling out future stimulus in the form of infrastructure investment as a way to help the economy is a major mistake, especially with US infrastructure in such lousy shape and so many US workers idled by the construction industry slowdown. To learn more about how government stimulus helps economies get through depressions, flip through some of Richard Koo's excellent slides below. They focus on Japan, the Depression, and recent US and Europe experiences...
Jobs
Plan would create jobs – work could start immediately
Minta ’08 ( Norman Y. Mineta, Former US Secretary of Transportation, Nov 19 2008, “ Preserving The Nation’s Infrastructure Must Be A Top Priority Of Leaders”, ) SRK
According to the recent release of joblessness numbers put out by the Bureau of Labor Statistics, there are more than 10.1 million people in this country who are unemployed. As a former secretary of Transportation, I know that for every $1 billion that is spent on transportation projects, an average 37,000 new jobs will be created, with the aftermath of these construction phases typically creating 5,000 to 6,000 permanent jobs. I would also challenge Bernanke's assertion that the nation would not see an immediate creation of jobs through infrastructure projects. There are cities, counties and states throughout the country with environmental impact statements and detailed plans completed and ready to go; yet these projects are languishing because of a lack of funding. If Congress approves an infusion of cash for these projects, there will be very little time before they are moving forward. Job creation is only one factor to consider when discussing investment in the nation's infrastructure. The Interstate 35W bridge that collapsed over the Mississippi River in Minneapolis during rush hour on Aug. 1, 2007, aimed a spotlight on America's crumbling public infrastructure and evoked a strong public response. Too many of the nation's railways, highways, bridges, airports and neighborhood streets are slowly decaying because of lack of investment and strategic long-term planning. Last year, the Federal Highway Administration deemed 72,000 bridges, or more than 12 percent of the country's total, "structurally deficient." But the funds to fix them are shrinking, and in September 2008, the Highway Trust Fund had a deficit, which the Congress corrected with an $8 billion infusion. President-elect Barack Obama's campaign platform included a commitment to revitalizing and strengthening the country's core transportation infrastructure. He believes that America's long-term competitiveness depends on the stability of the country's critical infrastructure, and he has pledged to strengthen the country's transportation systems, including roads and bridges. Obama has also stated that he will enter into a new partnership with civic, political and business leaders at the state and local levels to create a national infrastructure policy focused on how to upgrade the nation's infrastructure to meet the demands of a growing population, a changing economy and short- and long-term energy challenges.
Infrastructure bank would cut unemployment by hundreds of thousands
Anand 11 (Anika, MSNBC, “Bank plan would help build bridges, boost jobs“, July 6 2011, )
China announced last week that it opened the world’s longest sea bridge and added a line to the world’s largest high-speed rail network. Meanwhile, on this side of the Pacific, the United States is struggling to address its crumbling roads and creaky bridges. A bill wending its way through Congress looks to change that, and by doing so create jobs and fund projects, such as a high-speed rail line. American has fallen to 23rd in infrastructure quality globally, according to the World Economic Forum. It will take about $2 trillion over the next five years to restore the country’s infrastructure, says the American Society of Civil Engineers. Given America's weak economy and rising national debt, the government can’t promise anything close to an amount that dwarfs most countries' total economies. But a national infrastructure bank could help. The idea of such a bank has been around since the 1990s but has never gained significant attention until now. In March a bipartisan bill was introduced in the Senate that gained the support of the US Chamber of Commerce, America’s leading business lobby, and the AFL-CIO, the country’s largest labor federation — two groups on opposite sides of most debates. The BUILD Act, proposed by Sens. John Kerry, D-Mass., Kay Hutchinson, R-Texas, and Mark Warner, D-Va., would create a national infrastructure bank that would provide loans and loan guarantees to encourage private investment in upgrading America’s infrastructure. There are other similar proposals circulating in Congress, but the BUILD Act has gained the most traction. The bank would receive a one time appropriation of $10 billion, which would be aimed at sparking a total of $320 to $640 billion in infrastructure investment over the course of 10 years, Kerry's office says. They believe the bank could be self-sustaining in as little as three years. “Federal appropriations are scarce in this difficult budget environment, and there is increasing attention on inefficiencies in the way federal dollars are allocated,” wrote Kerry spokeswoman Jodi Seth in an e-mail. Advocates offer a laundry list of benefits for an “Ibank.” At the top of the list, they tout the bank’s political independence. The bank would be an independent government entity but would have strong congressional oversight. Bank board members and the CEO would be appointed by the president and confirmed by the Senate. Kerry says this structure would help eliminate pork-barrel earmark projects. If, for example, private investors wanted to invest in a project, under the BUILD Act they could partner with regional governments and present a proposal to the bank. The bank would assess the worthiness of the project based on factors like the public’s demand and support, and the project's ability to generate enough revenue to pay back public and private investors. The bank could offer a loan for up to 50 percent of the project’s cost, with the project sponsors funding the rest. The bank would also help draft a contract for the public-private partnership and ensure the government would be repaid over a fixed amount of time. If the Ibank funded something like the high-speed rail project, it would become another investor alongside a state government, a private equity firm or another bank. The project sponsors' loans would be repaid by generating revenue from sources such as passenger tickets, freight shipments, state dedicated taxes. Relies on loans Under previous proposals, which never have gained much momentum, an infrastructure bank would have offered grants, which would be more costly to taxpayers. The BUILD Act relies on loans instead, and project borrowers would be required to put up a reserve against potential bad debt. The bank would make money by charging borrowers upfront fees as well as interest rate premiums. The bill’s supporters say this type of public-private partnership model has been successfully applied to the Export-Import Bank of the United States, which has generated $3.4 billion for the Treasury over the past five years. The Export-Import bank finances and insures foreign purchases. It’s important to note that the infrastructure bank is only meant to jump-start infrastructure investment, not fund every project, said Michael Likosky, a senior fellow at NYU's Institute for Public Knowledge and a long-time proponent of a national infrastructure bank. Supporters hope the bank also would jump-start the job market. Former President Bill Clinton endorses the idea of an Ibank, although he has not necessarily thrown his weight behind the BUILD Act. “I think there are enormous jobs there,” he said in an interview last week on CNBC. “Every manufacturing job you create tends to create more than two other jobs in other sectors of the economy and it makes America more competitive, more productive.” According to the Department of Transportation's 2008 numbers, every $1 billion invested in transportation infrastructure creates between 27,800 and 34,800 jobs.
Solves growth
Infrastructure Bank boosts GDP and provides thousands of jobs
Phillips et all. 10 (Mr. Phillips is president of Oracle Corporation. Ms. Tyson is a professor at the Haas School of Business at the University of California, Berkeley. Mr. Wolf is CEO and chairman of UBS Americas. All three are members of President Obama's Economic Recovery Advisory Board. The Wall Street Journal, “The U.S. Needs and Infrastructure Bank,” January 15, 2010, )
Our nation's investment in its physical infrastructure is far below what is necessary to meet its needs. Infrastructure spending in real dollars is about the same now as it was in 1968 when the economy was a third smaller. No wonder the American Society of Civil Engineer gave America's infrastructure a failing grade of D in its 2009 report. Twenty-six percent of the nation's bridges are structurally deficient or functionally obsolete, and 188 cities have "brownfield" hazardous waste sites awaiting clean up and redevelopment, according to the engineering society. State and local governments account for about 75% of infrastructure spending, and most are reeling from budgetary shortfalls. In addition, the contraction of monoline insurers (specialized insurers that guarantee repayment of bonds) has made it much more difficult to issue infrastructure bonds. This has caused a growing backlog of economically justifiable projects that cannot be financed. Among the projects most at risk are projects of national or regional significance that span multiple states. The writing is on the wall: Our aging infrastructure will eventually constrain economic growth. This is why the president's Economic Recovery Advisory Board, an independent bipartisan group of business, academic and labor leaders of which we are members, recommends the establishment of a National Infrastructure Bank (NIB). The purpose of the bank is to invest in merit-based projects of national significance that span both traditional and technological infrastructure—roads, airports, bridges, high-speed rails, smart grid and broadband—by leveraging private capital. Infrastructure banks have proven successful elsewhere in the world, most notably in the European Union where the European Investment Bank has been operating successfully for over 50 years. That bank is one of the top five issuers of debt in the world. In 2008, it lent 58 billion euros ($81 billion) to finance projects, and had a target of $112 billion last year. It's time we accept that government alone can no longer finance all of the nation's infrastructure requirements. A national infrastructure bank could fill the gap. We believe that the NIB should be structured as a wholly owned government entity to keep borrowing costs low, align its interests with the public's, and avoid the conflicting incentives of quasi-government agencies. We also recommend that the NIB be run by a government-appointed board of professionals with the requisite expertise to evaluate complex projects based on objective cost-benefit analysis. Today, projects are subject to the uncertainties of the opaque congressional appropriations process, which is how we end up with proverbial and actual bridges to nowhere. The private sector raised over $100 billion in dedicated infrastructure funds in recent years, but most of that money is being spent on infrastructure projects outside the U.S. The NIB could attract private funds to co-invest in projects that pass rigorous cost-benefit tests, and that generate revenues through user fees or revenue guarantees from state and local governments. Investors could choose which projects meet their investment criteria, and, in return, share in project risks that today fall solely on taxpayers. The NIB would not only help the nation meet the infrastructure needs of the future, it would also support the economy's recovery over time. According to a study by Moody's , an increase in infrastructure spending of $1 increases GDP by about $1.59. This spending creates real jobs, particularly in the construction industry, which accounted for about a quarter of the nation's total job losses last year and shed another 53,000 jobs in December alone. Construction could face years of anemic growth, and the NIB could help boost this sector. We are not advocating make-work projects, but wiser and timelier investment in sorely needed projects of national significance. President Obama has proposed $25 billion in federal funding for a national infrastructure bank in his 2010 budget. Whatever the amount of initial funding, we think it's important to establish the bank now and then justify its continued funding based on its performance and investment returns.
Infrastructure Banks solves large scale projects and spurs economic growth
Kessler and McConaghy 11 (Jim Kessler: Way Director of the Third Way Economic Program, Ryan McConaghy: Vice President for Policy at Third, January 2011, “A National Infrastructure Bank,” )
In order to provide innovative, merit-based financing to meet America’s emerging infrastructure needs, Third Way supports the creation of a National Infrastructure Bank (NIB). The NIB would be a stand-alone entity capitalized with federal funds, and would be able to use those funds through loans, guarantees, and other Financial tools to leverage private Financing for projects. As such, the NIB would be poised to seize the opportunity presented by historically low borrowing costs in order to generate the greatest benefit for the lowest taxpayer cost. Projects would be selected by the bank’s independent, bipartisan leadership based on merit and demonstrated need. Evaluation criteria may include economic benefit, job creation, energy independence, congestion relief, regional benefit, and other public good considerations. Potential sectors for investment could include the full range or any combination of rail, road, transit, ports, dams, air travel, clean water, power grid, broadband, and others. January 2011 A National Infrastructure Bank - 5 The Economic Program The NIB will reform the system to cut waste, and emphasize merit and need. As a bank, the NIB would inject accountability into the infrastructure investment process. Since the bank would offer loans and loan guarantees using a combination of public and private capital, it would have the opportunity to move away from the traditional design-bid-build model and toward project delivery mechanisms that would deliver better value to taxpayers and investors. By operating on principles more closely tied to return on investment and financial discipline, the NIB would help to prevent the types cost escalation and project delays that have foiled the ARC Tunnel. America’s infrastructure policy has been significantly hampered by the lack of a national strategy rooted in clear, overarching objectives used to evaluate the merit of specific projects. The politicization and lack of coordination of the process has weakened public faith in the ability of government to effectively meet infrastructure challenges. In polling, 94% of respondents expressed concern about America’s infrastructure and over 80% supported increased federal and state investment. However, 61% indicated that improved accountability should be the top policy goal and only 22% felt that the federal government was effective in addressing infrastructure challenges. As a stand-alone entity, the NIB would address these concerns by selecting projects for funding across sectors based on broadly demonstrated need and ability to meet defined policy goals, such as economic benefit, energy independence, improved health and safety, efficiency, and return on investment. The NIB will create jobs and support competitiveness. By providing a new and innovative mechanism for project financing, the NIB could help provide funding for projects stalled by monetary constraints. This is particularly true for large scale projects that may be too complicated or costly for traditional means of financing. In the short-term, providing resources for infrastructure investment would have clear, positive impacts for recovery and growth. It has been estimated that every $1 billion in highway investment supports 30,000 jobs, and that every dollar invested in infrastructure increases GDP by $1.59. It has also been projected that an investment of $10 billion into both broadband and smart grid infrastructure would create 737,000 jobs. In the longer-term, infrastructure investments supported by the NIB will allow the U.S. to meet future demand, reduce the waste currently built into the system, and keep pace with competition from global rivals. January 2011 A National Infrastructure Bank - 6 The Economic Program The NIB will harness private capital to help government pay for new projects. The NIB would magnify the impact of federal funds by leveraging them through partnerships with private entities and other actors, providing taxpayers with more infrastructure bang for their public buck. Estimates have placed the amount of private capital readily available for infrastructure development at $400 billion, and as of 2007, sovereign wealth funds—another potential source of capital—were estimated to control over $3 trillion in assets with the potential to control $12 trillion by 2012. While these and other institutional funds have experienced declines as a result of the economic downturn, they will continue to be important sources of large, long-term investment resources. By offering loan guarantees to induce larger private investments or issuing debt instruments and securities, the NIB could tap these vast pools of private capital to generate investments much larger than its initial capitalization. In doing so, it could also lower the cost of borrowing for municipalities by lowering interest on municipal bonds for state and local governments by 50 to 100 basis points. The NIB would also be poised to help taxpayers take full advantage of historically low borrowing costs. In 2010, the yield on 10-year U.S. Treasuries reached a historic low of 3.22%, as compared to a rate of 6.03% in 2000 and a peak rate of 13.92% in 1981. Prior to the Great Recession, this rate had not dipped below 4% since 1962. By allowing government and private actors to access financing at historically low rates, the NIB would help to capitalize on a once-in-a-lifetime window to make enduring infrastructure investments
NIB would finance repairs and improvements thereby increasing GDP and creating more jobs
Kochan, ‘11
[Thomas Kochan, professor at MIT Sloan School of Management and cofounder of the Policy Research Network, 9/5/2011, Boston Globe ]
BUSINESS GROUPS and organized labor have at least one thing in common right now: a frustration that our politics are producing more hot rhetoric than good jobs, even as crucial national needs go unaddressed. But if private industry and labor unions pool their money and their political influence, they can lead the way toward modernizing an aging national infrastructure that dulls America's competitive edge. In doing so, they would also start building the kind of longer-term economic compact necessary to sustain the high-quality jobs that the nation desperately needs.¶ The United States needs some kind of national infrastructure bank - an entity that would provide the financing for long-overdue repairs and improvements to our roads, bridges, and other public works. There is a $2.2 trillion backlog of such projects. Amid rising concerns about federal spending, infrastructure investments are more efficient economic drivers than tax cuts or other stimulus spending in achieving these goals.¶ Moody's estimates every $1 spent on infrastructure generates a $1.59 increase in GDP. University of Massachusetts Professor Robert Pollin has shown these projects generate between 20 to 30 percent more jobs than equivalent tax cuts.
NIB key to durable jobs and lasting economic benefits
Wolf, ‘10
[Robert Wolf, Chairman and CEO & U.S. Senate Documents, 9/21/2010, Congressional Documents and Publications]
As a member of the President's Economic Recovery Advisory Board, I have worked with fellow board members to develop a considered approach to creating a National Infrastructure Bank. Today, I am here to share my own views, as a 26-year veteran of the markets, on why I believe a National Infrastructure Bank is in our nation's best interest. I will also offer specific recommendations on how the proposed bank should be structured to achieve its goals in an optimal manner.¶ Let me say at the outset that creating a National Infrastructure Bank at this time makes sense for two main reasons:¶ (1) It will attract private investment to help fund badly needed infrastructure improvements critical to America's competitiveness and economic growth.¶ State and local governments account for about 75% of public infrastructure spending, and many of these governments are under severe fiscal strain. A number of important projects have been delayed or sidetracked, especially those with high capital cost or those which cross state boundaries. A national infrastructure bank would vet projects carefully, lend to fund the highest priority projects, and help attract private sector capital to augment government funding. Preqin, a private equity industry consultant, estimates that there is over $180 billion dollars of private equity and pension fund capital focused on infrastructure equity investments. This capital can play an important role in bridging state and local budget gaps.¶ (2) It will create jobs.¶ The U.S. Department of Transportation estimates that $1 billion of Federal and State spending on transportation infrastructure creates 27,400 jobs. Similarly, the Milken Institute estimates that $1 billion of spending creates 25,000 jobs. Many of these jobs are in the construction industry and related sectors that have sustained the largest job losses in the economic downturn. Greater employment in these areas is essential to any sustained and accelerated economic recovery. A National Infrastructure Bank will provide funding for new projects that put people to work now - not just transportation-related jobs, but jobs that build durable infrastructure with lasting economic benefit, including projects in energy and electricity, water and wastewater, and telecommunications and broadband. Our hope is that new jobs will be created not only for construction workers, but also for engineers, architects, urban planners, scientists and many industrial production businesses.¶ To achieve these goals, it is crucial that a National Infrastructure Bank be chartered with a clear and achievable mission and strict operational guidelines.¶ I have looked at other government-sponsored infrastructure institutions from around the world and have developed views on what the National Infrastructure Bank's mission should and should not be.
Public infrastructure investment key to long term economic growth
Schwenninger, ‘10
[Sherle R. Schwenninger, founder of New America Foundation’s Economic Growth and American Strategy Programs, former director of World Policy Institute, Founding Editor of World Policy Journal, former Senior Program Coordinator for the Project on Development, Trade and International Finance at the Council on Foreign Relations, 2/23/2010, New America Foundation ]
With American consumers constrained by high household debt levels and with businesses needing to work off overcapacity in many sectors, we need a new, big source of economic growth that can replace personal consumption as the main driver of private investment and job creation. The most promising new source of growth in the near to medium term is America's pent-up demand for public infrastructure improvements in everything from roads and bridges to broadband and air traffic control systems to a new energy grid. We need not only to repair large parts of our existing basic infrastructure but also to put in place the 21st-century infrastructure for a more energy-efficient and technologically advanced society. This project, entailing billions of dollars of new government spending over the next five to ten years, would generate comparable levels of private investment and provide millions of new jobs for American workers.¶ More specifically, public infrastructure investment would have the following favorable benefits for the economy:¶ Job Creation. Public infrastructure investment would directly create jobs, particularly high-quality jobs, and thus would help counter the 8.4 million jobs lost since the Great Recession began. One study estimates that each billion dollars of spending on infrastructure can generate up to 17,000 jobs directly and up to 23,000 jobs by means of induced indirect investment. If all public infrastructure investment created jobs at this rate, then $300 billion in new infrastructure spending would create more than five million jobs directly and millions more indirectly, helping to return the economy to something approaching full employment.¶ A Healthy Multiplier Effect. Public infrastructure investment not only creates jobs but generates a healthy multiplier effect throughout the economy by creating demand for materials and services. The U.S. Department of Transportation estimates that, for every $1 billion invested in federal highways, more than $6.2 billion in economic activity is generated. Mark Zandi, chief economist at Moody's , offers a more conservative but still impressive estimate of the multiplier effect of infrastructure spending, calculating that every dollar of increased infrastructure spending would generate a $1.59 increase in GDP. Thus, by Zandi's conservative estimates, $300 billion in infrastructure spending would raise GDP by nearly $480 billion (close to 4 percent). ¶ A More Productive Economy. Public infrastructure investment would not only help stimulate the economy in the short term but help make it more productive over the long term, allowing us to grow our way out of the increased debt burdens resulting from the bursting of the credit bubble. As numerous studies show, public infrastructure increases productivity growth, makes private investment more efficient and competitive, and lays the foundation for future growth industries. In fact, many of the new growth sectors of the economy in agriculture, energy, and clean technology require major infrastructure improvements or new public infrastructure.
Infrastructure is key to economic competitiveness and productivity—the bank maximizes potential
Rohatyn & Slater 2/20 (Felix Rohatyn & Rodney Slater, 2/20/2012, “America needs its own infrastructure bank,” ProQuest)
America needs to invest in infrastructure. Despite signs of improvement, our economy is still in crisis. We could create millions of jobs by rebuilding our transport and water systems - ending the congestion that stifles our ports, airports, railroads and highways; increasing productivity; and empowering the US to compete with countries that are investing in infrastructure on a massive scale. Infrastructure financing tools are available, providing Washington wants to use them. They could bolster investment by leveraging hundreds of billions of dollars in private and international capital. The potential tools include a national infrastructure bank and other relatively minor legislative changes to encourage private investors off the sidelines. American mutual funds, pension funds and retail investors allocate relatively small portions of their $37,000bn in capital to new infrastructure initiatives. Creating a national infrastructure bank is not a new idea but it finally may be gaining traction. Congresswoman Rosa DeLauro has introduced a House bill to create one, and Senators Kay Bailey Hutchison and John Kerry co-sponsored similar legislation in the Senate. President Obama also supports a such a project. So do the AFL-CIO labour group and the US Chamber of Commerce, organisations that differ sharply on many issues but unite in calling for the US to rebuild. A national infrastructure bank could be independent and transparent. Government-owned but not government-run, it would have a bipartisan board and a staff of experts and engineers to plan projects based on quality and public need, not on politics. The bank would leverage public-private partnerships to maximise private funding and launch projects of regional and national significance with budgets of $100m or more. The infrastructure bank also should have authority to finance projects by issuing bonds with maturities of up to 50 years. These long-duration bonds would align the financing of infrastructure investments with the benefits they create, and their repayment would allow the bank to be self-financing. In addition to a national bank, state legislatures can encourage the creation of state infrastructure banks (32 states now have them) that can also sponsor PPPs. Congress can also promote private investment in infrastructure with two relatively small steps. First, it should pass bipartisan legislation that has been introduced in both of its houses - by Senators Ron Wyden and John Hoeven, and Representatives Leonard Boswell and Ed Whitfield - that would allow state infrastructure banks to sell tax-credit "Trip" bonds to investors. These bonds leverage private capital by providing investors a federal tax credit in lieu of interest. Second, Congress can expand the definitions of Real Estate Investment Trusts (Reits) and Master Limited Partnerships to include investments in assets such as roads, water, ports, airports, transmission lines, waste water and bridges. Reits are publicly traded corporate entities that invest in commercial real estate and pay a reduced or zero rate of tax on their earnings. In turn, Reits must distribute 90 per cent of their income to investors. Similarly, MLPs are publicly traded partnership vehicles that do not pay federal and state income taxes and return income to partners. Applying the Reit/MLP model to infrastructure assets would attract investment from the deep US retail and institutional investor market, dramatically increasing funding support for new projects. Projects that were once unable to attract support could become financially viable, and more infrastructure projects could be supported. Yes, there would be short-term costs in making these changes. But in approving infrastructure financing vehicles, Congress would distinguish between capital investments and expenses, a distinction that ought to - but rarely does - underpin federal budgeting. The federal budget should be a tool to encourage national investment, as it was when Thomas Jefferson purchased Louisiana and when Dwight Eisenhower built our super- highways. These great achievements proved public investment can generate vast returns. Investing in our infrastructure would prove it once again.
NIB would increase consumer confidence for continued growth post-stimulus
Skidelsky 11 (Robert, Emeritus Professor of Political Economy at the University of Warwick, March 30th, 2011, “For a National Investment Bank” )
The creation of a National Investment Bank would also have a final benefit that would be peripheral to its main purpose but might in the long run be its most important. The financial crisis has left the impression that the main purpose of the banking sector is to enrich tiny elite at the expense of taxpayers. Adair Turner, the chairman of the UK Financial Services Authority, expressed a widespread sentiment when he said in a review of the past decade of financial innovation that much of it was “socially useless...”4 In fact, the public understands that a well-functioning financial system is essential to the US economy; and in the light of recent experience, many also understand that extensive changes in behavior are required to bring such a system into being. Apart from the Dodd-Frank bill passed in July 2010, further regulatory reform for existing banks is clearly necessary, as the recent findings of the Financial Crisis Inquiry Commission, under Phil Angelides, have made clear. But such comprehensive efforts will be complex, and new regulatory regimes in particular take time to become established. A National Investment Bank, by contrast, would be able to adopt stricter rules from its inception, and thus demonstrate the social value of the financial sector to a quite justifiably disenchanted public. It could restore confidence, not only in future demand, but in banks and in banking itself.
Growth is immediate
(Rohatyn ‘2011, Felix G. Rohatyn, special adviser to the chairman and chief executive officer of Lazard and former chairman of New York’s Municipal Assistance Corp, member of the Council on Foreign Relations, American Academy of Arts and Sciences, and a Trustee for the Center for Strategic and International Studies, “Time for a US Infrastructure Bank”, Politico, 6/12/2011, )
We should view infrastructure financing as an investment rather than an expense and should establish a national, capital budget for infrastructure. This idea is not new. Five years ago, former Sen. Warren Rudman and I co-chaired a commission on public infrastructure at the Center for Strategic and International Studies — a bipartisan group of congressional and business leaders, governors and bankers that unanimously recommended an infrastructure bank and called for a capital budget. Yet these proposals were — and perhaps still are — unable to gain political traction. China, India and European nations are spending the equivalent of hundreds of billions of dollars on efficient public transportation, energy and water systems. Here in the United States, a five-year investment of $2.2 trillion is needed simply to make U.S. infrastructure dependable and safe, according to the American Society of Civil Engineers. The obvious, negative effect of this situation on our global competitiveness, quality of life and ability to create American jobs is a problem we no longer can ignore. This national infrastructure bank should be owned by the federal government but not operated by it. In this, it would be similar to the World Bank and European Investment Bank. Funded with a capital base of $50 billion to $60 billion, the infrastructure bank would have the power to insure bonds of state and local governments, provide targeted and precise subsidies and issue its own 30-to-50-year bonds to finance itself with conservative 3:1 gearing. Such a bank could easily leverage $250 billion of new capital in its first few years and as much as $1 trillion over a decade. Run by an independent board nominated by the president and confirmed by the Senate, the bank would finance projects of regional and national significance, directing funds to their most important uses. It would also provide a valuable guidance-system for the $73 billion that the federal government spends annually on infrastructure and avoid wasteful “earmark” appropriations. The money would come from funds now dedicated to existing federal programs.
Helps states
TI spending beneficial for states - Washington proves
Newman, ‘08
[Emily Newman, Staff Writer, 4/15/2008, The Bond Buyer ]
Washington's strong economic position, its current ability to sell debt and pay low interest rates, and the continual demand for new infrastructure projects will likely combine to encourage increased bond issuance for 2008, officials say.¶ The 2007-2009 operations budget includes $33.4 billion, while the capital budget provides more than $7.5 billion for transportation infrastructure and $4.6 billion for other construction. Roughly half of those projects will be funded with bonds. A supplemental budget released by Gov. Chris Gregoire's office includes four bond-related bills.¶ "No state has a shortage of infrastructure needs, and anything that helps the economy helps us have a favorable credit rating and helps us to do more funding," said Wolfgang Opitz, deputy director for the state's Office of Financial Management.
Stimulus Good – Generic
Shock stimulus self-finances and directs investment into the economy, establishing a long-term output growth rate
Summers and DeLong, ‘12
[Lawrence H. Summers: Harvard University, J. Bradford DeLong: U.C Berkeley, 3/20/2012, NBER ]
This paper focuses on policy choices in a deeply depressed demand constrained ¶ economy in which present output and spending are well below their potential level. ¶ We presume for the moment that monetary policy is constrained by the zero lower ¶ bound, and that the central bank is unable or unwilling to provide additional stimulus through quantitative easing or other means—an assumption we discuss further ¶ in Section V. The fact that most estimates of Federal Reserve reaction functions ¶ suggest that, if it were possible to have negative short-term safe nominal interest ¶ rates, they would have been chosen in recent years suggests the relevance of our ¶ analysis.¶ 7¶ We focus on the impact of temporary fiscal stimulus on the government’s long run ¶ budget constraint.¶ A very simple calculation conveys the major message of this paper: A combination ¶ of low real U.S. Treasury borrowing rates, positive fiscal multiplier effects, and ¶ modest hysteresis effects is sufficient to render fiscal expansion self-financing. ¶ Imagine a demand-constrained economy where the fiscal multiplier is 1.5, and the ¶ real interest rate on long-term government debt is 1 percent. Finally assume that a ¶ $1 increase in GDP increases tax revenues and reduces spending by $.33. Assume ¶ that the government is able to undertake a transitory increase in government spending, and then service the resulting debt in perpetuity, without any impact on risk ¶ premia.¶ Then the impact effect of an incremental $1.00 of spending is to raise the debt ¶ stock by $0.50. The annual debt service needed on this $0.50 to keep the real debt ¶ constant is $0.005. If reducing the size of the current downturn in production by¶ $1.50 avoids a 1% as large fall in future potential output—avoids a fall in future ¶ potential output of $0.015—then the incremental $1.00 of spending now augments ¶ future-period tax revenues by $0.005. And the fiscal expansion is self-financing.¶ The point would be reinforced by allowing for underlying growth in the economy, ¶ positive impacts of spending on future output, and increases in the price level as a ¶ result of expansion. It is dependent on multiplier and hysteresis effects, the assumption about government borrowing costs, and the assumption that government ¶ spending once increased can again be reduced. These issues and assumptions are ¶ explored in subsequent sections.¶ Below we develop a framework for assessing under what conditions fiscal expansion is self-financing, and whether fiscal expansion will pass a benefit-cost test. ¶ Throughout, we assume a transitory increase in government spending and assume ¶ that it does not affect government borrowing costs. We address these issues in subsequent sections.¶ A temporary boost ΔG to government purchases to increase aggregate demand in a ¶ depressed economy has four principal effects:¶ First, there is the standard short-term aggregate demand multiplier. In the present ¶ period, prices are predetermined or slow to adjust and in which the level of production is demand-determined. A boost to government spending for the present period ¶ only of ΔG percentage point-years is amplified or damped by the economy’s shortterm multiplier coefficient μ and boosts production and income Yn (“n” for “now) ¶ in the present period by an amount of percentage point-years:¶ (2.1)¶ € ¶ ΔYn ’ μΔG¶ We shall discuss plausible views as to the value of μ in normal times, and make the ¶ crucial point that there is a strong likelihood that μ is now above its normal-time ¶ value, in Section III.¶ Second, there are “hysteresis” effects: a depressed economy is one in which investment is low; in which the capital stock is growing slowly; and in which workers without employment are seeing their skills, their weak-tie networks they use to ¶ match themselves with vacancies in the labor market, and their morale decays. All ¶ of these reduce potential output. In future periods production is supply determined, ¶ and equal to potential output. Thus in future periods potential and actual output Yf¶ will be lower by some fraction η of the depth by which the economy is depressed ¶ in the present:¶ (2.2)¶ € ¶ ΔYf ’ηΔYn¶ where the units of η are inverse years: percent reductions in the flow of future potential output per percentage point-year of the present-period output gap.¶ We discuss the mechanisms which may make η nonzero, and evaluate its likely ¶ magnitude in Section IV. ¶ In an economy with a long-term output growth rate g and a social rate of time discount r and where r>g so that present-value calculations are possible, the net effect ¶ of these first two on the socially-discounted present value¶ 8¶ of the economy’s production is:¶ (2.3)¶ € ¶ ΔV ’ μ +¶ ημ¶ r − g¶ ⎡ ¶ ⎣ ¶ ⎢ ¶ ⎤ ¶ ⎦ ¶ ⎥ ΔG¶ where V is the present value of future output.¶ Third, financing the expansion ΔG of government purchases in the present period ¶ increases the national debt by an amount ΔD. In an economy with a multiplier coefficient μ and a baseline marginal tax-and-transfer rate τ, the required increase in ¶ the national debt is:¶ (2.4)¶ € ¶ ΔD ’ (1− μτ)ΔG¶ In order to maintain a constant debt-to-GDP ratio in the future periods thereafter, a ¶ fraction of this debt must be amortized. Assume for now that the real interest rate ¶ on government debt is equal to the social rate of time discount r. The taxes needed ¶ to finance these debt-amortization payments impose a marginal excess burden ξ¶ per dollar:¶ (2.5)¶ € ¶ ΔV ’ μ +¶ ημ¶ r − g¶ − ξ(1− μτ)¶ ⎡ ¶ ⎣ ¶ ⎢ ¶ ⎤ ¶ ⎦ ¶ ⎥ ΔG¶ where the future amortization at a constant debt-to-GDP ratio of the present-period ¶ fiscal expansion requires the government to commit recurring future-period cash ¶ flows of:¶ (2.6)¶ € ¶ (r − g)(1− μτ)¶ to this task. This paper assumes that there is a budget constraint: that the appropriate long-run real r is greater than the growth rate of the tax base g,¶ The fourth effect is a knock-on consequence of the second. Higher future-period ¶ output from the smaller hysteresis shadow cast on the economy because expanded ¶ government purchases reduce the size of the present-period depression means that ¶ the taxes τ levied to finance baseline government programs and to amortize the ¶ preexisting national debt bring in more revenue. The effect on the government’s ¶ future period net cash flows then becomes: (2.7)¶ € ¶ −(r − g)(1− μτ)+ημτ
Your authors don’t assume the current fiscal climate/The current fiscal climate supercharges the stimulus
(DeLong & Summers ’12, J. Bradford Delong, prof. of Economics at Berkley, former Deputy Assistant Secretary of the Department of the Treasury, and a research associate of the National Bureau of Economic Research, Lawrence H. Summers, former Secretary of the Treasury, former Director of the US National Economic Council, Prof at Harvard, “Fiscal Policy in a Depressed Economy”, 3/20/12, 2012_spring_BPEA_delongsummers.pdf)
This paper examines the impact of fiscal policy in the context of a protracted period of high unemployment and output short of potential like that suffered by the United States and many other countries in recent years. We argue that, while the conventional wisdom rejecting discretionary fiscal policy is appropriate in normal times, discretionary fiscal policy where there is room to pursue it has a major role to play in the context of severe downturns that take place in the aftermath of financial crises. Our analysis suggests that three aspects of situations typified by the current situation in the United States alter the normal calculus of costs and benefits with respect to fiscal policy. First, the absence of supply constraints and interest behavior associated with economy being constrained by a zero lower bound mean that the likely multiplier associated with fiscal expansion is likely to be substantially greater and longer lasting than in normal times. The multiplier may well be further magnified by the impact of economic expansion on expected inflation and hence in reducing real interest rates, an effect not present when inflation is above its target level and the zero lower bound is not a constraint. Second, even very modest hysteresis effects through which output shortfalls affect the economy's future potential have a substantial effect on estimates of the impact of expansionary fiscal policies on future debt burdens. While the data are not conclusive, we review a number of fragments of evidence suggesting that mitigating protracted output losses like those suffered by the United States in recent years raises potential future output. Third, extraordinarily
low levels of real interest rates raise questions about the efficacy of monetary policy as a source of stimulus, and reduce the cost of fiscal stimulus.
A fiscal stimulus solves—latest reports prove
(Greenstone & Looney 7/6,Michael Greenstone, Prof of Environmental Economics at MIT, and Adam Looney, senior fellow in Economic Studies and policy director of the Hamilton Project, “The Role of Fiscal Stimulus in Ongoing Recovery”, Brookings Institute, 7/6/12, )
The Great Recession has profoundly affected almost all Americans, but it has not impacted all states equally. Some states have rebounded strongly, while others continue to struggle. Why is this the case? The answer is not simple—many economic forces are at work in creating these differences, but two are of particular importance: (1) the varying responses of state and local governments to the economic downturn, and (2) the impacts of federal stimulus spending across states. In this month’s employment analysis, The Hamilton Project examines the effects of government policy in the rates of recovery among states and nationwide. Our survey of new evidence indicates that states that expanded government spending more (due in large part to support from federal stimulus during the recession) experienced smaller increases in their unemployment rates. This conclusion comes from a pair of new academic studies on the American Recovery and Reinvestment Act (ARRA) or the 2009 stimulus plan; both studies find robust evidence that government policy helped reduce the extent of the downturn and improve job growth. We also continue to explore the nation’s “jobs gap,” or the number of jobs that the U.S. economy needs to create in order to return to pre-recession employment levels.
Keynesian stimulus is good – monetarists got it wrong by basing their theory on beauty and greed rather than fact and monetarist statistical analyses are false
Krugman ’09 (Paul Krugman is a Professor of Economics and International Affairs at Princeton University, Centenary Professor at the London School of Economics, and an op-ed columnist for The New York Times. In 2008, Krugman won a Nobel Prize in Economics, September 6, 2009, “ How Did Economists Get It So Wrong?”, ) SRK
I. MISTAKING BEAUTY FOR TRUTH It’s hard to believe now, but not long ago economists were congratulating themselves over the success of their field. Those successes — or so they believed — were both theoretical and practical, leading to a golden era for the profession. On the theoretical side, they thought that they had resolved their internal disputes. Thus, in a 2008 paper titled “The State of Macro” (that is, macroeconomics, the study of big-picture issues like recessions), Olivier Blanchard of M.I.T., now the chief economist at the International Monetary Fund, declared that “the state of macro is good.” The battles of yesteryear, he said, were over, and there had been a “broad convergence of vision.” And in the real world, economists believed they had things under control: the “central problem of depression-prevention has been solved,” declared Robert Lucas of the University of Chicago in his 2003 presidential address to the American Economic Association. In 2004, Ben Bernanke, a former Princeton professor who is now the chairman of the Federal Reserve Board, celebrated the Great Moderation in economic performance over the previous two decades, which he attributed in part to improved economic policy making. Last year, everything came apart. Few economists saw our current crisis coming, but this predictive failure was the least of the field’s problems. More important was the profession’s blindness to the very possibility of catastrophic failures in a market economy. During the golden years, financial economists came to believe that markets were inherently stable — indeed, that stocks and other assets were always priced just right. There was nothing in the prevailing models suggesting the possibility of the kind of collapse that happened last year. Meanwhile, macroeconomists were divided in their views. But the main division was between those who insisted that free-market economies never go astray and those who believed that economies may stray now and then but that any major deviations from the path of prosperity could and would be corrected by the all-powerful Fed. Neither side was prepared to cope with an economy that went off the rails despite the Fed’s best efforts. And in the wake of the crisis, the fault lines in the economics profession have yawned wider than ever. Lucas says the Obama administration’s stimulus plans are “schlock economics,” and his Chicago colleague John Cochrane says they’re based on discredited “fairy tales.” In response, Brad DeLong of the University of California, Berkeley, writes of the “intellectual collapse” of the Chicago School, and I myself have written that comments from Chicago economists are the product of a Dark Age of macroeconomics in which hard-won knowledge has been forgotten. What happened to the economics profession? And where does it go from here? As I see it, the economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth. Until the Great Depression, most economists clung to a vision of capitalism as a perfect or nearly perfect system. That vision wasn’t sustainable in the face of mass unemployment, but as memories of the Depression faded, economists fell back in love with the old, idealized vision of an economy in which rational individuals interact in perfect markets, this time gussied up with fancy equations. The renewed romance with the idealized market was, to be sure, partly a response to shifting political winds, partly a response to financial incentives. But while sabbaticals at the Hoover Institution and job opportunities on Wall Street are nothing to sneeze at, the central cause of the profession’s failure was the desire for an all-encompassing, intellectually elegant approach that also gave economists a chance to show off their mathematical prowess. Unfortunately, this romanticized and sanitized vision of the economy led most economists to ignore all the things that can go wrong. They turned a blind eye to the limitations of human rationality that often lead to bubbles and busts; to the problems of institutions that run amok; to the imperfections of markets — especially financial markets — that can cause the economy’s operating system to undergo sudden, unpredictable crashes; and to the dangers created when regulators don’t believe in regulation. It’s much harder to say where the economics profession goes from here. But what’s almost certain is that economists will have to learn to live with messiness. That is, they will have to acknowledge the importance of irrational and often unpredictable behavior, face up to the often idiosyncratic imperfections of markets and accept that an elegant economic “theory of everything” is a long way off. In practical terms, this will translate into more cautious policy advice — and a reduced willingness to dismantle economic safeguards in the faith that markets will solve all problems. II. FROM SMITH TO KEYNES AND BACK The birth of economics as a discipline is usually credited to Adam Smith, who published “The Wealth of Nations” in 1776. Over the next 160 years an extensive body of economic theory was developed, whose central message was: Trust the market. Yes, economists admitted that there were cases in which markets might fail, of which the most important was the case of “externalities” — costs that people impose on others without paying the price, like traffic congestion or pollution. But the basic presumption of “neoclassical” economics (named after the congestion or pollution. But the basic presumption of “neoclassical” economics (named after the late-19th-century theorists who elaborated on the concepts of their “classical” predecessors) was that we should have faith in the market system. This faith was, however, shattered by the Great Depression. Actually, even in the face of total collapse some economists insisted that whatever happens in a market economy must be right: “Depressions are not simply evils,” declared Joseph Schumpeter in 1934 — 1934! They are, he added, “forms of something which has to be done.” But many, and eventually most, economists turned to the insights of John Maynard Keynes for both an explanation of what had happened and a solution to future depressions. Keynes did not, despite what you may have heard, want the government to run the economy. He described his analysis in his 1936 masterwork, “The General Theory of Employment, Interest and Money,” as “moderately conservative in its implications.” He wanted to fix capitalism, not replace it. But he did challenge the notion that free-market economies can function without a minder, expressing particular contempt for financial markets, which he viewed as being dominated by short-term speculation with little regard for fundamentals. And he called for active government intervention — printing more money and, if necessary, spending heavily on public works — to fight unemployment during slumps. It’s important to understand that Keynes did much more than make bold assertions. “The General Theory” is a work of profound, deep analysis — analysis that persuaded the best young economists of the day. Yet the story of economics over the past half century is, to a large degree, the story of a retreat from Keynesianism and a return to neoclassicism. The neoclassical revival was initially led by Milton Friedman of the University of Chicago, who asserted as early as 1953 that neoclassical economics works well enough as a description of the way the economy actually functions to be “both extremely fruitful and deserving of much confidence.” But what about depressions? Friedman’s counterattack against Keynes began with the doctrine known as monetarism. Monetarists didn’t disagree in principle with the idea that a market economy needs deliberate stabilization. “We are all Keynesians now,” Friedman once said, although he later claimed he was quoted out of context. Monetarists asserted, however, that a very limited, circumscribed form of government intervention — namely, instructing central banks to keep the nation’s money supply, the sum of cash in circulation and bank deposits, growing on a steady path — is all that’s required to prevent depressions. Famously, Friedman and his collaborator, Anna Schwartz, argued that if the Federal Reserve had done its job properly, the Great Depression would not have happened. Later, Friedman made a compelling case against any deliberate effort by government to push unemployment below its “natural” level (currently thought to be about 4.8 percent in the United States): excessively expansionary policies, he predicted, would lead to a combination of inflation and high unemployment — a prediction that was borne out by the stagflation of the 1970s, which and high unemployment — a prediction that was borne out by the stagflation of the 1970s, which greatly advanced the credibility of the anti-Keynesian movement. Eventually, however, the anti-Keynesian counterrevolution went far beyond Friedman’s position, which came to seem relatively moderate compared with what his successors were saying. Among financial economists, Keynes’s disparaging vision of financial markets as a “casino” was replaced by “efficient market” theory, which asserted that financial markets always get asset prices right given the available information. Meanwhile, many macroeconomists completely rejected Keynes’s framework for understanding economic slumps. Some returned to the view of Schumpeter and other apologists for the Great Depression, viewing recessions as a good thing, part of the economy’s adjustment to change. And even those not willing to go that far argued that any attempt to fight an economic slump would do more harm than good. Not all macroeconomists were willing to go down this road: many became self-described New Keynesians, who continued to believe in an active role for the government. Yet even they mostly accepted the notion that investors and consumers are rational and that markets generally get it right. Of course, there were exceptions to these trends: a few economists challenged the assumption of rational behavior, questioned the belief that financial markets can be trusted and pointed to the long history of financial crises that had devastating economic consequences. But they were swimming against the tide, unable to make much headway against a pervasive and, in retrospect, foolish complacency. III. PANGLOSSIAN FINANCE In the 1930s, financial markets, for obvious reasons, didn’t get much respect. Keynes compared them to “those newspaper competitions in which the competitors have to pick out the six prettiest faces from a hundred photographs, the prize being awarded to the competitor whose choice most nearly corresponds to the average preferences of the competitors as a whole; so that each competitor has to pick, not those faces which he himself finds prettiest, but those that he thinks likeliest to catch the fancy of the other competitors.” And Keynes considered it a very bad idea to let such markets, in which speculators spent their time chasing one another’s tails, dictate important business decisions: “When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done.” By 1970 or so, however, the study of financial markets seemed to have been taken over by Voltaire’s Dr. Pangloss, who insisted that we live in the best of all possible worlds. Discussion of investor irrationality, of bubbles, of destructive speculation had virtually disappeared from investor irrationality, of bubbles, of destructive speculation had virtually disappeared from academic discourse. The field was dominated by the “efficient-market hypothesis,” promulgated by Eugene Fama of the University of Chicago, which claims that financial markets price assets precisely at their intrinsic worth given all publicly available information. (The price of a company’s stock, for example, always accurately reflects the company’s value given the information available on the company’s earnings, its business prospects and so on.) And by the 1980s, finance economists, notably Michael Jensen of the Harvard Business School, were arguing that because financial markets always get prices right, the best thing corporate chieftains can do, not just for themselves but for the sake of the economy, is to maximize their stock prices. In other words, finance economists believed that we should put the capital development of the nation in the hands of what Keynes had called a “casino.” It’s hard to argue that this transformation in the profession was driven by events. True, the memory of 1929 was gradually receding, but there continued to be bull markets, with widespread tales of speculative excess, followed by bear markets. In 1973-4, for example, stocks lost 48 percent of their value. And the 1987 stock crash, in which the Dow plunged nearly 23 percent in a day for no clear reason, should have raised at least a few doubts about market rationality. These events, however, which Keynes would have considered evidence of the unreliability of markets, did little to blunt the force of a beautiful idea. The theoretical model that finance economists developed by assuming that every investor rationally balances risk against reward — the so-called Capital Asset Pricing Model, or CAPM (pronounced cap-em) — is wonderfully elegant. And if you accept its premises it’s also extremely useful. CAPM not only tells you how to choose your portfolio — even more important from the financial industry’s point of view, it tells you how to put a price on financial derivatives, claims on claims. The elegance and apparent usefulness of the new theory led to a string of Nobel prizes for its creators, and many of the theory’s adepts also received more mundane rewards: Armed with their new models and formidable math skills — the more arcane uses of CAPM require physicist-level computations — mild-mannered business-school professors could and did become Wall Street rocket scientists, earning Wall Street paychecks. To be fair, finance theorists didn’t accept the efficient-market hypothesis merely because it was elegant, convenient and lucrative. They also produced a great deal of statistical evidence, which at first seemed strongly supportive. But this evidence was of an oddly limited form. Finance economists rarely asked the seemingly obvious (though not easily answered) question of whether asset prices made sense given real-world fundamentals like earnings. Instead, they asked only whether asset prices made sense given other asset prices. Larry Summers, now the top economic adviser in the Obama administration, once mocked finance professors with a parable about “ketchup economists” who “have shown that two-quart bottles of ketchup invariably sell for exactly twice as much as one-quart bottles of ketchup,” and conclude from this that the ketchup exactly twice as much as one-quart bottles of ketchup,” and conclude from this that the ketchup market is perfectly efficient. But neither this mockery nor more polite critiques from economists like Robert Shiller of Yale had much effect. Finance theorists continued to believe that their models were essentially right, and so did many people making real-world decisions. Not least among these was Alan Greenspan, who was then the Fed chairman and a long-time supporter of financial deregulation whose rejection of calls to rein in subprime lending or address the ever-inflating housing bubble rested in large part on the belief that modern financial economics had everything under control. There was a telling moment in 2005, at a conference held to honor Greenspan’s tenure at the Fed. One brave attendee, Raghuram Rajan (of the University of Chicago, surprisingly), presented a paper warning that the financial system was taking on potentially dangerous levels of risk. He was mocked by almost all present — including, by the way, Larry Summers, who dismissed his warnings as “misguided.” By October of last year, however, Greenspan was admitting that he was in a state of “shocked disbelief,” because “the whole intellectual edifice” had “collapsed.” Since this collapse of the intellectual edifice was also a collapse of real-world markets, the result was a severe recession — the worst, by many measures, since the Great Depression. What should policy makers do? Unfortunately, macroeconomics, which should have been providing cleara guidance about how to address the slumping economy, was in its own state of disarray. IV. THE TROUBLE WITH MACRO “We have involved ourselves in a colossal muddle, having blundered in the control of a delicate machine, the working of which we do not understand. The result is that our possibilities of wealth may run to waste for a time — perhaps for a long time.” So wrote John Maynard Keynes in an essay titled “The Great Slump of 1930,” in which he tried to explain the catastrophe then overtaking the world. And the world’s possibilities of wealth did indeed run to waste for a long time; it took World War II to bring the Great Depression to a definitive end. Why was Keynes’s diagnosis of the Great Depression as a “colossal muddle” so compelling at first? And why did economics, circa 1975, divide into opposing camps over the value of Keynes’s views? I like to explain the essence of Keynesian economics with a true story that also serves as a parable, a small-scale version of the messes that can afflict entire economies. Consider the travails of the Capitol Hill Baby-Sitting Co-op. This co-op, whose problems were recounted in a 1977 article in The Journal of Money, Credit and Banking, was an association of about 150 young couples who agreed to help one another by baby- sitting for one another’s children when parents wanted a night out. To ensure that every couple did its fair share of baby-sitting, the co-op introduced a form of scrip: coupons made out of heavy did its fair share of baby-sitting, the co-op introduced a form of scrip: coupons made out of heavy pieces of paper, each entitling the bearer to one half-hour of sitting time. Initially, members received 20 coupons on joining and were required to return the same amount on departing the group. Unfortunately, it turned out that the co-op’s members, on average, wanted to hold a reserve of more than 20 coupons, perhaps, in case they should want to go out several times in a row. As a result, relatively few people wanted to spend their scrip and go out, while many wanted to baby- sit so they could add to their hoard. But since baby-sitting opportunities arise only when someone goes out for the night, this meant that baby-sitting jobs were hard to find, which made members of the co-op even more reluctant to go out, making baby-sitting jobs even scarcer. . . . In short, the co-op fell into a recession. O.K., what do you think of this story? Don’t dismiss it as silly and trivial: economists have used small-scale examples to shed light on big questions ever since Adam Smith saw the roots of economic progress in a pin factory, and they’re right to do so. The question is whether this particular example, in which a recession is a problem of inadequate demand — there isn’t enough demand for baby-sitting to provide jobs for everyone who wants one — gets at the essence of what happens in a recession. Forty years ago most economists would have agreed with this interpretation. But since then macroeconomics has divided into two great factions: “saltwater” economists (mainly in coastal U.S. universities), who have a more or less Keynesian vision of what recessions are all about; and “freshwater” economists (mainly at inland schools), who consider that vision nonsense. Freshwater economists are, essentially, neoclassical purists. They believe that all worthwhile economic analysis starts from the premise that people are rational and markets work, a premise violated by the story of the baby-sitting co-op. As they see it, a general lack of sufficient demand isn’t possible, because prices always move to match supply with demand. If people want more baby-sitting coupons, the value of those coupons will rise, so that they’re worth, say, 40 minutes of baby-sitting rather than half an hour — or, equivalently, the cost of an hours’ baby-sitting would fall from 2 coupons to 1.5. And that would solve the problem: the purchasing power of the coupons in circulation would have risen, so that people would feel no need to hoard more, and there would be no recession. But don’t recessions look like periods in which there just isn’t enough demand to employ everyone willing to work? Appearances can be deceiving, say the freshwater theorists. Sound economics, in their view, says that overall failures of demand can’t happen — and that means that they don’t. Keynesian economics has been “proved false,” Cochrane, of the University of Chicago, says. Yet recessions do happen. Why? In the 1970s the leading freshwater macroeconomist, the Nobel laureate Robert Lucas, argued that recessions were caused by temporary confusion: workers and companies had trouble distinguishing overall changes in the level of prices because of inflation or deflation from changes in their own particular business situation. And Lucas warned that any attempt to fight the business cycle would be counterproductive: activist policies, he argued, would just add to the confusion. By the 1980s, however, even this severely limited acceptance of the idea that recessions are bad things had been rejected by many freshwater economists. Instead, the new leaders of the movement, especially Edward Prescott, who was then at the University of Minnesota (you can see where the freshwater moniker comes from), argued that price fluctuations and changes in demand actually had nothing to do with the business cycle. Rather, the business cycle reflects fluctuations in the rate of technological progress, which are amplified by the rational response of workers, who voluntarily work more when the environment is favorable and less when it’s unfavorable. Unemployment is a deliberate decision by workers to take time off. Put baldly like that, this theory sounds foolish — was the Great Depression really the Great Vacation? And to be honest, I think it really is silly. But the basic premise of Prescott’s “real business cycle” theory was embedded in ingeniously constructed mathematical models, which were mapped onto real data using sophisticated statistical techniques, and the theory came to dominate the teaching of macroeconomics in many university departments. In 2004, reflecting the theory’s influence, Prescott shared a Nobel with Finn Kydland of Carnegie Mellon University. Meanwhile, saltwater economists balked. Where the freshwater economists were purists, saltwater economists were pragmatists. While economists like N. Gregory Mankiw at Harvard, Olivier Blanchard at M.I.T. and David Romer at the University of California, Berkeley, acknowledged that it was hard to reconcile a Keynesian demand-side view of recessions with neoclassical theory, they found the evidence that recessions are, in fact, demand-driven too compelling to reject. So they were willing to deviate from the assumption of perfect markets or perfect rationality, or both, adding enough imperfections to accommodate a more or less Keynesian view of recessions. And in the saltwater view, active policy to fight recessions remained desirable. But the self-described New Keynesian economists weren’t immune to the charms of rational individuals and perfect markets. They tried to keep their deviations from neoclassical orthodoxy as limited as possible. This meant that there was no room in the prevailing models for such things as bubbles and banking-system collapse. The fact that such things continued to happen in the real world — there was a terrible financial and macroeconomic crisis in much of Asia in 1997-8 and a depression-level slump in Argentina in 2002 — wasn’t reflected in the mainstream of New Keynesian thinking. Even so, you might have thought that the differing worldviews of freshwater and saltwater economists would have put them constantly at loggerheads over economic policy. Somewhat surprisingly, however, between around 1985 and 2007 the disputes between freshwater and saltwater economists were mainly about theory, not action. The reason, I believe, is that New Keynesians, unlike the original Keynesians, didn’t think fiscal policy — changes in government spending or taxes — was needed to fight recessions. They believed that monetary policy, administered by the technocrats at the Fed, could provide whatever remedies the economy needed. At a 90th birthday celebration for Milton Friedman, Ben Bernanke, formerly a more or less New Keynesian professor at Princeton, and by then a member of the Fed’s governing board, declared of the Great Depression: “You’re right. We did it. We’re very sorry. But thanks to you, it won’t happen again.” The clear message was that all you need to avoid depressions is a smarter Fed. And as long as macroeconomic policy was left in the hands of the maestro Greenspan, without Keynesian-type stimulus programs, freshwater economists found little to complain about. (They didn’t believe that monetary policy did any good, but they didn’t believe it did any harm, either.) It would take a crisis to reveal both how little common ground there was and how Panglossian even New Keynesian economics had become. V. NOBODY COULD HAVE PREDICTED . . . In recent, rueful economics discussions, an all-purpose punch line has become “nobody could have predicted. . . .” It’s what you say with regard to disasters that could have been predicted, should have been predicted and actually were predicted by a few economists who were scoffed at for their pains. Take, for example, the precipitous rise and fall of housing prices. Some economists, notably Robert Shiller, did identify the bubble and warn of painful consequences if it were to burst. Yet key policy makers failed to see the obvious. In 2004, Alan Greenspan dismissed talk of a housing bubble: “a national severe price distortion,” he declared, was “most unlikely.” Home-price increases, Ben Bernanke said in 2005, “largely reflect strong economic fundamentals.” How did they miss the bubble? To be fair, interest rates were unusually low, possibly explaining part of the price rise. It may be that Greenspan and Bernanke also wanted to celebrate the Fed’s success in pulling the economy out of the 2001 recession; conceding that much of that success rested on the creation of a monstrous bubble would have placed a damper on the festivities. But there was something else going on: a general belief that bubbles just don’t happen. What’s striking, when you reread Greenspan’s assurances, is that they weren’t based on evidence — they striking, when you reread Greenspan’s assurances, is that they weren’t based on evidence — they were based on the a priori assertion that there simply can’t be a bubble in housing. And the finance theorists were even more adamant on this point. In a 2007 interview, Eugene Fama, the father of the efficient-market hypothesis, declared that “the word ‘bubble’ drives me nuts,” and went on to explain why we can trust the housing market: “Housing markets are less liquid, but people are very careful when they buy houses. It’s typically the biggest investment they’re going to make, so they look around very carefully and they compare prices. The bidding process is very detailed.” Indeed, home buyers generally do carefully compare prices — that is, they compare the price of their potential purchase with the prices of other houses. But this says nothing about whether the overall price of houses is justified. It’s ketchup economics, again: because a two-quart bottle of ketchup costs twice as much as a one-quart bottle, finance theorists declare that the price of ketchup must be right. In short, the belief in efficient financial markets blinded many if not most economists to the emergence of the biggest financial bubble in history. And efficient-market theory also played a significant role in inflating that bubble in the first place. Now that the undiagnosed bubble has burst, the true riskiness of supposedly safe assets has been revealed and the financial system has demonstrated its fragility. U.S. households have seen $13 trillion in wealth evaporate. More than six million jobs have been lost, and the unemployment rate appears headed for its highest level since 1940. So what guidance does modern economics have to offer in our current predicament? And should we trust it? VI. THE STIMULUS SQUABBLE Between 1985 and 2007 a false peace settled over the field of macroeconomics. There hadn’t been any real convergence of views between the saltwater and freshwater factions. But these were the years of the Great Moderation — an extended period during which inflation was subdued and recessions were relatively mild. Saltwater economists believed that the Federal Reserve had everything under control. Freshwater economists didn’t think the Fed’s actions were actually beneficial, but they were willing to let matters lie. But the crisis ended the phony peace. Suddenly the narrow, technocratic policies both sides were willing to accept were no longer sufficient — and the need for a broader policy response brought the old conflicts out into the open, fiercer than ever. Why weren’t those narrow, technocratic policies sufficient? The answer, in a word, is zero. During a normal recession, the Fed responds by buying Treasury bills — short-term government debt — from banks. This drives interest rates on government debt down; investors seeking a higher rate of return move into other assets, driving other interest rates down as well; and normally these lower interest rates eventually lead to an economic bounceback. The Fed dealt with the recession that began in 1990 by driving short-term interest rates from 9 percent down to 3 percent. It dealt with the recession that began in 2001 by driving rates from 6.5 percent to 1 percent. And it tried to deal with the current recession by driving rates down from 5.25 percent to zero. But zero, it turned out, isn’t low enough to end this recession. And the Fed can’t push rates below zero, since at near-zero rates investors simply hoard cash rather than lending it out. So by late 2008, with interest rates basically at what macroeconomists call the “zero lower bound” even as the recession continued to deepen, conventional monetary policy had lost all traction. Now what? This is the second time America has been up against the zero lower bound, the previous occasion being the Great Depression. And it was precisely the observation that there’s a lower bound to interest rates that led Keynes to advocate higher government spending: when monetary policy is ineffective and the private sector can’t be persuaded to spend more, the public sector must take its place in supporting the economy. Fiscal stimulus is the Keynesian answer to the kind of depression-type economic situation we’re currently in. Such Keynesian thinking underlies the Obama administration’s economic policies — and the freshwater economists are furious. For 25 or so years they tolerated the Fed’s efforts to manage the economy, but a full-blown Keynesian resurgence was something entirely different. Back in 1980, Lucas, of the University of Chicago, wrote that Keynesian economics was so ludicrous that “at research seminars, people don’t take Keynesian theorizing seriously anymore; the audience starts to whisper and giggle to one another.” Admitting that Keynes was largely right, after all, would be too humiliating a comedown. And so Chicago’s Cochrane, outraged at the idea that government spending could mitigate the latest recession, declared: “It’s not part of what anybody has taught graduate students since the 1960s. They [Keynesian ideas] are fairy tales that have been proved false. It is very comforting in times of stress to go back to the fairy tales we heard as children, but it doesn’t make them less false.” (It’s a mark of how deep the division between saltwater and freshwater runs that Cochrane doesn’t believe that “anybody” teaches ideas that are, in fact, taught in places like Princeton, M.I.T. and Harvard.) Meanwhile, saltwater economists, who had comforted themselves with the belief that the great divide in macroeconomics was narrowing, were shocked to realize that freshwater economists hadn’t been listening at all. Freshwater economists who inveighed against the stimulus didn’t sound like scholars who had weighed Keynesian arguments and found them wanting. Rather, they sounded like people who had no idea what Keynesian economics was about, who were sounded like people who had no idea what Keynesian economics was about, who were resurrecting pre-1930 fallacies in the belief that they were saying something new and profound. And it wasn’t just Keynes whose ideas seemed to have been forgotten. As Brad DeLong of the University of California, Berkeley, has pointed out in his laments about the Chicago school’s “intellectual collapse,” the school’s current stance amounts to a wholesale rejection of Milton Friedman’s ideas, as well. Friedman believed that Fed policy rather than changes in government spending should be used to stabilize the economy, but he never asserted that an increase in government spending cannot, under any circumstances, increase employment. In fact, rereading Friedman’s 1970 summary of his ideas, “A Theoretical Framework for Monetary Analysis,” what’s striking is how Keynesian it seems. And Friedman certainly never bought into the idea that mass unemployment represents a voluntary reduction in work effort or the idea that recessions are actually good for the economy. Yet the current generation of freshwater economists has been making both arguments. Thus Chicago’s Casey Mulligan suggests that unemployment is so high because many workers are choosing not to take jobs: “Employees face financial incentives that encourage them not to work . . . decreased employment is explained more by reductions in the supply of labor (the willingness of people to work) and less by the demand for labor (the number of workers that employers need to hire).” Mulligan has suggested, in particular, that workers are choosing to remain unemployed because that improves their odds of receiving mortgage relief. And Cochrane declares that high unemployment is actually good: “We should have a recession. People who spend their lives pounding nails in Nevada need something else to do.” Personally, I think this is crazy. Why should it take mass unemployment across the whole nation to get carpenters to move out of Nevada? Can anyone seriously claim that we’ve lost 6.7 million jobs because fewer Americans want to work? But it was inevitable that freshwater economists would find themselves trapped in this cul-de-sac: if you start from the assumption that people are perfectly rational and markets are perfectly efficient, you have to conclude that unemployment is voluntary and recessions are desirable. Yet if the crisis has pushed freshwater economists into absurdity, it has also created a lot of soul- searching among saltwater economists. Their framework, unlike that of the Chicago School, both allows for the possibility of involuntary unemployment and considers it a bad thing. But the New Keynesian models that have come to dominate teaching and research assume that people are perfectly rational and financial markets are perfectly efficient. To get anything like the current slump into their models, New Keynesians are forced to introduce some kind of fudge factor that for reasons unspecified temporarily depresses private spending. (I’ve done exactly that in some of my own work.) And if the analysis of where we are now rests on this fudge factor, how much confidence can we have in the models’ predictions about where we are going? The state of macro, in short, is not good. So where does the profession go from here? VII. FLAWS AND FRICTIONS Economics, as a field, got in trouble because economists were seduced by the vision of a perfect, frictionless market system. If the profession is to redeem itself, it will have to reconcile itself to a less alluring vision — that of a market economy that has many virtues but that is also shot through with flaws and frictions. The good news is that we don’t have to start from scratch. Even during the heyday of perfect-market economics, there was a lot of work done on the ways in which the real economy deviated from the theoretical ideal. What’s probably going to happen now — in fact, it’s already happening — is that flaws-and-frictions economics will move from the periphery of economic analysis to its center. There’s already a fairly well developed example of the kind of economics I have in mind: the school of thought known as behavioral finance. Practitioners of this approach emphasize two things. First, many real-world investors bear little resemblance to the cool calculators of efficient- market theory: they’re all too subject to herd behavior, to bouts of irrational exuberance and unwarranted panic. Second, even those who try to base their decisions on cool calculation often find that they can’t, that problems of trust, credibility and limited collateral force them to run with the herd. On the first point: even during the heyday of the efficient-market hypothesis, it seemed obvious that many real-world investors aren’t as rational as the prevailing models assumed. Larry Summers once began a paper on finance by declaring: “THERE ARE IDIOTS. Look around.” But what kind of idiots (the preferred term in the academic literature, actually, is “noise traders”) are we talking about? Behavioral finance, drawing on the broader movement known as behavioral economics, tries to answer that question by relating the apparent irrationality of investors to known biases in human cognition, like the tendency to care more about small losses than small gains or the tendency to extrapolate too readily from small samples (e.g., assuming that because home prices rose in the past few years, they’ll keep on rising). Until the crisis, efficient-market advocates like Eugene Fama dismissed the evidence produced on behalf of behavioral finance as a collection of “curiosity items” of no real importance. That’s a much harder position to maintain now that the collapse of a vast bubble — a bubble correctly diagnosed by behavioral economists like Robert Shiller of Yale, who related it to past episodes of “irrational exuberance” — has brought the world economy to its knees. On the second point: suppose that there are, indeed, idiots. How much do they matter? Not much, argued Milton Friedman in an influential 1953 paper: smart investors will make money by buying when the idiots sell and selling when they buy and will stabilize markets in the process. But the second strand of behavioral finance says that Friedman was wrong, that financial markets are sometimes highly unstable, and right now that view seems hard to reject. Probably the most influential paper in this vein was a 1997 publication by Andrei Shleifer of Harvard and Robert Vishny of Chicago, which amounted to a formalization of the old line that “the market can stay irrational longer than you can stay solvent.” As they pointed out, arbitrageurs — the people who are supposed to buy low and sell high — need capital to do their jobs. And a severe plunge in asset prices, even if it makes no sense in terms of fundamentals, tends to deplete that capital. As a result, the smart money is forced out of the market, and prices may go into a downward spiral. The spread of the current financial crisis seemed almost like an object lesson in the perils of financial instability. And the general ideas underlying models of financial instability have proved highly relevant to economic policy: a focus on the depleted capital of financial institutions helped guide policy actions taken after the fall of Lehman, and it looks (cross your fingers) as if these actions successfully headed off an even bigger financial collapse. Meanwhile, what about macroeconomics? Recent events have pretty decisively refuted the idea that recessions are an optimal response to fluctuations in the rate of technological progress; a more or less Keynesian view is the only plausible game in town. Yet standard New Keynesian models left no room for a crisis like the one we’re having, because those models generally accepted the efficient-market view of the financial sector. There were some exceptions. One line of work, pioneered by none other than Ben Bernanke working with Mark Gertler of New York University, emphasized the way the lack of sufficient collateral can hinder the ability of businesses to raise funds and pursue investment opportunities. A related line of work, largely established by my Princeton colleague Nobuhiro Kiyotaki and John Moore of the London School of Economics, argued that prices of assets such as real estate can suffer self-reinforcing plunges that in turn depress the economy as a whole. But until now the impact of dysfunctional finance hasn’t been at the core even of Keynesian economics. Clearly, that has to change. VIII. RE-EMBRACING KEYNES So here’s what I think economists have to do. First, they have to face up to the inconvenient reality that financial markets fall far short of perfection, that they are subject to extraordinary delusions and the madness of crowds. Second, they have to admit — and this will be very hard for the people who giggled and whispered over Keynes — that Keynesian economics remains the best framework we have for making sense of recessions and depressions. Third, they’ll have to do their best to incorporate the realities of finance into macroeconomics.
Keynes was right – his theories are the only way of explaining the 2007-2009 crisis
Taylor ’11 (Lancy Taylor is the Arnhold Professor of International Cooperation and Development at The New School For Social Research. Director, Center for Economic Policy Analysis, Jan 1, 2011, “ Maynard's Revenge: The Collapse of Free Market Macroeconomics”)
Maynard Keynes’s revenge is simple. He was correct about how to do mac roeconomics. Initial reformation and then revolution against his ideas beginning in the 1940s were misleading and often wrong. The ways he pro posed to analyze macro problems are the only ones of any use in under standing the global crisis of 2007-2009. Being right about such fundamen tal points ought to be recompense enough for the way his version of macroeconomics has been treated since the 1970s.
Keynes has the only plausible solution – assumes actual human behavior
Taylor ’11 (Lancy Taylor is the Arnhold Professor of International Cooperation and Development at The New School For Social Research. Director, Center for Economic Policy Analysis, Jan 1, 2011, “ Maynard's Revenge: The Collapse of Free Market Macroeconomics”)
The macroeconomics created by Keynes and his closest followers pro vides the only plausible path toward understanding the huge changes that engulfed the world economy in the latter part of the twentieth century. The neoliberal political economy that led into the crisis took shape in the 1970s and 1980s. Reasons why it broke down can be read from the data, with major shifts in behavior on the real and financial sides of the U.S. and global economies playing crucial roles. Redistribution of income and wealth among socioeconomic groups was especially important. In George Soros’s terminology introduced in Chapter 1, economic actors’ imperfect cognitive perceptions about the economic system combined with their limited ability to manipulate it to produce the near collapse of the neo liberal system.
Lack of TI hurts economy
Infrastructure degradation will cost the US increasingly more – congestion already saps 1.6 percent of GDP
Regan 12 (Ed Regan is a CDM Smith senior vice president based in Columbia, South Carolina, USA, and a preeminent thought leader on transportation finance and planning. Nearly 4 decades of dedication to the toll industry have fed his passion to advocate sustainable solutions for funding transportation infrastructure today and in the future. January 10, 2012, Falling Behind: A Crisis in Transportation Infrastructure Investment FUNDING FUTURE MOBILITY: EXIT 1, )
This is our first stop in a thought leadership series that discusses the current state of transportation infrastructure and explores future funding solutions. In “Falling Behind,” we examine how today’s investments are not meeting the growing needs of the U.S. transportation system, creating a gap that will continue to grow if action isn’t taken. Coming Up Short Recognizing a growing problem with infrastructure investment, the last federal transportation authorization bill in 2005 enacted by the U.S. Congress established two independent commissions to address transportation policy and funding: the National Transportation Policy and Revenue Study Commission and the National Transportation Infrastructure Finance Commission. Both commissions identified huge shortfalls in transportation funding at virtually every level of government. Assuming no improvement from current conditions over the next 25 years, the finance commission forecasted average federal needs for capital transportation investments at $78 billion per year and total investment at all government levels at $172 billion per year. Assuming reasonable improvements in the system, including capacity expansion, the finance commission estimates rose to $100 billion per year in federal dollars and $215 billion per year at all levels of government. The policy commission estimated even higher amounts will be needed. Forecasts of revenue from current federal sources are expected to meet just 41 percent of needs without improvements to the system, and only 33 percent of the amount needed to improve the system. Similar shortfalls are shown at all levels of government. In short, the two commissions indicated that transportation funding needs to be increased between 175 and 240 percent over the next 25 years to maintain and improve transportation infrastructure. Inflation Brings Gas Tax Deflation Are these estimates realistic? A quick look at recent trends in the U.S. Highway Trust Fund (HTF) show they are. The HTF is the primary source of dedicated funding for transportation at the federal level. It was established with the advent of the federal gas tax in 1956 as a means to fund the interstate highway system. The current federal gas tax is $0.184 per gallon—slightly higher for diesel—and has not been increased in almost 20 years. This chart shows recent HTF trends and forecasts provided by the American Association of State Highway and Transportation Officials (AASHTO). Revenue into the HTF had historically been close to outlays, but since 2008, outlays have significantly exceeded revenues. The HTF essentially went broke in 2008 and has required significant transfers of funding from the U.S. General Fund in each of the last 3 years. By 2015, just 3 years away, federal funding needs are expected to exceed revenues by $17 billion assuming no increase is made to the federal gas tax. Over the long term, there have been increases in both the federal and state gas tax levels, but they have not kept up with inflation. As this chart shows, the total gas tax —including the federal and average state taxes—rose from $0.115 per gallon in 1963 to about $0.39 per gallon in 2009. After adjusting for inflation, the 2009 tax is equivalent to just $0.056 in 1963 dollars, a decrease of 50 percent in purchasing power in spite of several rate increases over 46 years. But the real demand for transportation investment comes from vehicle miles of travel, not gallons of fuel consumed. Over the years, we have seen significant improvements in fuel efficiency, which further erode the effective funding capacity of the per-gallon tax. Fleet fuel efficiency standards for the future have been aggressively increased, which will further reduce the funding capacity by another 45 percent by 2016. Hybrid and electric vehicles are great for reducing greenhouse gas emissions and our dependency on foreign oil, but they will have a major negative impact on transportation funding. The Cost of Falling Behind The U.S. transportation system is aging rapidly and is in bad need of reconstruction and rehabilitation. Much of the interstate highway system is more than 50 years old, and reconstruction and expansion will cost 10 to 20 times its original cost. There is a real cost to this underinvestment in transportation—a price paid every day by sitting in traffic, paying more for goods, and deteriorating competitiveness in an increasingly global economy. The American Society of Civil Engineers (ASCE) recently issued a report, entitled “Failure to Act,” which attempted to quantify the economic impact of underinvestment in infrastructure. It estimated that in 2010, the cost to businesses and households was nearly $130 billion, including increased operating costs, safety issues and travel time delays. It also projected that this will increase to more than $500 billion per year by2040, with a cumulative economic cost over the next 30 years of $3 trillion if current transportation investment levels continue. These ASCE estimates may well be conservative. In a recent report, Building America’s Future— a bipartisan coalition of elected officials dedicated to increasing infrastructure investment—puts the annual cost of urban congestion alone at $115 billion, noting that Americans waste 4.8 billion hours per year sitting in traffic. If the costs of delays to freight movement are factored in, congestion costs reach $200 billion per year—about 1.6 percent of the U.S. gross domestic product. Without significant increases in investment, at levels which will not only maintain but increase capacity, we can look forward to exponential growth in congestion in U.S. cities. Global Perspective Today, we see an increasingly global economy with a rapidly changing, competitive landscape. Never has mobility and transportation efficiency been more important to stay competitive in world markets. Thankfully, the United States has always led the world in transportation investment and innovations. At least until now. According to Building America’s Future, U.S. infrastructure was ranked first globally by the World Economic Forum’s 2005 index. In 2010, that number dropped to 15th. It is clear that the United States is facing an uphill battle to improve funding systems and bridge the widening gap between its current transportation system and the worldwide norm. In our next series installment, we will explore how much investment is actually being made in this vital system.
Poor transportation Infrastructure saps every sector of the economy – getting worse with time
ASCE 11 (American Society of Civil Engineers, Failure to Act The economic impact of current Investment trends In surface Transportation infrastructure, )
The nation’s surface transportation infrastructure includes the critical highways, bridges, railroads, and transit systems that enable people and goods to access the markets, services, and inputs of production essential to America’s economic vitality. For many years, the nation’s surface transportation infrastructure has been deteriorating. Yet because this deterioration has been diffused throughout the nation, and has occurred gradually over time, its true costs and economic impacts are not always immediately apparent. In practice, the transportation funding that is appropriated is spent on a mixture of system expansion and preservation projects. Although these allocations have often been sufficient to avoid the imminent failure of key facilities, the continued deterioration leaves a significant and mounting burden on the U.S. economy . This burden will be explored further in this report. Deteriorating conditions and performance impose costs on American households and businesses in a number of ways. Facilities in poor condition lead to increases in operating costs for trucks, cars, and rail vehicles. Additional costs include damage to vehicles from deteriorated roadway surfaces, imposition of both additional miles traveled, time expended to avoid unusable or heavily congested roadways or due to the breakdown of transit vehicles, and the added cost of repairing facilities after they have deteriorated as opposed to preserving them in good condition. In addition, increased congestion decreases the reliability of transportation facilities, meaning that travelers are forced to allot more time for trips to assure on-time arrivals (and for freight vehicles, on-time delivery). Moreover, it increases environmental and safety costs by exposing more travelers to substandard travel conditions and requiring vehicles to operate at less efficient levels. As conditions continue to deteriorate over time, they will increasingly detract from the ability of American households and businesses to be productive and prosperous at work and at home. This report is about the effect that surface transportation deficiencies have, and will continue to have, on U.S. economic performance. For the purpose of this report, the term “deficiency” is defined as the extent to which roads, bridges, and transit services fall below standards defined by the U.S. Department of Transportation as “minimum tolerable conditions” (for roads and bridges) and “state of good repair” for transit 1 . These standards are substantially lower than ideal conditions, such as “free-flow2 ,” that are used by some researchers as the basis for highway analysis. This report is about the effect these deficiencies have, and will continue to have, on U.S. economic performance. In 2010, it was estimated that deficiencies in America’s surface transportation systems cost households and businesses nearly $130 billion. This included approximately $97 billion in vehicle operating costs, $32 billion in travel time delays, $1.2 billion in safety costs and $590 million in environmental costs. In 2040, America’s projected infrastructure deficiencies in a trends extended scenario are expected to cost the national economy more than 400,000 jobs. Approximately 1.3 million more jobs could exist in key knowledge-based and technology-related economic sectors if sufficient transportation infrastructure were maintained. These losses are balanced against almost 900,000 additional jobs projected in traditionally lower-paying service sectors of the economy that would benefit by deficient transportation (such as auto repair services) or by declining productivity in domestic service related sectors (such as truck driving and retail trade). If present trends continue, by 2020 the annual costs imposed on the U.S. economy by deteriorating infrastructure will increase by 82% to $210 billion, and by 2040 the costs will have increased by 351% to $520 billion (with cumulative costs mounting to $912 billion and $2.9 trillion by 2020 and 2040, respectively). Table 1 summarizes the economic and societal costs of today’s deficiencies, and how the present values of these costs are expected to accumulate by 2040. Table 2 provides a summary of impacts these costs have on economic performance today, and how these impacts are expected to increase over time. The avoidable transportation costs that hinder the nation’s economy are imposed primarily by pavement and bridge conditions, highway congestion, and transit and train vehicle conditions that are operating well below minimum tolerable levels for the level of traffic they carry. If the nation’s infrastructure were free of deficient conditions in pavement, bridges, transit vehicles, and track and transit facilities, Americans would earn more personal income and industry would be more productive, as demonstrated by the gross domestic product (value added) that will be lost if surface transportation infrastructure is not brought up to a standard of “minimum tolerable conditions.” As of 2010, the loss of GDP approached $125 billion due to deficient surface transportation infrastructure. The expected losses in GDP and personal income through 2040 are displayed in Table 2. Across the U.S., regions are affected differently by deficient and deteriorating infrastructure. The most affected regions are those with the largest concentrations of urban areas, because urban highways, bridges and transit systems are in worse condition today than rural facilities. Peak commuting patterns also place larger burdens on urban capacities. However, because the nation is so dependent on the Interstate Highway System, impacts on interstate performance in some regions or area types are felt throughout the nation. Nationally, for highways and transit, 630 million vehicle hours traveled were lost due to congestion in 2010. This total is expected to triple to 1.8 billion hours by 2020 and further increase to 6.2 billion hours in 2040. 3 These vehicle hours understate person hours and underscore the severity of the loss in productivity. The specific economic implications of the further deterioration of the U.S. national surface transportation system are as follows: « Deficient surface transportation infrastructure will cost Americans nearly $3 trillion by 2040, as shown in Table 1, which represents more than $1.1 trillion in added business expenses and nearly $1.9 trillion from household budgets. « This cost to business will reduce the productivity and competitiveness of American firms relative to global competitors. Increased cumulative cost to businesses will reach $430 billion by 2020. Businesses will have to divert increasing portions of earned income to pay for transportation delays and vehicle repairs, draining money that would otherwise be invested in innovation and expansion. « Households will be forced to forgo discretionary purchases such as vacations, cultural events, educational opportunities, and restaurant meals, reduce health related purchases along with other expenditures that affect quality of life, in order to pay transportation costs that could be avoided if infrastructure were built to sufficient levels. Increased cumulative costs to households will be $482 billion in 2020. « The U.S. will lose jobs in high value, high-paying services and manufacturing industries. Overall, this will result in employee income in 2040 that is $252 billion less than would be the case in a transportation-sufficient economy. In general three distinct forces are projected to affect employment: n First, a negative impact is due to larger costs of transportation services in terms of time expended and vehicle costs. These costs absorb money from businesses and households that would otherwise be directed to investment, innovation and “quality of life purchases.” Thus, not only will business and personal income be lower, but more of that income will need to be diverted to transportation related costs. This dynamic will create lower demand in key economic sectors associated with business investments for expansion and research and development, and in consumer sectors. n Second, the impact of declining business productivity, due to inefficient surface transportation, tends to push up employment, even if income is declining. Productivity deteriorates with infrastructure degradation, so more resources are wasted in each sector. In other words, it may take two jobs to complete the tasks that one job could handle without delays due to worsening surface transportation infrastructure. n Third, related to productivity effects, degrading surface transportation conditions will generate jobs to address problems created by worsening conditions in sectors such as transportation services and automobile repair services.6 American Society of Civil Engineers « Overall job losses are mitigated by more people working for less money and less productively due to the diminished effectiveness of the U.S. surface transportation system. Recasting the 2020 and 2040 initial job impacts based on income and productivity lost reduces worker effectiveness by an additional 27% (another 234,000 jobs). By 2040, this drain on wages and productivity implies an additional 115% effect if income and productivity were stable (another 470,000 jobs). « By 2040 the cost of infrastructure deficiencies are expected to result in the U.S. losing more than $72 billion in foreign exports in comparison with the level of exports from a transportation-sufficient U.S. economy. These exports are lost due to lost productivity and the higher costs of American goods and services, relative to competing product prices from around the globe
Infrastructure Good
Transportation infrastructure turbo-boosts economic growth
Agénor and Moreno-Dodson ’06 (Pierre-Richard Agénor - University of Manchester - Centre for Growth and Business Cycle Research, Blanca Moreno-Dodson - Lead Economist with the Public Sector Governance Group in the Poverty Reduction and Economic Management (PREM) at the World Bank, March 30 2006, “ Public Infrastructure and Growth: New Channels and Policy Implications”, ) SRK
The foregoing analysis suggests that public infrastructure can affect economic growth by a) enhancing indirectly the productivity of workers, in addition to the direct effect on the productivity of labor used as input in the production function; b) facilitating adjustment costs associated with private capital formation and its mobility to relatively more profitable activities; c) enhancing the durability of private capital; and d) improving health and education outcomes, as well as compounding their effect on growth. These channels operate in parallel with the more traditional productivity and complementarity effects associated with infrastructure. From a policy standpoint, the “new” channels provide important lessons. Facilitating road transportation and communications can translate into higher productivity of workers, even when maintaining the same capital to labor ratio in the infrastructure sector. For instance, in Kenya and Uganda, facilitating access to communications allowed farmers to be better informed about international commodity prices and was conducive to higher agricultural productivity. Eliminating infrastructure constraints, such as water shortages, electricity outages and difficult road access, can facilitate the process of shifting private resources to more productive sectors, for instance from nontradables to tradables, or from agriculture to services and manufacturing. Similarly, by facilitating movement of people and goods, improved infrastructure can lead in the medium term to higher investments in the rural sector and greater agricultural diversification. Farmers must be able to obtain inputs at reasonable costs, and also to sell their outputs at remunerative prices. Transportation costs, in particular, are crucial for them to decide whether or not to engage in certain activities. For instance, while China increased agricultural productivity in rural areas, investments in infrastructure, coupled with labor mobility, increased flows of labor and capital to urban centers and facilitated growth in the manufacturing and services sectors.
Transportation infrastructure creates high value added and is a prerequisite for the economy and quality of life
Mačiulis et al. ’08 ( Alminas Mačiulis – Head of the Italian Transportation Investment Directorate, Aidas Vasilis Vasiliauskas – Researcher at VILNIUS GEDIMINAS TECHNICAL UNIVERSITY, Gražvydas Jakubauskas - Italian Ministry of Transport and Communications. Head of Innovations and Development Division, 20 September 2008, “ THE IMPACT OF TRANSPORT ON THE COMPETITIVENESS OF NATIONAL ECONOMY”, ) SRK
7. Conclusions 1. The influence of the transport sector on market development is quite often underestimated when planning society and business costs. Therefore, a certain transport policy instrument should be more actively discussed and evaluated at all levels of decision making processes. 2. Statistical information is not sufficient to evaluate the efficiency and necessary planning of transport infrastructure development or the supply of transport services. Undoubtedly, in terms of statistical analysis, there is a need for a more detailed analysis of transport sector activities and for revealing the results of transport activities as well as its influence on the competitiveness of economy and importance for the development of other sectors and live quality. 3. The internalization of external transport costs, research on efficient energy transportation technologies and the reducing emission are the main domains where scientific engineering and technological collaboration is needed to ensure mobility in conditions for market globalization. 4. Having in mind a positive balance of the export-import of transport services, it means that the transport sector is very competitive in the international arena and thus should be further strongly developed. 5. Lithuania, just as other countries with developing economies, has an objective to ensure a rapid growth of national economy and an increase in competitiveness. Through the allocation of public investments, the national economy development policy strives for maximum economic growth in the short term. Improving transport infrastructure is one of the key priorities of such investment. Timely allocation to the modernization of the transport system could ensure sustainable mobility for the members of the society and transportation of goods to maintain a dynamic development of economy and to increase Lithuania’s competitive capacity in global markets. 6. Lithuania’s access to the EU has resulted in changes in the macroeconomic environment whish improved conditions for competition, the development of business contacts and a faster development of both pas- senger and freight transport. Sustainable and efficient transport operations are both a service creating high value added and a precondition for a successful development of other branches of economy and the quality of life. 7. ‘Sustainable mobility’, that is disconnecting mobility from its harmful effects, has been strongly promoted by the EU Transport Policy documents in recent years. It encourages using a broad range of policy tools ranging from economic instruments and regulatory measures to infrastructure investment and new technologies in order to achieve sustainable mobility and reduce the negative impacts of transport.
Transportation infustrcture critical to support local and global economies
Rodrigue and Notteboom ’09 (Dr. Jean-Paul Rodrigue - Department of Global Studies and Geography at Hofstra University and Dr. Theo Notteboom - is a professor at and the president of the Institute of Transport and Maritime Management Antwerp of the University of Antwerp, 2009, “The Geography of Transport Systems”, Chapter 7, ) SRK
Like many economic activities that are intensive in infrastructures, the transport sector is an important component of the economy impacting on development and the welfare of populations. When transport systems are efficient, they provide economic and social opportunities and benefits that result in positive multipliers effects such as better accessibility to markets, employment and additional investments. When transport systems are deficient in terms of capacity or reliability, they can have an economic cost such as reduced or missed opportunities. Efficient transportation reduces costs, while inefficient transportation increases costs. The impacts of transportation are not always intended, and can have unforeseen or unintended consequences such as congestion. Transport also carries an important social and environmental load, which cannot be neglected. The added value and employment effects of transport services usually extend beyond employment and added value generated by that activity; indirect effects are salient. For instance, transportation companies purchase a part of their inputs from local suppliers. The production of these inputs generates additional value-added and employment in the local economy. The suppliers in turn purchase goods and services from other local firms. There are further rounds of local re-spending which generate additional value-added and employment. Similarly, households that receive income from employment in transport activities spend some of their income on local goods and services. These purchases result in additional local jobs and added value. Some of the household income from these additional jobs is in turn spent on local goods and services, thereby creating further jobs and income for local households. As a result of these successive rounds of re-spending in the framework of local purchases, the overall impact on the economy exceeds the initial round of output, income and employment generated by passenger and freight transport activities. Thus, from a general standpoint the economic impacts of transportation can be direct, indirect and related: Direct impacts (also known as induced) the outcome of accessibility changes where transport enables employment, added value, larger markets and enables to save time and costs. Indirect impacts the outcome of the economic multiplier effects where the price of commodities, goods or services drop and/or their variety increases. Indirect value-added and jobs are the result of local purchases by companies directly dependent upon transport activity. Transport activities are responsible for a wide range of indirect value-added and employment effects, through the linkages of transport with other economic sectors (e.g. office supply firms, equipment and parts suppliers, maintenance and repair services, insurance companies, consulting and other business services). Related impacts the outcome of economic activities and firms partly relying on efficient transport services for both passengers and freight. For instance, the steel industry requires cost efficient import of iron ore and coal for the blast furnaces and export activities for finished products such as steel booms and coils. Manufacturers and retail outlets and distribution centers handling imported containerized cargo rely on efficient transport and seaport operations.
Even small fluctuations in quality of transportation infrastructure has major impacts on the economy
Rodrigue and Notteboom ’09 (Dr. Jean-Paul Rodrigue - Department of Global Studies and Geography at Hofstra University and Dr. Theo Notteboom - is a professor at and the president of the Institute of Transport and Maritime Management Antwerp of the University of Antwerp, 2009, “The Geography of Transport Systems”, Chapter 7, ) SRK
Contemporary trends have underlined that economic development has become less dependent on relations with the environment (resources) and more dependent on relations across space. While resources remain the foundation of economic activities, the commodification of the economy has been linked with higher levels of material flows of all kinds. Concomitantly, resources, capital and even labor have shown increasing levels of mobility. This is particularly the case for multinational firms that can benefit from transport improvements in two significant markets: Commodity market. Improvement in the efficiency with which firms have access to raw materials and parts as well as to their respective customers. Thus, transportation expands opportunities to acquire and sell a variety of commodities necessary for industrial and manufacturing systems. Labor market. Improvement in the access to labor and a reduction in access costs, mainly by improved commuting (local scale) or the use of lower cost labor (global scale). A common fallacy in assessing the importance and impact of transportation on the economy is to focus only on transportation costs, which tend to be relatively low (5 to 10% of the value of a good). Transportation is an economic factor of production of goods and services, implying that relatively small changes can have substantial impacts in on costs, locations and performance. An efficient transport system with modern infrastructures favors many economic changes, most of them positive. It provides market accessibility by linking producers and consumers. The major impacts of transport on economic processes can be categorized as follows: Geographic specialization. Improvements in transportation and communication favor a process of geographical specialization that increases productivity and spatial interactions. An economic entity tends to produce goods and services with the most appropriate combination of capital, labor, and raw materials. A given area will thus tend to specialize in the production of goods and services for which it has the greatest advantages (or the least disadvantages) compared to other areas as long as appropriate transport is available for trade. Through geographic specialization supported by efficient transportation, economic productivity is promoted. This process is known in economic theory as comparative advantages. Large scale production. An efficient transport system offering cost, time and reliability advantages permits goods to be transported over longer distances. This facilitates mass production through economies of scale because larger markets can be accessed. The concept of “just-in-time” has further expanded the productivity of production and distribution with benefits such as lower inventory levels and better responses to shifting market conditions. Thus, the more efficient transportation becomes, the larger the markets that can be serviced and the larger the scale of production. Increased competition. When transport is efficient, the potential market for a given product (or service) increases, and so does competition. A wider array of goods and services becomes available to consumers through competition which tends to reduce costs and promote quality and innovation. Globalization has clearly been associated with a competitive environment that spans the world. Increased land value. Land which is adjacent or serviced by good transport services generally has greater value due to the utility it confers to many activities. In some cases, the opposite can be true if related to residential activities. Land located near airports and highways, near noise and pollution sources, will thus suffer from corresponding diminishing land value. Transport also contributes to economic development through job creation and its derived economic activities. Accordingly, a large number of direct (freighters, managers, shippers) and indirect (insurance, finance, packaging, handling, travel agencies, transit operators) employment are associated with transport. Producers and consumers take economic decisions on products, markets, costs, location, prices which are themselves based on transport services, their availability, costs and capacity.
The plan is key to a competitive economy and net makes money
Pellet ’10 (Jennifer Pellet, Editor-at-large at Chief Executive Magazine, Jul/Aug 2010, “Rebuilding America”, p. 62-66, ) SRK
The country's infrastructure is literally crumbling. Bridges and roads suffer from dire levels of congestion and are in desperate need of restructuring or replacement. Water and waste systems are cracking and leaking. The electric grid and broadband networks can't handle the demands of a 2 1st century economy. In fact, our national infrastructure is in such bad shape thatthe American Society of Civil Engineers recently gave it an overall "D" grade in its 2009 Report Card for America's Infrastructure. In the meantime, gaps imperil public safety, impair economic competitiveness and hinder efforts to give the economy a badly needed boost by creating new jobs. Despite the multiple threats a failing infrastructure poses, it's been tough to rally support around the issue, agreed CEOs gathered for a Rebuilding America roundtable discussion held in partnership with Terex, a $4 billion construction and infrastructure equipment company based in Westport, Conn. Infrastructure investment has never had much appeal for the American public, and in a post-stimulus package era, characterized by concern about spending in general and the swelling deficit in particular, shelling out the hefty sums needed is an even harder sell. Then there's the undeniable lack of consensus around what, exactly, needs to be done and how to go about it. "We're living on the vision of our forefathers," noted Ron DeFeo, CEO of Terex, who pointed out that the building of the interstate highway system- and the prosperity it brought- were made possible by the vision of President Dwight D. Eisenhower. "Eisenhower built the road system and FDR built dams, but we're paving potholes today. The real challenge is where 's the vision for the future?" Right now, countries like China and India seem to have cornered the market for that vision. As the U.S. debates priorities and potential sources of funding, China is planning to lay down 26,000 miles of new track by 2020 (much of it due by 2012), adding new highspeed rail lines between major cities. India's finance minister recently called for a doubling of the country's infrastructure spending to $1 trillion over the next five years, and said private-sector firms would be allowed to sell special bonds to help pay for it. Meanwhile, the U.S. faces a $1.176 trillion shortfall in the estimated $2.2 trillion required over the next five years to bring the country's roads, bridges, levees, schools, water supply and other systems up to speed. "India and China are essentially where the U.S. was back in the '5Os and '60s as it relates to infrastructure," noted Chip McClure, CEO of ArvinMeritor. "Every time I go there I'm amazed by the progress they've made. It won't happen overnight, but they have plans for the number of roads they want to build in the next year, five years and 10 years. They're going to quickly pass us if we're not careful." Unfortunately, from a political standpoint the timing of this crisis is not ideal. To politicians, pushing infrastructure initiatives is seen as political suicide. "The problem is that right now everyone is worried about the deficit," observed Irene Walsh, managing director of Deloitte's U.S. Infrastructure and Project Finance Advisory practice. "And in terms of spending, this is not a top priority. Health care was the top priority and now it's climate change. Infrastructure is moving down the agenda." Getting support to raise funds to finance infrastructure projects is even trickier- occasional efforts to hike the federal gas tax by 1 0 cents a gallon have been stymied by public outcry for 16 years now. The Vision Quest Investing in infrastructure could prove the key to revitalizing the economy, providing the critical growth in jobs and the foundation for greater international competitiveness that President Obama and Congress are so desperate to deliver. Yet in the current environment, communicating and advancing that concept and developing a plan to execute it may well fall to the private sector. "We cannot expect the public sector to lead with a plan," said Tom Wright, executive director of Regional Plan Association. "That's asking them to lead with their chins. They're just not going to do that. They're going to need the private sector and other entities to put the ideas on the table." Rallying the necessary public and political support for such an effort will also require tying the infrastructure issue to a central message. "The dialogue will need to change," argued George P'ierson, CEO of Parsons Brinckerhoff. "We talk about spending, which has a connotation with the public of 'there it goes,' as opposed to investment and the return we will get in terms of jobs, tax revenue and economic development. Businesses understand a return on investment and so do people."
TI is critical to overcoming the global and national economic climate
Smith, 1/25 (John Robert Smith, President and CEO of Reconnecting America, a national non-profit transit research and advocacy think-tank, 1/25/2012, Reconnecting America, )
"I appreciate the President's recognition that repairing our transportation infrastructure must be a part of any plan to make an America 'built to last.' As the President pointed out, both Republican and Democratic administrations invested in great highway projects after World War II. Those major infrastructure investments benefited everybody, as the President noted, 'from the workers who built them to the businesses that still use them today.' And now, many of those roads and bridges are in disrepair. "Today, as the nation begins to rise out of a deep recession, an investment in transportation infrastructure is critically important, including not only roads and bridges, but other modes such as trains and buses. Transportation choices for Americans are essential for reducing our dependence on foreign oil, increasing access to opportunity, and improving our quality of life. Indeed, transportation is a key component in making many of the President's other proposals work. We need transit options and intermodal links to take students to college, to transport unemployed workers to job training, and to bring employees and customers to small businesses. Quality, reliable public transportation systems are the anchors that help many communities thrive, whether they are in rural, suburban, or urban areas. “A world class transportation system can be made in America with Americans working to ensure that Americans have a way to get to work. That is a solution we can all support. As a former Republican mayor, I was pleased to hear the president's strong call not to politicize transportation construction. I encourage members of both parties to work towards a solution that will benefit all Americans."
Further TI investment key to economic productivity
Obama, ‘09
[Barack H. Obama, the president, 4/16/2009, Daily Compilation of Presidential Documents ]
¶ Thank you very much. That is a wonderful reception, and I want to, in addition to Ray LaHood and Joe Biden, Rahm Emanuel, all of who have worked on this extensively, I also want to acknowledge Jim Oberstar and Rob Andrews, two of our finest Members of Congress, both people who understand that investing in our infrastructure, investing in our transportation system pays enormous dividends over the long term. So I'm grateful to them for being here.¶ ¶ Well, I've been speaking a lot lately about what we're doing to break free of our economic crisis so to put people back to work and move this nation from recession to recovery. And one area in which we can make investments with impact both immediate and lasting is in America's infrastructure. And that's why the Recovery and Reinvestment Plan we passed not 2 months ago included the most sweeping investment in our infrastructure since President Eisenhower built the Interstate Highway System in the 1950s. And these efforts will save money by untangling gridlock, and saving lives by improving our roads, and save or create 150,000 jobs, mostly in the private sector, by the end of next year. Already, it's put Americans back to work. And so far, we're ahead of schedule, we're under budget, and adhering to the highest standards of transparency and accountability.¶ ¶ But if we want to move from recovery to prosperity, then we have to do a little bit more. We also have to build a new foundation for our future growth. Today, our aging system of highways and byways, air routes and rail lines is hindering that growth. Our highways are clogged with traffic, costing us $80 billion a year in lost productivity and wasted fuel. Our airports are choked with increased loads. Some of you flew down here and you know what that was about. We're at the mercy of fluctuating gas prices, all too often. We pump too many greenhouse gases into the air.¶ ¶ What we need, then, is a smart transportation system equal to the needs of the 21st century, a system that reduces travel times and increases mobility, a system that reduces congestion and boosts productivity, a system that reduces destructive emissions and creates jobs.
Mobility key to economy and welfare
Subramanian, ‘11
[Dr. N. Subramanian, Consulting Engineer, 9/20/2011, NBM & CW ]
Mobility is fundamental to economic and social activities of any country. Mobility is provided by the transportation infrastructure and this has a huge impact on the development and welfare of the population. In several countries, lack of transportation infrastructure and regulatory controls are jointly impacting economic development. Moreover, transport systems are among the various factors affecting the quality of life and safety in a city. Though there are several modes of transport, like road, rail, air, and water, in many countries road networks cater to the majority of transportation needs. For example, in India, as per the National Highways Authority of India, about 65% of freight and 80% passenger traffic is carried by the roads. The National Highways carry about 40% of total road traffic, though only about 2% of the road network is covered by these roads. Rural areas have poor access 33% of villages in India still do not have all-weather road and remains cutoff during monsoon. Average growth of the number of vehicles has been around 10.16% per annum over recent years. (The Automobile industry in India is rapidly growing with an annual production of over 2.6 million vehicles.) Hence only roads and bridges are considered in this article.¶ Demand for freight and passenger transport, particularly by road, has typically grown 1.5 to 2 times faster than GDP in most developing and transition countries. Public investment in transport typically accounts for 2.0 to 2.5 per cent of GDP and may rise as high as 4 percent or more in countries modernizing or building new transport infrastructure. GOI has raised the investment in infrastructure development from 4.7% to 8% of GDP in 11th five year plan. According to recent estimates by Goldman Sachs, India will need to spend $1.7 trillion on infrastructure projects over the next decade to boost economic growth, of which $500 billion is budgeted to be spent during the Eleventh Five-Year Plan [It may be of interest to compare it with the situation in USA: Complex calculations done by the American Society of Civil Engineers (ASCE), revealed that decaying roads, bridges, railroads, and transit systems are costing the United States $129 billion a year. ASCE's 2009 Report Card for America's Infrastructure graded the America's infrastructure a "D" based on 15 categories, and estimated that USA needs to invest approximately $2.2 trillion from 2009 - 2014 to maintain infrastructure in a state of good repair. The 2009 Report Card, gave grade "D-" for roads, and grade "C" for bridges (). It noted that nearly one-third of roads in USA are in poor or mediocre condition, 25% of bridges either structurally deficient or functionally obsolete!]. With the need for such a large scale development of infrastructure in India, the way forward is to move to fast track construction mode, to upgrade quickly the design standards and specification to international standards, to modernize the construction techniques, to use new construction materials, and to use some innovative techniques..
Infrastructure will shape our economic future—only the bank can finance
McConaghy and Kessler 2011 (Ryan & Jim, Deputy Director of Third Way Economic Program; VP for Policy at Third Way, Schwartz Initiative on American Economic Policy, "A National Infrastructure Bank," 2011, )
America’s economic future will hinge on how fast and well we move people, goods, power, and ideas. Today, our infrastructure is far from meeting the challenge. Upgrading our existing infrastructure and building new conduits to generate commerce will put people to work quickly in long-term jobs and will create robust growth. Funding for new infrastructure will be a crucial investment with substantial future benefits, but the current way that Congress doles out infrastructure financing is too political and wasteful. A National Infrastructure Bank will provide a new way to harness public and private capital to bridge the infrastructure gap, create jobs, and ensure a successful and secure future. America’s investment in infrastructure is not sufficient to spur robust growth. In October, Governor Chris Christie announced his intention to terminate New Jersey’s participation in the Access to the Region’s Core (ARC) Tunnel project, citing cost overruns that threatened to add anywhere from $2-$5 billion to the tunnel’s almost $9 billion price tag. At the time, Christie stated, “Considering the unprecedented fiscal and economic climate our State is facing, it is completely unthinkable to borrow more money and leave taxpayers responsible for billions in cost overruns. The ARC project costs far more than New Jersey taxpayers can afford and the only prudent move is to end this project.”1 Despite the fact that the project is absolutely necessary for future economic growth in the New Jersey-New York region and would have created thousands of jobs, it was held captive to significant cost escalation, barriers to cooperation between local, state, and federal actors, and just plain politics.
Competitiveness ( not a thing )
NIB solves competitiveness through long term infrastructure growth and sustainable leadership
Alessi 11
(Christopher, Associate writer for Foreign Affairs, September 8th, 2011, “Banking on U.S. Infrastructure Revival”, )
Most urgently, the bank would be a means of creating jobs in the construction, manufacturing, and retail trade sectors of the economy. With unemployment stuck above 9 percent, a plan to get fourteen million unemployed Americans back to work is a top government priority. Moreover, as the U.S. economy continues to stagnate--and fears of a global double-dip recession abound--generating jobs is seen as crucial. Investing in infrastructure, along with education and technology, is a way to tackle unemployment by addressing longstanding structural problems on "the tradable side of the economy," economist and Nobel laureate A. Michael Spence recently told CFR. At the same time, U.S. infrastructure is undoubtedly deteriorating, undermining the foundations of the country's economy. In turn, this is weakening the ability of the United States--the world's largest economy--to exercise economic leadership throughout the globe. The World Economic Forum's 2011-2012 Global Competitiveness Report said the United States declined in competitiveness for the third year in a row, dropping to fifth place. The Global Competitive Index is composed of twelve pillars, including infrastructure. "For decades, we have neglected the foundation of our economy while other countries have invested in state-of-the-art water, energy, and transportation infrastructure, wrote Michael B. Likosky, a senior fellow at New York University's Institute for Public Knowledge, in a July 12 New York Times op-ed. Congressional Democrats (WSJ)--and President Obama--are Washington's biggest proponents of an independent, national infrastructure bank. They argue that the bank would incite private investment and spur job creation in the short term--while strengthening the foundations of the economy in the long run. But many congressional Republicans say that, as with the stimulus package implemented during the height of the financial crisis, U.S. workers would not immediately feel the effects of infrastructure spending, if at all. Senate Republican leader Mitch McConnell says more government spending (NYT) would only strangle already-anemic economic growth.
NIB would restore American competitiveness and leadership through joint public-private investments and technological innovation
Robertson 11
(Joseph, writer for the Independents of Principle foundation, July 18th, 2011, “Why We Should Have a National Infrastructure Bank”, )
We know that if we can rebuild, invest in, benefit from and then reinvest in, world-leading high-quality infrastructure, we can secure long-term stable job creation, and a more generalized prosperity that strengthens the middle class and lubricates engines of investment. We know this, but the confluence of harsh symptoms of long-running problems in our economy, this near “perfect storm” of degradations, makes it difficult to figure out how we can fund this and not lose ground on other fronts. A National Infrastructure Innovation and Reinvestment Bank would have a number of virtues that would allow us to accomplish this. To name a few of the most important ones: It would combine incentives from government and diverse private investments to optimize the flow of ready investment to a long-term strategy for sustainable economic growth. It would allow for large-scale direction of public funds to high-yield infrastructure projects, without imposing massive new costs on the federal budget. It would allow public and private investments at the national level to take pressure off state and local governments, so they could better fund needed services, like police and schools It would restore some balance to the balance of public-sector spending vs. costs to taxpayers, taking pressure off state and local property tax burdens, which some blame for slowing the housing recovery. It would pay significant dividends in terms of laying the groundwork—literally—for a robust, world-leading, smart-grid-enabled clean energy economy. It would take the cost associated with using and maintaining a crumbling and outdated national infrastructure base off our list of long-term, highly costly economic challenges. It would stimulate massive new investment in technological innovation, possibly the strongest point in the 21st century US economy. It would allow for democratizing and decentralizing both the economic landscape of infrastructure investment and for transport and energy, helping to rebuild the middle class. It would encourage more constructive, more affordable, more spontaneous mobility, increasing economic opportunity for people across the nation. It would, given several of the above, help to restore American leadership in social mobility—as our infrastructure and our middle class have been eroded, the US has slipped to 10th in the world in social mobility, otherwise known as the American dream.
Fixing infrastructure key to hegemony and economy
Washington Post ’10 (Ashley Halsey III, Staff Writer for the Washington Post, 10/4/2010, “ Failing U.S. transportation system will imperil prosperity, report finds”, ) SRK
The United States is saddled with a rapidly decaying and woefully underfunded transportation system that will undermine its status in the global economy unless Congress and the public embrace innovative reforms, a bipartisan panel of experts concludes in a report released Monday. U.S. investment in preservation and development of transportation infrastructure lags so far behind that of China, Russia and European nations that it will lead to "a steady erosion of the social and economic foundations for American prosperity in the long run." That is a central conclusion in a report issued on behalf of about 80 transportation experts who met for three days in September 2009 at the University of Virginia. Few of their conclusions were groundbreaking, but the weight of their credentials lends gravity to their findings. Co-chaired by two former secretaries of transportation - Norman Y. Mineta and Samuel K. Skinner - the group estimated that an additional $134 billion to $262 billion must be spent per year through 2035 to rebuild and improve roads, rail systems and air transportation. "We're going to have bridges collapse. We're going to have earthquakes. We need somebody to grab the issue and run with it, whether it be in Congress or the White House," Mineta said Monday during a news conference at the Rayburn House Office Building. The key to salvation is developing new long-term funding sources to replace the waning revenue from federal and state gas taxes that largely paid for the construction and expansion of the highway system in the 1950s and 1960s, the report said. "Infrastructure is important, but it's not getting the face time with the American people," Skinner said. "We've got to look at this as an investment, not an expense." A major increase in the federal gas tax, which has remained unchanged since it was bumped to 18.4 cents per gallon in 1993, might be the most politically palatable way to boost revenue in the short term, the report said, but over the long run, Americans should expect to pay for each mile they drive. "A fee of just one penny per mile would equal the revenue currently collected by the fuel tax; a fee of two cents per mile would generate the revenue necessary to support an appropriate level of investment over the long term," the report said. Fuel tax revenue, including state taxes that range from 8 cents in Alaska to 46.6 cents in California, have declined as fuel efficiency has increased. President Obama mandated that new cars get 35.5 miles on average per gallon by 2016, and government officials said last week that they are considering raising the average to 62 miles per gallon by 2025. Facing midterm elections in November, Congress has lacked the will to tackle transportation funding. Efforts to advance a new six-year federal transportation plan stalled on Capitol Hill after the previous one expired last year. If Congress were to do the report's bidding, the task would be far broader in scope than simply coming up with trillions of dollars in long-term funding to rebuild a 50-year-old highway system.
Congestion
Staving off inevitable congestion through infrastructure is crucial to saving the economy
Staley 07
(Sam, economic development policy analyst for the New York Times, November 25, 2007, “A Congested Economy”, )
But if congestion continues, eventually it will eat away at economic productivity in the region. Congestion reduces the pool of resources available to businesses and workers by reducing access to jobs and employees. A 30-minute commute to work might become 45 minutes or an hour, pushing the job outside a worker’s “opportunity circle,” which is the amount of time a typical worker is willing to travel to a job. Productivity can compensate for the economic drag of congestion but only to a certain point. If congestion becomes too severe, the economy begins to fragment, which means that businesses drawing on a large metropolitan labor pool will be forced to tap into only those who live within a certain time and distance to the job. A fragmented economy hurts productivity. It’s already happening in the region. The Partnership for New York City, a business group, estimates that eliminating excess traffic congestion would add as much as $4 billion and 52,000 jobs to the regional economy. Congestion drains the region’s manufacturing sector of $2 billion in revenue and 8,674 jobs. Wholesale trade takes a congestion hit worth $1.3 billion in increased operating costs.
Transportation investment explodes economic growth – GDP is increased 63 times the transportation investment
Cervero ’09 ( ROBERT CERVERO, Berkeley Professor of City & Regional Planning; Carmel P. Friesen Chair in Urban Studies; Director, Institute of Urban & Regional Development; Director, University of California Transportation Center, Oct 26 2009, “Transport Infrastructure and Global Competitiveness: Balancing Mobility and Livabiliy”, ) SRK
Studies at the metropolitan level (Boarnet 1998) as well as nationwide tabula- tions (Aschauer 1990) have shown a link between transport investments and economic growth (albeit to varying degrees). Global statistics, too, suggest an association. As shown in Figure 1, data on fifty-two global cities from the Mobility in Cities Database of the UITP (International Association of Public Transport 2006 ) show a moderately strong and positive association between gross domestic product and investments in roadways (left image, N = 31) and public transport (right image, N = 47), all expressed on a per capita basis. While correlation does not mean causation, transport infrastructure appears to matter: GDP per capita trends upward with transport expenditures: €69 and €63 for every euro spent on roads and public transport per inhabitant. Regressing GDP per capita on both of these variables produced the following estimates (noting that once these two variables were included, other available supply-side and land-use variables in the database were not significant predictors):
Spend Now Save Later
Spending now is best due to low interest rates – no risk of crowd out due to preexisting unemployment
Avent 12 (Ryan Avent is The Economist's economics correspondent. He covers the field of academic economics, with a focus on developments in macroeconomic, Mar 28th 2012, A good time for infrastructure investment,
)
The Treasury has just published a white paper full of reasons to favour additional investment. Even if you are sceptical of the utility of fiscal stimulus qua stimulus, now seems like a very good time to undertake much more investment than normal. As the Treasury paper points out, very low interest rates and high unemployment mean that the odds of crowding out private spending and investment are much lower than normal. Cheaper than normal capital and labour also imply that taxpayers will receive a better deal on spending than would typically be the case. The cost-benefit calculus on infrastructure investment has shifted toward doing more of it, or at least squeezing more expected investment into the present period. Other research, like the new Brookings paper by Brad DeLong and Larry Summers, also indicates that the bar for greater investment should be lower. Given the potential that unemployment will become increasingly persistent as time goes on, the value of government spending that reduces joblessness—even temporarily—is higher than may be appreciated. Any projects that seemed like good ideas in general, and there are a lot of them, look like really, really good ideas now. And yet Congress has struggled mightily to keep even existing spending going. The nation's primary transportation-funding law expired in 2009. Normally a wholesale replacement or reauthorisation would follow that expiration; Congress has instead repeatedly extended the old law while bickering over how to come up with money to replace the increasingly meagre take from the nation's petrol tax. The latest extension is set to expire, and legislators are arguing over what to do next. They might extend the measure again—for 60 to 90 days. Or they might stonewall themselves into a temporary shutdown of all federally funded projects. Inaction is absurd and embarrassing, especially since funding is the primary (though not the only) source of disagreement and the costs of borrowing and unemployment (and the likelihood of a decent return on infrastructure investment) indicate that just borrowing the money to spend on new roads and rails would be a reasonable course of action. If ever there should have been a policy so obviously sensible as to attract bipartisan support, more money for infrastructure was it. Right now, when it comes to partisan politics, sensibility's got nothing to do with it.
Infrastructure spending is inevitable, acting now capitalizes on low interest rates and provides growth
Holahan and Kroncke 12 (By William L. Holahan and Charles O. Kroncke, Charles O. Kroncke, left, is associate dean in the University of South Florida College of Business. William L. Holahan is a professor of economics at the University of Wisconsin at Milwaukee. Wednesday, June 13, 2012, On U.S. infrastructure, spend now, gain later, )
When the American Society of Civil Engineers issued a report card giving D and F grades for major infrastructure assets in the United States, the group estimated that it would cost $2.2 trillion to rehabilitate them. Even though these public sector assets support the private sector of the economy, and despite the availability of cheap money, Congress has no current plans to remedy this situation. Its reluctance to support investment in infrastructure is unfortunate because this is an opportune time to earn a better report card; presently, we can borrow at very low interest rates to upgrade our streets, roads, bridges, railroads, school buildings, Internet bandwidth and K-12 education. We have earned the trust of foreign investors, who value the safety of our financial markets and seek to loan us money through their purchases of U.S. Treasury bonds. In the short run, infrastructure investment would stimulate business growth and employ otherwise unemployed resources of labor and equipment. In the longer run, when these assets are in good working order, they would support faster growth of the economy, a prerequisite for bringing down the national debt and putting workers back on the path to higher after-tax incomes. What are we waiting for? Congressional inaction reflects the public concern over "runaway spending" and the rapid rise in the debt over the past 30 years, and especially the last five. Much of this concern rests on the falsely imagined equivalence of all government spending. But consumption spending and investment spending play very different roles in the economy, whether done by a firm, a family or the government. Our national debate should pivot from a narrow focus on debt alone to one that separates investment from consumption, that is, whether the borrowed money is spent in ways that repayment can be expected through increased future productivity. Carefully chosen infrastructure spending is an investment that pays for itself in greater economic growth; in fact, failure to make these investments can retard growth. Infrastructure investment spending is more likely to be accepted by struggling taxpayers than increased consumption spending on safety net programs such as food stamps or extended unemployment insurance, however dire the need for such programs may be. Seriously? More debt? How often have we heard that the size of our current national debt — some $15 trillion — prevents us from borrowing more money? Even with interest rates this low and opportunities so beneficial, the resistance to further borrowing is quite strong. The false and misleading claim is that we have already "mortgaged the future" and we "don't have the money." These slogans reflect a key concern: the ability to repay the debt. The usual measure of the ability to repay debt is the ratio of debt to gross domestic product. Since infrastructure assets have very long lives, this measure should be calculated over a long time horizon. The public debt is projected to grow to $70 trillion over the next 75 years. If we experience 2 percent economic growth, national income over this period will total $2.46 quadrillion. The resulting ratio would be a mere 2.84 percent, demonstrating that as a nation, we are in a position to make cost-beneficial, growth-enhancing investments. Some additional arithmetic makes this point more forcefully. Suppose the infrastructure investments enable the economy to grow just one-tenth of one percent faster (2.1 percent versus 2.0 percent). Due to the power of compound interest, the added GDP over those 75 years is $116 trillion. Yes, the projected national debt is large, much larger than this year's GDP. But arithmetic also shows that failure to invest in growth will deny future generations the enormous gains available from even tiny improvements in economic growth rates.
Spending on Infrastructure is inevitable, acting now saves BIG
Weissmann 12 (JORDAN WEISSMANN - Jordan Weissmann is an associate editor at The Atlantic. He has written for a number of publications, including The Washington Post and The National Law Journal. It's a Tragedy We're Not Spending More on Infrastructure, JUN 4 2012, )
The cruel irony of this situation is that there's never been a better time for us to build. The interest rates on 10-year treasury bonds just hit a 220-year low. We're paying better rates than when George Washington was running unopposed for the presidency. When inflation is taken into account, we're effectively getting paid by investors to hold their cash. And barring the possibility Europe gets obliterated in a freak super-volcanic eruption, leaving T-bills as the last asset on earth that banks can hold as collateral, chances are we're not going to see deals like this again. But the deficit! you say. Dick Cheney is right here: The deficit doesn't really matter in this case. Most infrastructure spending is not really optional. You either fix the roads, or they fall apart. Perhaps disastrously. A 2011 study by the Urban Land Institute and Ernst & Young estimated the United States needed to spend $2 trillion to fix the country's physical plant. And unless you believe that we're going to miraculously eliminate the entire deficit in the near future, we're going to have to borrow that money at some point. We might as well do it while the financial markets are paying us for the privilege.
Transportation infrastructure failing now – much cheaper to fix now than later
CNN ’11 (Tom Foreman, Staff Writer for CNN, 1/25/2011, “State of Transportation is 'weak,' engineers say,” ) SRK
Washington (CNN) -- As President Obama is set to take stock of the nation during his State of the Union address Tuesday, a civil engineers group gives the U.S. transportation system low grades. For example, the nation's bridges. Most of us don't think much about bridges until one we need is closed or is damaged or collapses, as the I-35W one did in Minneapolis in 2007, killing 13 people. Yet engineers all over the country who really know about such things say we ought to be thinking about bridges a lot more. And here is something we should consider: One in four of our bridges is either in need of repair or obsolete in terms of handling modern traffic and loads. That startling fact comes from the American Society of Civil Engineers, which every few years consults with dozens of the nation's experts on all sorts of infrastructure matters. The society gives U.S. bridges a grade of C. And bridges aren't the only problem in what we could call the State of the Union's Infrastructure. Roads, airports, water supplies, railways, dams, schools and on and on it goes; all are, according to the engineers' latest report in 2009, in pretty dire shape. Infrastructure report card The amount of air travel in the U.S. increased by 7% last year, but an overhaul of the air travel infrastructure is long overdue, according to the American Society of Civil Engineers. The group gave the nation's aviation system a grade of D. Compared with trucks, railways are much more efficient for moving goods: using about 20% less energy per mile if used properly. But comparatively little has been invested in expanding U.S. railroad capacity. Rail gets a C minus. What is the state of your community? Tell us Consider this: Although a steady drinking water supply is crucial to even the most basic success, water systems nationwide are so old and decrepit that the American Society of Civil Engineers estimates 7 billion gallons of drinking water are being lost through leaky pipes every day. How can America save crumbling water delivery systems? Inland shipping along canals and rivers keeps millions of American homes warm with coal and families fed with grains such as wheat and corn. But locks on canals and rivers, which were made to last only 50 years, are now on average 60 years old. Navigable waterways get a D minus from the civil engineers. See details of the ASCE report card Public transit use grew 25 percent in the past 10 years, and yet fully half of all Americans have no access to commuter buses or trains; many more have sketchy access at best. You get the picture. However, it may be a little harder to see the multiplying effect. Experts at the American Society of Civil Engineers point out that for each year that these infrastructure problems are not addressed, they grow exponentially worse. It's kind of like a leak in the roof. It may be painful to pay for new shingles when the leak is small, but if you wait until it expands and soaks the walls and floors below, the damage and cost will be much, much harder to bear. In recent years, many politicians have started talking much more seriously about infrastructure problems, but when faced with a stumbling economy, they are finding it harder than ever before to lean into big-ticket repairs. After all, until the day comes that a bridge falls down, it often looks just fine.
.
now is key because of cheap labor and low intrest rates
Callahan 7/09 (David Callahan is a co-founder of the think tank Demos, a public policy group based in New York City, where he is currently a Senior Fellow, “ Put Hardhats to Work With New Infrastructure Spending”, )
Construction workers remain the hardest hit of all American workers, according to Friday's job numbers. This sector has a staggering unemployment rate of 12.8 percent, the highest of any corner of the U.S. economy. That rate is down from 15.6 percent at this time last year, but remains brutally high -- and, inevitably, the data doesn't take into account those who fly beneath the radar, such as undocumented immigrants. Construction workers tend to be male and many have not gone beyond high school. This is not an easy group to retrain for other jobs. And because many of these workers used to build houses -- an industry unlikely to boom again any time soon -- it's unclear how market forces alone will offer salvation to the hardhat crowd in the near future. Many construction workers have been out of work since the housing crash began four or five years ago. Many have already exhausted their long-term unemployment benefits or soon will, given moves by Congress and state governments to curtail such benefits. Skilled workers once riding high during boom times are now, in many cases, totally destitute. This is a human tragedy. And quite apart from that, such unemployment could increasingly become a source of social instability. Does this nation really want a vast army of indigent men, adept with tools and heavy machinery, who have nothing to lose by turning to crime or other violent actions? I don't think so. But there is an obvious way to mitigate sky high unemployment among construction workers, which is to put them to work on infrastructure projects. There is plenty to do on this front. A bipartisan study last year found that the United States needs to spend some $2 trillion on infrastructure over the next decade beyond what is now projected. That same study found that many of America's competitors are investing more heavily than we are in ways that will put us at a disadvantage. China, for instance, is building the most modern rail systems and airports in the world. With interest rates at a historic low, and a huge supply of surplus skilled labor, it's hard to imagine a better time than now for the U.S. to borrow a lot of money to strengthen its infrastructure. Unlike many forms of public spending, moreover, investing in infrastructure is one that enjoys strong support from leading business groups like the U.S. Chamber of Commerce. Business gets the link between infrastructure and economic growth. This should not be a polarizing issue.
Decaying infrastructure will cost $3.1 trillion by 2020
Huffington Post ’11 (Matt Sledge, Staff Writer for the Huffington Post, 7/27/11, “ Deteriorating Transportation Infrastructure Could Cost America $3.1 Trillion”, ) SRK
New tires add up. That's the finding of a report issued Wednesday by the American Society for Civil Engineers, which tallies up the cost of our decaying surface transportation infrastructure, from potholes to rusting bridges to buses that never come. The engineers found that overall, the cost of failing to invest more in the nation's roads and bridges would total $3.1 trillion in lost GDP growth by 2020. For workers, the toll of investing only at current levels would be equally daunting: 877,000 jobs would also be lost. Already, the report found, deficient and deteriorating surface transportation cost us $130 billion in 2010. By and large those costs would not come from the more dramatic failings of America's transportation system -- like the collapse of the I-35W Bridge in Minnesota -- but more mundane or even invisible problems. The minivan that hits a pothole chips away at a family's income. The clogged highway that drains away an extra half hour of a trucker's day also drives up the cost of shipping for businesses. Congestion, the report found, is of particular cause for concern. Already, 40 percent of urban interstates have capacity deficiencies. Currently, that costs us $27 billion a year in lost time and other inefficiencies wasted on the roads. By 2020, that number could grow tenfold, reaching $276 billion a year. The civil engineers are, by their own admission, a biased party -- they stand to gain the most from renewed investment in infrastructure -- but they paint a picture of an infrastructure shortfall that would have ripple effects far and wide through society. Companies, the report estimates, would underperform by $240 billion over the next ten years without additional investment. Exporters, which would have trouble moving goods to market, would send $28 billion in trade less abroad. The cost to families' household budgets, the report suggests, would by $1,060 a year. Underscoring the wider appeal of ASCE's argument, the report received the backing of both labor and business leaders. "Today’s report from the American Society of Civil Engineers further reinforces that the U.S. is missing a huge opportunity to ignite economic growth, improve our global competitiveness, and create jobs," Tom Donohue, president and CEO of the U.S. Chamber of Commerce, said in a release. Richard Trumka, the AFL-CIO president, said in a release that "with a modest increase in investment, we can rebuild a strong economy where business can thrive and workers can afford a place to live, raise a family, take an occasional vacation, pay for their children’s education and have a dignified retirement." The ASCE claims the answer to the transportation problem is simple: Invest more, and quickly. "The problems facing our nation's infrastructure are widely acknowledged and well understood," said Andrew Herrmann, the president-elect of the ASCE.
Generic Growth
Infrastructure bank would increase productivity and strengthen future growth
Schwenninger, ‘10
[Sherle R. Schwenninger, founder of New America Foundation’s Economic Growth and American Strategy Programs, former director of World Policy Institute, Founding Editor of World Policy Journal, former Senior Program Coordinator for the Project on Development, Trade and International Finance at the Council on Foreign Relations, 2/23/2010, New America Foundation ]
Needed Investments that Will Pay for Themselves. New infrastructure investment can easily be financed at historically low interest rates through a number of mechanisms, including the expansion of Build America Bonds and Recovery Zone bonds (tax-credit bonds that are subsidized by favorable federal tax treatment) and the establishment of a National Infrastructure Bank. Public infrastructure investment will pay for itself over time as a result of increased productivity and stronger economic growth. Several decades of underinvestment in public infrastructure has created a backlog of public infrastructure needs that is undermining our economy's efficiency and costing us billions in lost income and economic growth. By making these investments now, we would eliminate costly bottlenecks and make the economy more efficient, thereby allowing us to recoup the cost of the investment through stronger growth and higher tax revenues
Infrastructure banks in successful use elsewhere in the world – key to regain U.S. competitive advantage
Thomasson, ‘11
[Scott Thomasson, Director of Public Policy and Progressive Policy Institute, U.S. HOR document, 10/12/11, congressional documents and publications ]
¶ Building and maintaining world-class infrastructure is essential for America to compete in the global economy and to attract capital investment needed for-long-term growth and job creation. As other countries pour money and resources into modernizing their own infrastructure, the U.S. is lagging behind and surrendering one of our greatest competitive advantages: a strong system of infrastructure that was once the envy of the rest of the world. To regain our competitive edge, we need a national infrastructure strategy that takes advantage of modern financing and policy innovations that other countries are already using to out-invest and out-compete the U.S.¶ ¶ The national infrastructure bank is an approach that has been adopted by developed countries around the world to facilitate investment in new transportation projects and other types of infrastructure, with strong track records of success. Many states in the U.S. have also established their own versions of infrastructure banks, with more being added and expanded every year. There is also strong support for a national infrastructure bank from a broad coalition of top corporate CEOs, Wall Street investors, organized labor, and local government leaders.
Only a bank makes improvements conducive to a recovery
Koroluk, 10 (Korky Koroluk, regular freelance contributor to the Journal of Commerce, 9/29/2010, “Infrastructure bank idea gains traction,” Journal of Commerce ed. 78, ProQuest)
Patrick Natale, of the American Society of Civil Engineers, said the proposal is on the right track, adding that it must be just a first step in a comprehensive plan to improve surface transportation in the country. Felix Rohatyn, a prominent investment banker, applauded the idea of an infrastructure bank, as a way to begin to reverse policies that treat infrastructure projects as a way to meet local political objectives instead of national economic ones. And, Michael Likosky, an economist, said simply the bank would mean reinvesting in America. As it happened, Likosky had a new book coming out just a week after Obama's announcement. It's called Obama's Bank: Financing a Durable New Deal. In it, he explains the ways in which Obama's proposal is much like a modern version of the New Deal instituted by President Franklin Roosevelt to help lift the U.S. (and the world) out of the Great Depression of the 1930s. An infrastructure bank, Likosky argued, could "relay the foundation of the economy" through longterm projects that would allow businesses to plan ahead, so they can create and keep good jobs. Through the bank, the government would invest in projects along with the private sector using criteria based upon merit, not upon political advantage. He pointed out that there are investment funds, pension funds, hedge funds, insurers and other institutional investors keen to invest in infrastructure opportunities. He claims that, if properly structured, $60 million of government investment can generate almost $450 billion in public works. William Galston, an economist with The Brookings Institution, agrees with Likosky, and emphasized that the decisions of an infrastructure bank "should be made by a board of governors insulated from traditional political pressures." He suggested that the bank would have to leverage its start-up capital to attract private-sector investors seeking a reasonable rate of return. "To provide it, most projects the bank funds would have to generate revenue streams from user fees and other sources," he said. There are, of course, big and important differences between Canada and the United States. Our political systems are different. Our mind-set is different. But, there are lessons we can learn if we watch carefully as the debate about an infrastructure bank plays out. Many people in the U.S. have emphasized that a functioning national infrastructure is not optional. It is necessary to the country's economic future, its global competitiveness, its ability to create a lot of jobs over the long term. The same can be said for Canadian infrastructure. And it could be achieved, if we can find ways to keep our politicians from behaving like ... well, politicians.
NIB key to long term future competitiveness and lasting growth
U.S. Senate Document, ‘11
[Senator Christopher A. Coon’s speech on the floor of Senate and directed towards President Obama, 11/3/11, Congressional Documents and Publications < >]
WASHINGTON - U.S. Senator Chris Coons (D-Del.) spoke on the Senate floor for the second day in a row on Thursday, voicing his support for the Rebuild America Jobs Act, which was introduced Monday to help address America's jobs crisis by investing in America's crumbling infrastructure. Senator Coons is an original cosponsor to the bill.¶ - As Delivered on November 3, 2011 -¶ I rise today to speak about one way forward out of it, and I think one of the reasons why there is so much frustration with Congress and the general public is there is broad support for some simple solutions to get Americans back to work, to revive and strengthen our economy that we just seem incapable of reaching across this partisan divide and moving forward.¶ One of those is an infrastructure bank. I rise today to follow up on a speech I gave yesterday about why investing in American infrastructure means investing in America's future.¶ Infrastructure, building roads and bridges, highways and sewer systems, modernizing America's backbone enjoys very broad support from all across the United States, from all different sectors because Americans understand it will put folks back to work, into building trades industry that have taken the hardest hit in this recession, and in a way that will lay the groundwork for our long-term future competitiveness.¶ This is smart spending. This is investing in the best tradition of federal, state, local, private partnerships to make America more competitive for the future. Today, I want to talk about one element of the bill, which I hope we will move to later today. The American Infrastructure Financing Authority or known more colloquially as the National Infrastructure Bank.¶ If this idea sounds familiar, it's because it has already been introduced, it's a bipartisan bill, the BUILD Act, championed by Senator Kerry and Senator Hutchison. And of which I am a cosponsor, and one that provides a creative financing vehicle for building infrastructure going forward.¶ As you know, Mr. President, before becoming a senator in the election last year, just a year ago yesterday, I served for six years as the county executive of Delaware's largest county, and one of the things our county was responsible for was running a countywide sewer system. We had 1,800 miles of sanitary sewer, and it was a constant challenge to maintain. That's a lot of pipe, a lot of pump stations and a lot of sewage backing up in people's homes in the middle of the night, which led to a lot of aggravated calls from constituents. It was an aging system, like so much of America's infrastructure, one in which we had underinvested for too long. And from personal experience, I can tell you that the lack of that infrastructure, of adequate sewer capacity, was a major barrier to future growth.¶ So, too, across states and counties and cities all over this country, where the roads and rail, the ports and the sewer systems aren't up to current global standards, we can't expect to grow to meet our global competitors. When we talk about capital infrastructure improvements at the local level in the government I used to be with, it wasn't some wish list, this wasn't some future technology, this wasn't some risky investment. It was triage. It was critically needed investment in pipes in the ground that would protect our water, strengthen our community and grow our economy.
US losing its competitive edge – needs NIB to fuel our economy over the long-term
Dodd, ‘10
[Chris Dodd, Senate Banking Committee Chairman, 9/21/2010, Congressional Documents and Publications and U.S. Senate Documents ]
¶ "Today, we are here to discuss how investing in our public infrastructure can help to strengthen our economic recovery and create well-paying jobs for American workers.¶ ¶ "In 1955, President Dwight Eisenhower sent a message to Congress. In it, he called on Congress to meet the challenge presented by a national economy that was rapidly outgrowing its capacity to transport people and goods. The result of that message was a monumental federal investment in our national infrastructure--our Interstate Highway System.¶ ¶ "Eisenhower's initiative was broad in scope, and bold in conception. It built upon over a century of investments in our railroads, ports, water and sewer systems, and other infrastructure. These investments helped build the world's strongest economy.¶ ¶ "Now other nations are catching up and focusing a greater share of resources on infrastructure investment than the United States. China puts 9 percent of its GDP towards infrastructure projects and India contributes 5 percent.¶ ¶ "These countries are focused on providing their citizens with fast, reliable transit options. They are lowering their reliance on fossil fuels.¶ ¶ "They are making investments on the scale that our nation made early in the 20th century--but they are focusing on the needs of a 21st century economy.¶ ¶ "We cannot afford to lose our competitive advantage.¶ ¶ "We need to do better. This includes passing a long-term surface transportation bill which will remain the backbone of our transportation policy. Only a long-term bill can give our state and local governments the certainty they need to ramp up investments in our road, transit, and rail infrastructure. While these investments are vital to the health of our transportation systems, we also need a new approach to infrastructure finance.¶ ¶ "A National Infrastructure Bank will build on our nation's legacy of bold, innovative investments in public infrastructure. It would complement our current infrastructure financing programs in a manner that delivers taxpayers the best bang for their buck.¶ ¶ "First, an infrastructure bank would create a competitive, merit-based process to distribute money. Projects would be subject to cost-benefit analysis to determine their national and regional economic impact.¶ ¶ "Second, a well-designed National Infrastructure Bank would leverage state, local, and private funds to support these investments. With the current system of formula grants, states often simply substitute federal funding for state funding. The Infrastructure Bank's competitive selection process can reward those projects that best leverage new public or private funding to expand the pie, not just rearrange the slices.¶ ¶ "Lastly, it would allow us to shift our focus from the near-term to the long-term. This will provide opportunities to fund large projects of national and regional significance, projects that require vision and patience. Investments like these will fuel our economy and create jobs over the long-term.
Competitiveness
NIB would boost long term competitiveness through reduced demand and waste
McConaghy and Kessler 11
(Ryan, Deputy Director of the Third Way Economic Program, Jim, Vice President for Policy at Third Way, January 2011, “A National Infrastructure Bank”, )
By providing a new and innovative mechanism for project financing, the NIB could help provide funding for projects stalled by monetary constraints. This is particularly true for large scale projects that may be too complicated or costly for traditional means of financing. In the short-term, providing resources for infrastructure investment would have clear, positive impacts for recovery and growth. It has been estimated that every $1 billion in highway investment supports 30,000 jobs,37 and that every dollar invested in infrastructure increases GDP by $1.59.38 It has also been projected that an investment of $10 billion into both broadband and smart grid infrastructure would create 737,000 jobs.39 In the longer-term, infrastructure investments supported by the NIB will allow the U.S. to meet future demand, reduce the waste currently built into the system, and keep pace with competition from global rivals.
Plans key to US Competitiveness
Dirion 6/21 (Rod Diridon, Sr., has served as executive director of the Mineta Transportation Institute (MTI) since four years after its creation by Congress in 1991. Mr. Diridon has chaired more than 100 international, national, state and local programs, most related to transit and the environment. He frequently provides legislative testimony on sustainable transportation issues and is regarded by many as the “father” of modern transit service in Silicon Valley, June 21, 2012, “ U.S. must fund transportation infrastructure”, ) SRK
The country that moves product to the market and people to work most efficiently wins the international geo-economic competition. That's never been more threateningly true than now, as the aging and incomplete U.S. transportation systems fall into decline with dwindling hope of recovery. Major sections of President Dwight Eisenhower's interstate highway system, especially interchanges and lane widening, are incomplete. The overall system is poorly maintained, including bridges and pavement, except for those supported by our San Francisco Bay Area's bridge tolls, which have been increased recently. Our mass transit systems are well planned but incomplete. New, more efficient and sustainable modes, such as high-speed rail and automated guide-way transit that already support the rest of the world's economies, are not available in the United States. The 18.4 cent-per-gallon federal gas tax, the traditional funding source for transportation, was increased last in 1993 and is woefully inadequate to meet current and future needs. Remember, fuel prices are up drastically, which results in fewer miles being driven and stimulates the development of more efficient cars. All of that leads to less fuel purchased. The gas tax is per gallon - fewer miles and better economy equals fewer gallons consumed, which equals less fuel taxes collected for four out of the past five years. Yet our aging and obsolete infrastructure needs more funding, not less. Congress has been unable to find the funding or the votes to reauthorize the essential national surface transportation act. If that authorization lapses at the end of June, the national system will cease to function. The 2006 funding is being extended every three months or so at 2006 levels, which were inadequate then and even more so now. To replace the dwindling gas taxes, a significant portion of that funding now comes from the national general fund, which was not intended to support the transportation system. Yet no serious consideration is being given to increasing the traditional source of transportation funding, the gas tax.
=== IMPACTS ===
Double Dip kills economy
Double dip kills econ
NYT ’11 ( CATHERINE RAMPELL, Staff Writer, August 7, 2011, “ Second Recession in U.S. Could Be Worse Than First”, ) SRK
If the economy falls back into recession, as many economists are now warning, the bloodletting could be a lot more painful than the last time around. Given the tumult of the Great Recession, this may be hard to believe. But the economy is much weaker than it was at the outset of the last recession in December 2007, with most major measures of economic health — including jobs, incomes, output and industrial production — worse today than they were back then. And growth has been so weak that almost no ground has been recouped, even though a recovery technically started in June 2009. “It would be disastrous if we entered into a recession at this stage, given that we haven’t yet made up for the last recession,” said Conrad DeQuadros, senior economist at RDQ Economics. When the last downturn hit, the credit bubble left Americans with lots of fat to cut, but a new one would force families to cut from the bone. Making things worse, policy makers used most of the economic tools at their disposal to combat the last recession, and have few options available. Anxiety and uncertainty have increased in the last few days after the decision by Standard & Poor’s to downgrade the country’s credit rating and as Europe continues its desperate attempt to stem its debt crisis. President Obama acknowledged the challenge in his Saturday radio and Internet address, saying the country’s “urgent mission” now was to expand the economy and create jobs. And Treasury Secretary Timothy F. Geithner said in an interview on CNBC on Sunday that the United States had “a lot of work to do” because of its “long-term and unsustainable fiscal position.” But he added, “I have enormous confidence in the basic regenerative capacity of the American economy and the American people.” Still, the numbers are daunting. In the four years since the recession began, the civilian working-age population has grown by about 3 percent. If the economy were healthy, the number of jobs would have grown at least the same amount. Instead, the number of jobs has shrunk. Today the economy has 5 percent fewer jobs — or 6.8 million — than it had before the last recession began. The unemployment rate was 5 percent then, compared with 9.1 percent today. Even those Americans who are working are generally working less; the typical private sector worker has a shorter workweek today than four years ago. Employers shed all the extra work shifts and weak or extraneous employees that they could during the last recession. As shown by unusually strong productivity gains, companies are now squeezing as much work as they can from their newly “lean and mean” work forces. Should a recession return, it is not clear how many additional workers businesses could lay off and still manage to function. With fewer jobs and fewer hours logged, there is less income for households to spend, creating a huge obstacle for a consumer-driven economy. Adjusted for inflation, personal income is down 4 percent, not counting payments from the government for things like unemployment benefits. Income levels are low, and moving in the wrong direction: private wage and salary income actually fell in June, the last month for which data was available. Consumer spending, along with housing, usually drives a recovery. But with incomes so weak, spending is only barely where it was when the recession began. If the economy were healthy, total consumer spending would be higher because of population growth. And with construction nearly nonexistent and home prices down 24 percent since December 2007, the country does not have a buffer in housing to fall back on. Of all the major economic indicators, industrial production — as tracked by the Federal Reserve — is by far the worst off. The Fed’s index of this activity is nearly 8 percent below its level in December 2007. Likewise, and perhaps most worrisome, is the track record for the country’s overall output. According to newly revised data from the Commerce Department, the economy is smaller today than it was when the recession began, despite (or rather, because of) the feeble growth in the last couple of years. If the economy were healthy, it would be much bigger than it was four years ago. Economists refer to the difference between where the economy is and where it could be if it met its full potential as the “output gap.” Menzie Chinn, an economics professor at the University of Wisconsin, has estimated that the economy was about 7 percent smaller than its potential at the beginning of this year. Unlike during the first downturn, there would be few policy remedies available if the economy were to revert back into recession. Interest rates cannot be pushed down further — they are already at zero. The Fed has already flooded the financial markets with money by buying billions in mortgage securities and Treasury bonds, and economists do not even agree on whether those purchases substantially helped the economy. So the Fed may not see much upside to going through another politically controversial round of buying. “There are only so many times the Fed can pull this same rabbit out of its hat,” said Torsten Slok, the chief international economist at Deutsche Bank. Congress had some room — financially and politically — to engage in fiscal stimulus during the last recession. But at the end of 2007, the federal debt was 64.4 percent of the economy. Today, it is estimated at around 100 percent of gross domestic product, a share not seen since the aftermath of World War II, and there is little chance of lawmakers reaching consensus on additional stimulus that would increase the debt. “There is no approachable precedent, at least in the postwar era, for what happens when an economy with 9 percent unemployment falls back into recession,” said Nigel Gault, chief United States economist at IHS Global Insight. “The one precedent you might consider is 1937, when there was also a premature withdrawal of fiscal stimulus, and the economy fell into another recession more painful than the first.”
Double dip = war
Double dip leads to war
Financial Times ’10 ( Tina Fordham, Staff Writer, “ Investors can’t ignore the rise of geopolitical risk”, ) SRK
Geopolitical risk is on the rise after years of relative quiet – potentially creating further headwinds to the global recovery just as fears of a double-dip recession are growing, says Tina Fordham, senior political analyst at Citi Private Bank. “Recently, markets have been focused on problems within the eurozone and not much moved by developments in North Korea, new Iran sanctions, tensions between Turkey and Israel or the unrest in strategically significant Kyrgyzstan,” she says. “But taken together, we don’t think investors can afford to ignore the return of geopolitical concerns to the fragile post-financial crisis environment.” Ms Fordham argues the end of post-Cold War US pre-eminence is one of the most important by-products of the financial crisis. “The post-crisis world order is shifting. More players than ever are at the table, and their interests often diverge. Emerging market countries have greater weight in the system, yet many lack experience on the global stage. Addressing the world’s challenges in this more crowded environment will be slower and more complex. This increases the potential for proliferating risks: most notably the prospect of politically and/or economically weakened regimes obtaining nuclear weapons; and military action to keep them from doing so. “Left unresolved, these challenges could disrupt global stability and trade. This would be a very unwelcome time to see the return of geopolitical risk.”
Lack of growth = war
Lack of growth causes global conflict
Lachman and Auslin ’09 ( Desmond Lachman joined AEI after serving as a managing director and chief emerging market economic strategist at Salomon Smith Barney, Michael Auslin, AEI's director of Japan Studies, was an associate professor of history and senior research fellow at the MacMillan Center for International and Area Studies at Yale University prior to joining AE, “ The Global Economy Unravels”, )
The world's policymakers are finally waking up to how synchronized and how severe the global economic crisis is turning out to be. Just this week, newspapers reported that the British army is being put on standby to deal with possible civil disorder. World leaders are beginning to grasp the all too likely political fallout from a sustained period of falling output, rapidly rising unemployment and declining equity and home prices. However, their uncoordinated global policy response to this crisis underscores the political failure to embrace policies most likely to restore growth and not simply bust national budgets. Conversely, global policymakers do not seem to have grasped the downside risks to the global economy posed by a deteriorating domestic and international political environment. If the past is any guide, the souring of the political environment must be expected to fan the corrosive protectionist tendencies and nationalistic economic policy responses that are already all too much in evidence. After spending much of 2008 cheerleading the global economy, the International Monetary Fund now concedes that output in the world's advanced economies is expected to contract by as much as 2% in 2009. This would be the first time in the post-war period that output contracted in all of the world's major economies. The IMF is also now expecting only a very gradual global economic recovery in 2010, which will keep global unemployment at a high level. As a barometer of the political and social tensions that this grim world economic outlook portends, one needs look no further than the recent employment forecast of the International Labor Organization. Sadly, the erstwhile rapidly growing emerging-market economies will not be spared by the ravages of the global recession. Output is already declining precipitously across Eastern and Central Europe as well as in a number of key Asian economies, like South Korea and Thailand. A number of important emerging-market countries like Ukraine seem to be headed for debt default, while a highly oil-dependent Russia seems to be on the cusp of a full-blown currency crisis. Perhaps of even greater concern is the virtual grinding to a halt of economic growth in China. The IMF now expects that China's growth rate will approximately halve to 6% in 2009. Such a growth rate would fall far short of what is needed to absorb the 20 million Chinese workers who migrate each year from the countryside to the towns in search of a better life. As a barometer of the political and social tensions that this grim world economic outlook portends, one needs look no further than the recent employment forecast of the International Labor Organization. The ILO believes that the global financial crisis will wipe out 30 million jobs worldwide in 2009, while in a worst case scenario as many as 50 million jobs could be lost. What do these trends mean in the short and medium term? The Great Depression showed how social and global chaos followed hard on economic collapse. The mere fact that parliaments across the globe, from America to Japan, are unable to make responsible, economically sound recovery plans suggests that they do not know what to do and are simply hoping for the least disruption. Equally worrisome is the adoption of more statist economic programs around the globe, and the concurrent decline of trust in free-market systems. The threat of instability is a pressing concern. China, until last year the world's fastest growing economy, just reported that 20 million migrant laborers lost their jobs. Even in the flush times of recent years, China faced upward of 70,000 labor uprisings a year. A sustained downturn poses grave and possibly immediate threats to Chinese internal stability. The regime in Beijing may be faced with a choice of repressing its own people or diverting their energies outward, leading to conflict with China's neighbors. Russia, an oil state completely dependent on energy sales, has had to put down riots in its Far East as well as in downtown Moscow. Vladimir Putin's rule has been predicated on squeezing civil liberties while providing economic largesse. If that devil's bargain falls apart, then wide-scale repression inside Russia, along with a continuing threatening posture toward Russia's neighbors, is likely. Even apparently stable societies face increasing risk and the threat of internal or possibly external conflict. As Japan's exports have plummeted by nearly 50%, one-third of the country's prefectures have passed emergency economic stabilization plans. Hundreds of thousands of temporary employees hired during the first part of this decade are being laid off. Spain's unemployment rate is expected to climb to nearly 20% by the end of 2010; Spanish unions are already protesting the lack of jobs, and the specter of violence, as occurred in the 1980s, is haunting the country. Meanwhile, in Greece, workers have already taken to the streets. Europe as a whole will face dangerously increasing tensions between native citizens and immigrants, largely from poorer Muslim nations, who have increased the labor pool in the past several decades. Spain has absorbed five million immigrants since 1999, while nearly 9% of Germany's residents have foreign citizenship, including almost 2 million Turks. The xenophobic labor strikes in the U.K. do not bode well for the rest of Europe. A prolonged global downturn, let alone a collapse, would dramatically raise tensions inside these countries. Couple that with possible protectionist legislation in the United States, unresolved ethnic and territorial disputes in all regions of the globe and a loss of confidence that world leaders actually know what they are doing. The result may be a series of small explosions that coalesce into a big bang. One has to hope that ahead of the next G-20 summit in London this April, global policymakers will get real about the gravity of the present global economic and political situation. For only with a coordinated and forceful economic policy response is there any hope of extricating ourselves from what is turning out to be the most serious global economic slump since the Great Depression.
= Plan Popular =
Plan popular—increased investments vital now
Natter, 08 (Ari Natter, 3/11/2008, “Business Groups Back Infrastructure Bank,” Traffic World, ProQuest)
Backers of a national bank dedicated to funding major infrastructure projects around the country told a Senate panel considering such a proposal Tuesday that increased investment is critical for the vitality of the nation's economy. "Our infrastructure is in crisis," said Janet F. Kavinoky, the U.S. Chamber of Commerce's director of transportation infrastructure. "We are going to have to find and invest more public dollars in our infrastructure." The Senate Banking Committee examined the proposal, which calls for the formation of an independent bank modeled after the Federal Deposit Insurance Corp. to evaluate and finance infrastructure projects that require at least $75 billion in federal funding. Proposed last August by Sens. Christopher J. Dodd, D-Conn., and Chuck Hagel, R-Neb., the National Infrastructure Bank Act has received the support of the leading Democratic presidential candidates. Representatives from the AFL-CIO, Goldman Sachs, the American Society of Civil Engineers, and the Center for Strategic and Infrastructure Studies also testified in favor of the proposal Tuesday. "It is not an unimaginable thing to begin to finance this bank," Felix Rohatyn, a CSIC trustee testified, "Especially when you think about it as an investment and not an expenditure."
Congress willing to raise the gas tax in support
Hill, 92 (Patrice Hill, reporter on The Washington Times' business desk, 10/30/1992, ProQuest)
Flanagan said that other members of Congress besides Gephardt would support such an infrastructure bank, and might be willing to raise or devote between 2 cents and 3 cents of the federal gasoline tax to it each year. "It's not out of the question that this could happen next year," he said. Each penny the gas tax is raised generates about $1 billion in revenues. But some meeting participants said the proposal could run into trouble next year if the newly elected Congress and President put top priority on cutting the inflated federal deficit. "Most people are agreed this is the way to go, but every time you sit down with the people on Capitol Hill, you keep running into problems with such infrastructure funds off-budget. But Francis X. Lilly, president of Bear, Stearns Fiduciary Services and a member of the infrastructure commission, said capital budgeting probably would be viewed as a gimmick." Changing the rules is always a good way to get the deficit down," he joked. Another speaker at the meeting, Robert L. Mitchell, a former chairman of the Michigan Task Force on Public Investment, said the bank proposal might meet some resistance from the states if it relies on a higher federal gas tax. Step up their own infrastructure spending, he said. But O'Cleireacain said the proposal should not supplant state infrastructure spending or their tax-exempt borrowing. "Theoretically, state and local governments could borrow more cheaply" and finance the projects themselves, she said. "The problem is, that isn't happening. That's why this panel was created - because it just isn't being done."
Bipartisan support backing NIB proposals
Senate Release, ‘11
[Senate Finance Committee News Release, 11/2/2011, Congressional Documents and Publications ]
WASHINGTON - Today, Senate Republicans, led by Finance Committee Ranking Member Orrin Hatch (R-Utah), unveiled legislation, the Long-Term Surface Transportation Extension Act of 2011, that would speed up transportation construction projects, and provide employers with relief from burdensome federal regulations, without taxing job creators or adding a dime to the nation's debt. The provisions included in the bill draw from bipartisan recommendations, including those from the President's Council on Jobs and Competitiveness. This legislation is an alternative to Senate Democrats' latest tax and spend proposal that includes a risky so-called "infrastructure bank."¶ "Built on several of the President's Jobs Council's proposals, this legislation is a better way of speeding transportation construction, while scrapping burdensome regulations that are hurting our nation's job creators," said Hatch. "It isn't funded with job-killing tax hikes. It doesn't add a dime to the debt. And unlike the Democrats' stimulus proposal, it should garner bipartisan support."¶ "Unlike the Democrats' stimulus/tax increase proposal, the Republican alternative to extend the federal highway program for two years would prevent a tax hike while reducing the deficit," said Republican Leader Mitch McConnell (R-Ky.). "And unlike the Democrats' proposal in which less than a tenth of the funding would be spent this fiscal year, our approach cuts through regulatory red tape and eliminates mandatory transportation enhancements, giving states more flexibility to create jobs right away."
NIB has a broad cross-party support
Rohatyn, ‘11
[Felix G. Rohatyn, special adviser to the chairman and ceo of lazard and former chairman of NY’s municipal, American investment banker that prevent bankruptcy NYC in the 1970s, US ambassador to France and long term advisor to the US Democratic Party, 7/12/11, POLITICO ]
President Barack Obama talked at his news conference Monday about creating a national infrastructure bank that could help rebuild and repair America’s roads, bridges and ports and also address our serious unemployment problem. He cited the bank as one crucial way to stimulate the economy.¶ I would urge the president to move forward on this so we can begin to restore America’s infrastructure and strengthen our economy for the long term.¶ Even as Congress debates fiscal strategies, our country’s competitors and partners around the globe make massive investments in public infrastructure. Meanwhile, our nation’s roads and bridges, schools and hospitals, airports and railways, ports and dams, waterlines and air-control systems are rapidly and dangerously deteriorating.¶ We should view infrastructure financing as an investment rather than an expense and should establish a national, capital budget for infrastructure. This idea is not new.¶ Five years ago, former Sen. Warren Rudman and I co-chaired a commission on public infrastructure at the Center for Strategic and International Studies — a bipartisan group of congressional and business leaders, governors and bankers that unanimously recommended an infrastructure bank and called for a capital budget. Yet these proposals were — and perhaps still are — unable to gain political traction.¶ China, India and European nations are spending the equivalent of hundreds of billions of dollars on efficient public transportation, energy and water systems. Here in the United States, a five-year investment of $2.2 trillion is needed simply to make U.S. infrastructure dependable and safe, according to the American Society of Civil Engineers.¶ The obvious, negative effect of this situation on our global competitiveness, quality of life and ability to create American jobs is a problem we no longer can ignore.
NIB has a broad coalition of support
Kochan, ‘11¶ [Thomas Kochan, professor at MIT Sloan School of Management and cofounder of the Policy Research Network, 9/5/2011, Boston Globe ]
For such reasons, President Obama is likely to call for greater infrastructure spending in his upcoming jobs talk. But some in Congress have already called it "dead in the water," in large part because it looks to them like another big government program.¶ This is why business and labor need to lead this effort. By showing they are willing to work together to fund and manage a private-public bank, they can help convince Congress to do its part - essentially, to authorize issuance of special low-interest bonds. And, by working together, business and labor can show Congress and the American people they are trying to help end the polarization that is killing the economic recovery and ruining our democracy.¶ As governments around the world face growing fiscal pressures, the use of some outside money for public infrastructure has become more common, and these investments have paid off well for investors, workers, and customers. In Britain, 15 percent of infrastructure projects are now private-public partnerships. These projects are chosen purely on their economic merits, not for political patronage, and have achieved high on-time and on-budget performance outcomes, 80 percent customer satisfaction ratings, and higher employment standards than conventionally financed and managed projects.¶ Meanwhile, the Housing Investment Trust, funded by the US building trades, has financed over 100,000 housing units since its inception and has consistently met its benchmark rate of return. Indeed, there is growing interest in this market. Goldman Sachs, Citigroup, and Morgan Stanley have created their own global infrastructure investment funds. It's time the nation as a whole catches up with this new market opportunity.¶ The AFL-CIO has stated it is ready to commit up to $10 billion from union pension funds over the next five years to help fund a national infrastructure bank. Now business leaders, who say they are reluctant to invest because of uncertainty about where the economy is headed, need to get off the sidelines and use some of their large piles of cash to join in creating a long-term strategy for making investments in American jobs pay off.¶ Wall Street should be able to more than match what labor is contributing - and then put its financial engineering talents to work to help assemble investment vehicles to build up the bank's capacity.¶ There is a broader issue here. In an era of narrow partisanship, the United States needs a long-term compact - not just between business and labor, but also involving government and educational institutions - to create conditions that promote innovation, sustainable economic growth, and high-skilled employment. On Labor Day and beyond, America's workers should convert their anger over the lack of jobs into a call for such a compact.
Majority support the NIB – seen as way to insulate investment from politics
Halsey, ‘11
[Ashley Halsey, Staff Writer, 2/14/11, Washington Post ]
The Rockefeller Foundation infrastructure survey found that Americans don't support either as an option to raise revenues, or any other approach that would tax them directly. Seventy-one percent opposed a gas tax increase, 64 percent were against new tolls on existing roads and bridges, and 58 percent said no to paying for each mile they drive.¶ While 66 percent said they thought spending on infrastructure is important, the same number of those surveyed said the government didn't spend transportation money efficiently.¶ "People are willing to pay if they have faith they are getting quality," Turner said. "Uncertainty in the poll more reflects a frustration with bridges to nowhere from Congress. The answer is that with clear outcomes and better accountability, people want and support investments in transportation infrastructure."¶ Almost as many said they would support President Obama's proposal to create a National Infrastructure Bank.¶ The bank is seen as a way to insulate government investment from the political process, keeping the focus on the most important projects and encouraging investment from the private sector. Approaching transportation from a banker's perspective, advocates say, would emphasize making investments in projects that have demonstrable financial returns.
Broad coalition of support behind NIB
Thomasson, ‘11
[Scott Thomasson, Director of Public Policy and Progressive Policy Institute, U.S. HOR document, 10/12/11, congressional documents and publications ]
Here in the U.S., there is also strong support for a national infrastructure bank from a broad coalition of top corporate CEOs, Wall Street investors, organized labor, and local government leaders. These are the people making decisions every day that drive our country's economic prosperity, and they recognize the huge potential for a bank to help address our investment needs by mobilizing private capital to leverage public funding.¶ At a Capitol Hill forum held last week by the Progressive Policy Institute, urgent calls for swift action and smarter financing policies came from top executives from Nucor, the nation's largest steel producer; Siemens, a multinational corporation making huge investments in manufacturing, energy, and infrastructure here in the U.S.; Ullico, an insurance company owned and funded by large union pensions; UBS Investment Bank, which advises U.S. and foreign investors on infrastructure financing; and Meridiam Infrastructure, a private-capital fund focused on investing directly in U.S. transportation, water, and energy projects. Both the U.S. Chamber of Commerce and the AFL-CIO have prominently endorsed the bipartisan Senate proposal for a bank that has more recently been adopted in the American Jobs Act.¶ Although governments, investors, and industry leaders throughout the U.S. and around the world have seen the wisdom and benefits of infrastructure banks as a tool to supplement direct public funding, the idea is still new and unfamiliar to many here in Washington. There continues to be a great deal of confusion and misinformation about the role of a national bank, and about the structure and features of specific bank proposals currently before Congress, including the president's own proposal included in the American Jobs Act.¶ A properly structured national infrastructure bank is an innovative but sound investment tool that deserves to be a part of the current debate about the many challenges of investing in long-term economic growth and job creation. As Chamber President Tom Donohue has said, it's an invaluable part of the solution to how we pay for projects we can't afford to ignore, but it can only work if added to a strong foundation of spending in the transportation reauthorization bills.
Plan popular—bipartisan support
(Department of Transportation ’11, US Department of Transportation, “Secretary LaHood and Transportation Leaders Join President Obama’s Call for Job-Creating Infrastructure Investments”, 9/9/11, )
In his address to the nation last night, President Obama called on Congress to pass the American Jobs Act, which will invest in job-creating transportation projects and establish a National Infrastructure Bank, a concept with strong bipartisan support. There is also wide agreement among business leaders, labor unions, economists and elected officials that making significant investments in America’s roads, rails, and airports will not only put hundreds of thousands of people to work quickly, it is crucial to the nation’s future economic growth and prosperity
= AT: States =
Strong federal commitment is critical to maintain state economies, hampers overall growth
JOHNSON ET AL ‘10 (Nicholas, Iris J. Lav, Elizabeth McNichol, Nicholas Johnson- graduate degree from Duke University's Terry Sanford Institute of Public Policy, Director of the State Fiscal Project. AND Iris J. Lav- created the State Fiscal Analysis Initiative, Holds an MBA from George Washington University and an AB from the University of Chicago. AND Elizabeth McNichol- M.A. in Political Science University of Chicago. “ Additional Federal Fiscal Relief Needed to Help States Address Recession’s Impact “, March 1, )
Because of state budget calendars, it would not be effective for the Administration and Congress to wait until the fall of 2010 to consider additional aid to the states for state fiscal year 2011. In most states, the governor’s proposed budget for fiscal year 2011[12] is being developed this fall. At the end of calendar 2009 or the beginning of calendar 2010, governors will submit their budgets to their legislatures, to be considered between January and June 2010. Final budgets for fiscal year 2011 will be adopted at some point during that period. Some states, particularly those with short legislative sessions, require the adoption of budgets by March or April. States budget for their fiscal years as a whole, not for six-month periods. The spending cuts and tax increases that states will institute in order to balance their 2011 budgets will be determined based on the state’s budget projections for all of fiscal year 2011. Those projections will include a significant drop-off in ARRA funds for the final half of the state fiscal year (i.e., after December 2010). Accordingly, many of the actions that states will take to balance their 2011 budgets will be implemented next summer (or in some cases even earlier if budget gaps have reopened for the current fiscal year). To gain maximum revenue, states that plan to adopt tax increases to help address their looming fiscal year 2011 shortfalls may want to put them in place as quickly as possible. The same applies to spending reductions; for example, many cuts in education spending are likely to take effect next summer, at the start of the 2010-2011 school year. The bottom line is that unless states know that additional aid is coming — even if they do not actually receive the dollars until calendar year 2011 — they will institute large new budget cuts and/or tax increases by next summer to close the shortfalls in their fiscal 2011 budgets. Conclusion State fiscal assistance under ARRA will end or largely be exhausted by the end of calendar year 2010. Unfortunately, big state deficits are expected to continue through state fiscal year 2012 — that is, for another 18 months or so after 2010 ends. If states do not receive additional federal assistance beyond the scheduled expiration of such aid, they will be forced to institute further deep budget cuts and/or substantial tax increases. Such actions would place a drag on the U.S. economy, impeding the recovery and costing many jobs. Such measures also could cause serious hardship for many families and individuals that have lost their jobs and are relying on Medicaid and other key state services to make it through this unusually painful economic downturn.
States would use loans – not included in budgetary processes
CBO, ‘12
[Congressional Budget Office, July 2012, CBO ]
Comparison with Existing Infrastructure Banks¶ An infrastructure bank that is substantially owned or ¶ controlled by the U.S. government would, under longstanding federal budgeting practices, be included in the ¶ federal budget and subject to its accounting rules.¶ 8¶ According to those longstanding practices, any entity that ¶ is drawing on federal funds and subject to federal control ¶ will be part of the recorded budgetary activities of the ¶ federal government.¶ That treatment differs from the way in which two widely ¶ cited examples of infrastructure banks—state infrastructure banks and the European Investment Bank—operate. ¶ As infrastructure banks controlled by individual states, ¶ state infrastructure banks are primarily capitalized by ¶ state dollars, although most also have received federal ¶ grants. In addition, some state infrastructure banks operate with the goal of being self-sustaining by using only ¶ their earnings from the repayment of loans to support ¶ loans or grants to additional state projects.¶ 9¶ State infrastructure banks are not included in state budgets because ¶ states have different budget accounting rules than the ¶ federal government.¶ 10¶ The European Investment Bank is ¶ an independent, nonprofit entity owned by the member ¶ countries of the European Union that seeks its own funding via debt instruments and makes loans to entities ¶ throughout the member countries.¶ 11¶ Neither its costs ¶ nor its income are reflected in the national budgets of ¶ the member countries because it is considered an ¶ independent entity.
National approach critical
Pellet ’10 (Jennifer Pellet, Editor-at-large at Chief Executive Magazine, Jul/Aug 2010, “Rebuilding America”, p. 62-66, ) SRK
McClure agreed, comparing the benefits of an integrated national approach to the benefit of IT protocols and the dangers of developing systems in silos. "If we don't coordinate this, we'll end up with the same issues we had in manufacturing- 72 different systems that can't communicate with one another," he pointed out. 'There's got to be some kind of coordinated effort at the top or we'll end up with lots of different islands that are never connected."
States can’t do it alone
Pellet ’10 (Jennifer Pellet, Editor-at-large at Chief Executive Magazine, Jul/Aug 2010, “Rebuilding America”, p. 62-66, ) SRK
Even within regions, aligning factions around initiatives can be difficult. Priorities vary greatly by state and efforts tend to get mired in tugsof-war between the various localities angling for maximum benefit. Given the controversy around what should be done and how to accomplish it, what will it take to move the envelope on infrastructure? For most, the answer is in creating a compelling, central message. "There are plenty of plans," noted Pierson. "There are plenty of industry organizations who are interested in these issues. What seems to be lacking is the knitting that will pull this all together and drive a consensus plan." A commitment to promoting that message to the public and to politicians will also be critical. "We've got to continue the drumbeat," says Byron Payne, executive vice president of Wells Fargo Equipment Finance. "Keep talking to politicians and get them to understand that this has to be a priority, then capital formation to take care of these issues will follow." Ultimately, meeting the infrastructure challenge is a national imperative. "There are some real challenges in the mentality and the philosophy in the U.S relative to infrastructure that don't exist in other parts of the world," said Rodman. "That will truly be a challenge for this country as we compete in the global marketplace. We will become a second-class country if we these vital investments in infrastructure are not made."
States CP can never solve – republicans will block because of anti-spending ideology
Huffington Post ’11 (Matt Sledge, Staff Writer for the Huffington Post, 7/27/11, “ Deteriorating Transportation Infrastructure Could Cost America $3.1 Trillion”, ) SRK
But that doesn't mean Congress is rushing to fix them. Re-authorization of the transportation bill that pays for most of our highways has stalled. The House Republican outline for a bill would slash one third of transportation funding. The idea behind cutting those funds is that private enterprise could fill the gap. Further, gas taxes revenues, which have traditionally been used to pay for transportation funding, are falling because they aren't tied to inflation and more people are switching over to fuel-efficient cars. For conservatives, some sort of new tax is verboten, even though they might appreciate infrastructure's benefits to business. But even the Republican chair of the House Transportation Committee is not satisfied with his transportation plan. He said
he was forced to limit his spending plan because of the House GOP leadership's allergy to tax revenue. "They wouldn't vote on a Mother's Day resolution if it had extra spending on it," Rep. John Mica (R-Fla.) told the Wall Street Journal. David Goldberg, the communications director of Transportation for America, said part of the problem with finding new government funding for transportation lies with the fact that there are fewer new roads to be built. Much of what we need to do lies with fixing old highways. "Maintenance and repair and upgrades are not as sexy as ribbon-cuttings on new projects," Goldberg said, "And there's a lot of political pressure many times to build new projects." But beyond that, Goldberg would also like to see expanded access to mass transit. One surprising result of the ASCE report was that cost of deficiencies to Americans in bus transit alone would add up to $398 billion by 2020. Scott Bernstein, the president of the Center for Neighborhood Technology, said that while "the general argument that we need to not lose any more ground is sound," we should look more closely at what our infrastructure spending gets us. "I think they missed the opportunity to talk about what people actually spend on transportation," Bernstein said. He said he thought inadequate spending on infrastructure, especially on mass transit, hurts poor families disproportionately. "Simply spending it on maintaining highway capacity isn't likely to give people much more of a deal," Bernstein said. The new report is agnostic on where we should direct new transportation money towards, if we ever decide to increasing spending at all. But ASCE does give a nod towards high speed rail, saying that: Most of America's major economic competitors in Europe and Asia -- including Japan, Germany, France, Spain and Great Britain, as well as rapidly developing and developed countries such as China, Taiwan and South Korea -- have already invested in and are reaping the benefits of improved competitiveness from their intermetropolitan high speed rail systems. Simply continuing to invest in the nation's existing transportation infrastructure may not be enough to maintain its standing in the global economy in the long run. So far, Goldberg said, we're nowhere near looking at problems like that. "The big question is, can we come to any kind of agreement about what is worth investing in? And can we do it in a timely enough way to avoid the bills the engineers' report warns us of?" Of course, decaying roads and bridges don't make everyone worse off. One of the report's few bright spots: The future looks good for auto repair shops, which are expected to see increased demand as our roads get worse.
States don’t need an NIB – their own proves its inadequacies
Laing, ‘11
[Keith Laing, Staff Writer, 10/12/11, The Hill ]
A national infrastructure bank, as proposed … is dead on arrival in the House of Representatives,” Mica said. “If you want a recipe to not get people to work, adopt that proposal.” ¶ Democrats fired back by questioning why Mica was holding a subcommittee hearing on the proposal when it appeared he had already decided against the plan. ¶ “The majority seems to have already made up its mind about this proposal,” said Rep. Eddie Bernice Johnson (D-Texas). ¶ The evidence, Johnson said, was in the very name of the hearing: “National Infrastructure Bank: More Bureaucracy and More Red Tape.” ¶ The infrastructure bank is a key component of Obama’s jobs package, which Senate Democrats are now breaking into smaller parts after the measure failed to move forward in the upper chamber on Tuesday night. ¶ Obama would invest $10 billion to create the bank and a national fund for transportation projects. Advocates say the money could be used to lure investment in public-private partnerships that are increasingly popular in the transportation sector. ¶ Obama has tried to sell the proposal, which was introduced in the upper chamber this spring by Sens. John Kerry (D-Mass.) and Kay Bailey Hutchison (R-Texas), as a bipartisan idea that would create jobs quickly. ¶ But Mica said Wednesday that 33 states already have infrastructure banks of their own. The problem, he said, is keeping them adequately funded. ¶ “You’ll hear from the Oklahoma transportation secretary in a minute … he’ll tell you they have the bank, they don’t have the money,” Mica told members of the subcommittee. States are “up against the wall,” he said. ¶ “They don’t have the money to finance a national infrastructure bank,” Mica argued. ¶ For his part, Oklahoma Secretary of Transportation Gary Ridley called the proposal for a national infrastructure bank “untimely and unnecessary.” ¶ “For financing transportation projects, the states only require clear federal guidance in the law and the continued and enhanced utilization of existing financing opportunities,” he said in written testimony submitted to the subcommittee. “A bold, new vision will be necessary to meet the increasing transportation challenges ahead, and it is unlikely that such a vision will be defined by an easy payment plan.” ¶ Ridley said his state has had an infrastructure bank since the 1990s, “but it’s not capitalized.” ¶ “We haven’t had a use for it,” he said.
States can’t solve—Political motives suppress growth
(Ehrlich ’10, Everett Ehrlich, Dr. Everett M. Ehleading founder of ESC Company, an economics company, served as Executive Director of the CSIS Commission on Public Infrastructure under co-chairmen Felix Rohatyn and Warren Rudman., “A National Infrastructure Bank: A Road Guide to the Destination”, Progressive Policy Institute, 10/2010, )
As many writers have noted, American infrastructure is depreciating rapidly – we are likely well below the replacement rate of investment in roads, mass transit, airports, ports, rail, and water assets. The logical implication is that we need to invest more. But more investment in and of itself will not move us towards having the right mix of infrastructure assets in place.
The current mix results from one of two selection processes. The first is devolution to the states (for example the cost-sharing grants delivered by the Highway Trust Fund), and the second is selection by Federal agencies (e.g., the Corps of Engineers). At worst, these processes lead to politically motivated outcomes, either because state governments favor some projects for wholly non-economic reasons, or because the Congress can muscle the selection process from the federal agencies. The most recent transportation authorization bill, passed in 2005, made the word “earmark” famous by incorporating a stunning $24 billion of them – the price of having a law passed. Insofar as we have given the task of project selection to the political process, it would be surprising if this kind of event didn’t happen, not that it sometimes does. Politicized project selection is one of several problems associated with the current process. But it is one of the reasons why a National Infrastructure Bank is so important and so urgently needed: not just because a bank might be able to lever federal dollars, but because it can use the existing dollars more wisely and obtain a higher public return.
States fail – logrolling, no benefit-cost analysis, rare evaluations, and no prioritization
Puentes, ‘11
[Robert Puentes, Senior Fellow, 2/2011, Metropolitan Policy Program, Brookings-Rockefeller Project/Foundation ]
Second, state investments are not made in a sufficiently strategic, economy-enhancing way. ¶ States also face challenges because they spend their (now-declining) transportation dollars poorly. ¶ For example, many states have tended to allocate investments via logrolling rather than evidence. ¶ As a result, projects are spread around the state like peanut butter.¶ 10¶ The metropolitan areas that ¶ will deliver the next economy—since they already concentrate the assets that matter to smart economic growth like transportation—are often undermined by spending and policy decisions that fail to ¶ recognize the economic engines they are and focus investments accordingly. Nor have states been ¶ deliberate about recognizing and supporting the particular needs and challenges of both metro and ¶ non-metro areas. ¶ State transportation policies also remain rigidly stovepiped and disconnected as states fail to take ¶ advantage of potential efficiencies gained through integrated systems. By failing to join up transportation up with other policy areas—such as housing, land use, energy—states are diminishing the power ¶ of their interventions and reducing the return on their investments. This is a very different approach ¶ from how the economy functions and is out-of-step with innovations to connect transportation investments to economic prosperity. The benefits of federal, state and private investments are amplified ¶ when metropolitan areas pursue deliberate strategies across city and suburban lines that build on the¶ distinctive advantages of the broader metropolis.¶ Lastly, states have generally not had the courage to make hard choices and truly tie their transportation programs to achieving the kinds of outcomes described above. Benefit/cost or economic impact ¶ analyses are rarely, if ever, used in deciding among alternative projects and regular evaluations of ¶ outcomes are typically not conducted.¶ 11¶ Most states fail to prioritize rehabilitation and maintenance ¶ on a programmatic level and instead react on a project-by-project basis. So far, efforts to reduce oil ¶ dependency are largely ephemeral. And only three states consider social equity a primary transportation goal.¶ 12¶ Incoming governors and state legislatures face serious transportation-related challenges. They can ¶ pursue band-aid approaches to shore up their budgets through standard program cuts and allow their ¶ existing programs to limp along. Or they can begin to put in place a policy framework that connects ¶ transportation to the elements of the post-recession economy in a pragmatic manner.
State banks fail – inadequate financing, high interest rates for states
Thomasson, ‘11
[Scott Thomasson, Economic and Domestic Policy Director of Progressive Policy Institute, testimony to US H.O.R, 10/12/2011 Scribd/Progressive Policy Institute ]
Myth #6: We don’t need a national infrastructure bank, because we can strengthen state infrastructure banks instead. Reality:¶ State banks are an excellent tool and an important step in the right direction for project finance in the U.S. But state banks are woefully inadequate for meeting many of our financing needs, and they should not be thought of as substitutes for a national infrastructure bank, or even as incompatible with creating a national bank. A well designed national bank offers a number of features and advantages not available from state banks. A national bank could finance large, expensive projects that are beyond the scale of state banks. A national bank would be better able to evaluate and finance projects of regional and national significance—those that produce clear economic benefits to the country, but which otherwise would not benefit any one state enough to justify bearing the cost alone. And a properly structured national bank would have much lower borrowing costs than state banks, particularly with U.S. Treasury yields at historically low levels, as they are now. A national bank could easily be structured to complement and empower state banks by passing through lower federal borrowing costs for state-sponsored projects. Giving states the option to partner with the national bank would be an additional and purely voluntary tool, so the argument that the bank would somehow limit the decision-making power of state banks is entirely misplaced.
States can’t solve – no large scale, expensive projects and half the normal amount of funding
Thomasson, ‘11
[Scott Thomasson, Economic and Domestic Policy Director of Progressive Policy Institute, testimony to US H.O.R, 10/12/2011 Scribd/Progressive Policy Institute ]
Myth #4: A national infrastructure bank would shift more decision making to Washington and out of the hands of states. Reality:
A properly structured national infrastructure bank would not be a monolithic central-planning authority that would tie states’ hands and impose its judgment on state funding priorities. To the contrary, a well designed bank would empower states by giving them a new option to pursue low-cost financing of projects of their own choosing, and it would provide them the opportunity to benefit from large-scale projects that cross state borders or that may be too expensive or unwieldy for states to execute alone. In this way, a national bank could complement state infrastructure banks and Highway Trust Fund allocations, and it could also avoid the kind of frustration states have now over the failure of Congress to pass long-term reauthorization bills.
= AT: Random =
AT: The American Recovery and Reinvestment Act solves
ARRA wasn’t big enough and cant solve long term investment
Kessler and McConaghy 11 (Jim Kessler: Way Director of the Third Way Economic Program, Ryan McConaghy: Vice President for Policy at Third, January 2011, “A National Infrastructure Bank,” )
Didn’t the American Recovery and Reinvestment Act already include a large amount of funding for infrastructure projects? The American Recovery and Reinvestment Act included over $70 billion to begin to address America’s infrastructure deficit. 46 While that figure represents an important down payment on America’s infrastructure needs, it does not approach the funding levels necessary to close the infrastructure gap or to reform the investment system. America still needs a long-term financing solution that reforms the process and harnesses private capital to fully bridge the infrastructure gap.
AT: more red tape
Infrastructure bank would help eliminate “red tape”
Thomasson 11 (Scott Thomasson: economic and domestic policy director of the progress policy institute, OCTOBER 12, 2011, “Hearing before the subcommittee on Highways and transit “National Infrastructure Bank: More Bureaucracy and Red Tape”” )
Many of the arguments for a national infrastructure bank are the same as those made in favor of state banks, and even for existing credit programs like TIFIA, both of which have been supported by members of this Committee on both sides. The objection to creating a national bank as somehow inferior to supporting state infrastructure banks seems to rest on the claim that a national bank would impose new burdens on states and shift decision making from state officials to Washington bureaucrats. Neither of these objections is accurate. In spite of the suggestion built into the title of today’s hearing, my hope is that the members of the Subcommittee will be open to considering the ways in which a national infrastructure bank could actually reduce red tape for states, and possibly even shrink the regulatory footprint of federal bureaucracy in the landscape of project finance activity nation wide. If properly implemented, an independent bank could actually reduce regulatory burdens imposed by existing federal programs, by establishing a project selection and financing process that is focused on the economic merits of investments, rather than the myriad regulatory and policy goals pursued by different bureaucratic silos in executive branch departments. Whether every existing federal mandate and regulation should be attached to infrastructure bank financing is a policy choice to be
TIFIA Fails
TIFIA fails – small, appointed staff
Thomasson, ‘11
[Scott Thomasson, Economic and Domestic Policy Director of Progressive Policy Institute, testimony to US H.O.R, 10/12/2011 Scribd/Progressive Policy Institute ]
Myth #7: We don’t need a separate infrastructure bank, because we can simply expand existing programs like TIFIA or the Export-Import Bank. Reality:¶ Both TIFIA and the Export-Import (“Ex-Im”) Bank are well-run programs that are effective in achieving the specific missions they are charged with. There are structural similarities between AIFA and both TIFIA and Ex-Im that make the idea of transforming either program to act like an infrastructure bank very interesting on paper and perhaps worth exploring more. However, the organization and governance of the infrastructure bank would be materially different from TIFIA, and its mission and expertise would not necessarily be compatible with the Ex-Im Bank¶ TIFIA is already oversubscribed with only a handful of staff to process loan applications. Some people familiar with the workings of the TIFIA program believe it will not be able to handle the additional workload that will accompany recent proposals to “super-size” its budget authority. Throwing more money at the TIFIA program without an enhanced organizational structure will run the same risks of questionable underwriting decisions that the Solyndra critics allege of the DOE loan guarantee program. An independent and professionally staffed infrastructure bank is the best response to the increasing need for expansion and better management of federal credit programs. A properly structured national bank achieves this first and foremost by replacing politically driven decision making with a more transparent and merit-based evaluation process overseen by a bipartisan and expert board of directors. This feature of the bank becomes even more important as the federal government moves toward financing larger, big-ticket projects that are beyond the scale of anything existing programs have taken on before.
Ex-Im Bank Fails
Ex-Im would fail – different institutional culture
Thomasson, ‘11
[Scott Thomasson, Economic and Domestic Policy Director of Progressive Policy Institute, testimony to US H.O.R, 10/12/2011 Scribd/Progressive Policy Institute ]
With respect to the idea that we can create an infrastructure bank within the Ex-Im Bank, we should be cautious about assuming we can re-task a well established bureaucracy with an entirely new mission that requires different financing expertise and a different institutional culture. It is probably better to avoid big changes to a program that is currently functioning well, and instead to look to it as a model to be drawn upon and replicated instead of forcing a merger of two very different programs under the one roof.
No Funding Trade-off
No funding tradeoff with other transportation programs – bank bonds
Thomasson, ‘11
[Scott Thomasson, Economic and Domestic Policy Director of Progressive Policy Institute, testimony to US H.O.R, 10/12/2011 Scribd/Progressive Policy Institute ]
Myth #8: Funding for a national infrastructure bank would rob from proposed funding for Highway Trust Fund programs, including TIFIA and state infrastructure banks. Reality:¶ The infrastructure bank proposal is not a zero-sum competitor for Highway Trust Fund resources with TIFIA, SIBs, or any other existing programs in the surface transportation bull. Most of the bank proposals are drafted to be funded by appropriations outside the Highway Trust Fund, or in some cases by allowing the bank to issuing its own bonds. They are also designed to supplement existing programs and allocations, not substitute for them. Not only would the initial funding not need to rob Trust Fund resources, the activities of the bank could relieve some of the pressures on these oversubscribed and underfunded programs by providing an alternative financing path for certain projects that now rely on Trust Fund programs. This would free up money for projects that are most appropriate for these funding programs.
AT: Downgrade
Standard and Poor wont downgrade – they specifically requested more TI investment
Szakonyi 4/5/12(Szakonyi, Mark, Associate Editor of the Journal of Commerce, April 5, 2012, “S&P: Agency says crisis possible if infrastructure, transportation funding not met ”, Journal of Commerce, )
Standard & Poor’s said the U.S. government’s inability to provide long-term infrastructure and transportation funding could create another credit crisis. The warning from the rating agency, which downgraded the U.S. credit rating in August, comes as Congress struggles to approve a multiyear surface transportation bill. Congress on March 29 approved a three-month extension of highway funding after the House failed to pass its five-year, $260 billion plan to match the Senate’s already approved two-year, $109 billion bill. S&P warns “reduced or unpredictable federal support and lower demand could result in deferred maintenance projects that would keep our nation’s transportation infrastructure in good repair,” according to The Fiscal Times. Few transportation analysts expect Congress to approve a plan by the end of the year, making it difficult for state transportation agencies to commit to long-term projects.
= State Budget Adv =
States’ budgets already in trouble, forcing cuts to key programs—only federal action solves
Oliff et al, 6-27 (Phil Oliff - Policy Analyst with the State Fiscal Project; Masters degree in Public Policy from Harvard University’s John F. Kennedy School of Government, 6/27/2012, )
In states facing budget gaps, the consequences are severe in many cases — for residents as well as the economy. To date, budget difficulties have led at least 46 states to reduce services for their residents, including some of their most vulnerable families and individuals.[4] More than 30 states have raised taxes to at least some degree, in some cases quite significantly. If revenues remain depressed, as is expected in many states, additional spending and service cuts are likely. Indeed, a number of states have made substantial cuts to balance their budgets for fiscal year 2013. While data are not yet available that would show the mix of state actions to resolve their budget gaps for 2013, the data through 2012 show that states have enacted more and more spending cuts every year since 2008. Federal aid and state tax increases have played diminishing roles in addressing the gaps, as the emergency federal aid ended and the elections of 2010 changed the political leadership in a number of states.[5] Spending cuts are problematic during an economic downturn because they reduce overall demand and can make the downturn deeper. When states cut spending, they lay off employees, cancel contracts with vendors, eliminate or lower payments to businesses and nonprofit organizations that provide direct services, and cut benefit payments to individuals. In all of these circumstances, the companies and organizations that would have received government payments have less money to spend on salaries and supplies, and individuals who would have received salaries or benefits have less money for consumption. This directly removes demand from the economy. Tax increases also remove demand from the economy by reducing the amount of money people have to spend. However, to the extent these increases are on upper-income residents, that effect is minimized. This is because these residents tend to save a larger share of their income, and thus much of the money generated by a tax increase on upper income residents comes from savings and so does not diminish economic activity. At the state level, a balanced approach to closing deficits — raising taxes along with enacting budget cuts — is needed to close state budget gaps in order to maintain important services while minimizing harmful effects on the economy. Ultimately, the actions needed to address state budget shortfalls place a considerable number of jobs at risk. The roughly $55 billion shortfall that states have faced for fiscal year 2013 equals about 0.36 percent of GDP. Assuming that economic activity declines by one dollar for every dollar that states cut spending or raise taxes, and based on a rule of thumb that a one percentage point loss of GDP costs the economy 1 million jobs, the state shortfalls projected to date could prevent the creation of 360,000 public- and private-sector jobs next year. The Role of the Federal Government Federal assistance lessened the extent to which states needed to take actions that further harmed the economy. The American Recovery and Reinvestment Act (ARRA), enacted in February 2009, included substantial assistance for states. The amount in ARRA to help states maintain current activities was about $135 billion to $140 billion over a roughly 2½-year period — or between 30 percent and 40 percent of projected state shortfalls for fiscal years 2009, 2010, and 2011. Most of this money was in the form of increased Medicaid funding and a “State Fiscal Stabilization Fund.” (There were also other streams of funding in the Recovery Act flowing through states to local governments or individuals, but these will not address state budget shortfalls.) This money reduced the extent of state spending cuts and state tax and fee increases. In addition, H.R. 1586 — the August 2010 jobs bill — extended enhanced Medicaid funding for six months, through June 2011, and added $10 billion to the State Fiscal Stabilization Fund. Even with this extension, federal assistance largely ended before state budget gaps had fully abated. The Medicaid funds expired in June 2011, the end of the 2011 fiscal year in most states,[6] and states had drawn down most of their State Fiscal Stabilization Fund allocations by then as well. So even though significant budget gaps remained in 2012, there was little federal money available to close them. Partially as a result, states’ final 2012 budgets contained some of the deepest spending cuts since the start of the recession. One way to avert these kinds of cuts, as well as additional tax increases, would have been for the federal government to reduce state budget gaps by extending the Medicaid funds for as long as state fiscal conditions are expected to be problematic. But far from extending this aid, federal policymakers are moving ahead with plans to cut ongoing federal funding for states and localities, thereby making state fiscal conditions even worse. The federal government has already cut non-defense discretionary spending by nine percent in real terms since 2010. Discretionary spending caps established in the federal debt limit deal this past summer will result in an additional six percent cut by the end of the next decade. The additional cut by the end of the next decade would grow to 11 percent if sequestration — the automatic, across-the-board cuts also established in the debt limit deal — is allowed to take effect. Fully one-third of non-defense discretionary spending flows through state and local governments in the form of funding for education, health care, human services, law enforcement, infrastructure, and other services that states and localities administer. Large cuts in federal funding to states and localities would worsen state budget problems, deepen the size of cuts in spending, increase state taxes and fees, and thus slow economic recovery even further than is already likely to occur.
Scenario 1 is Education
State budget crises causing cuts in technical K-12 and university education
Leachman et al., 11 (Michael Leachman- Director of State Fiscal Research with the State Fiscal Policy division of the Center; holds a Ph.D. in sociology from Loyola University Chicago; policy analyst for nine years at the Oregon Center for Public Policy; AND*** Nicholas Johnson- graduate degree from Duke University's Terry Sanford Institute of Public Policy, Director of the State Fiscal Project, which works to develop strategies for long-term structural reform of state budget and tax systems, encourage low-income tax relief, and improve the way states prioritize funding, received the Ian Axford Fellowship in Public Policy, a program financed by the New Zealand government and administered by Fulbright New Zealand. Through this fellowship, he spent six months as an advisor to the New Zealand Treasury and the New Zealand Ministry of Social Development; AND*** Erica Williams- M.A. in International Policy the Monterey Institute of International Studies; Policy Analyst with the State Fiscal Project, 7/28/2011, “State Budget Cuts in the New Fiscal Year Are Unnecessarily Harmful,” )
Since states spend more of their budgets on education and health care than anything else, lawmakers imposing large spending cuts are hard-pressed to avoid cutting back on these essential public services. Many states also will lay off state employees or cut their pay and benefits. These actions, coming on top of deep cuts that states have already made over the last three years, place a drag on the nation’s economic recovery. Elementary and Secondary Education At least 23 states have made identifiable cuts in support for public schools. In many cases, these cuts undermine school finance systems that are intended to reduce disparities between high-wealth and low-wealth school districts, so the largest impacts may be felt in communities that are least able to compensate for the loss of funds from their own resources. Arizona is cutting $183 million from K-12 education spending in the coming year and continues another $377 million in cuts that were implemented over the previous three years, bringing the total cut relative to pre-recession levels to $560 million, or $530 per pupil. Colorado is cutting state spending on K-12 education by $347 per pupil compared to last school year. Florida is cutting spending on K-12 education by $542 per pupil compared with last year. The state also has cut $13 million from the state’s school readiness program that gives low-income families access to high quality early care for their children. The cut means over 15,000 children currently participating in the program will no longer be served. Florida also reduced by 7 percent the per-student allocation to providers participating in the state’s universal prekindergarten program for 4-year-olds, which will mean that classrooms have more children per teacher. Georgia cut state and lottery funds for pre-kindergarten by 15 percent, which will mean shortening the pre-K school year from 180 to 160 days for 86,000 four-year-olds, increasing class sizes from 20 to 22 students per teacher, and reducing teacher salaries by 10 percent. Iowa reduced state funding for its statewide pre-kindergarten program for four-year-olds by 9 percent from last year. Schools serving these children will now receive fewer dollars per child and may have to make up for lost funds with reduced enrollment or higher property taxes. The state is also cutting back support for a community-based early childhood program that provides resources to parents with children from birth to age 5, including a cut of nearly 30 percent to preschool tuition assistance. Illinois is cutting general state aid for public schools by $152 million, on top of a loss of $415 million in expired federal recovery dollars — a total decrease of 11 percent. The budget takes $17 million from the state fund that supports early childhood education efforts, which may result in an estimated 4,000 fewer children receiving preschool services and 1,000 fewer at-risk infants and toddlers receiving developmental services. The budget also eliminates state funding for advanced placement courses in school districts with large concentrations of low-income students, mentoring programs for teachers and principals, and an initiative providing targeted, research-based instruction to students with learning difficulties. Kansas cut the basic funding formula for K-12 schools by $232 per-pupil, bringing this funding nearly 6 percent below fiscal year 2011 budgeted levels. For the third year in a row, Louisiana will fail to fund K-12 education at the minimum amount required to ensure adequate funding for at-risk and special needs students, as determined by the state’s education finance formula. Per student spending will be $215 below the level set out by the finance formula for FY12. Michigan is cutting K-12 education spending by $470 per student. Mississippi, for the fourth year in a row, will fail to meet the state’s statutory obligation to support K-12 schools, underfunding school districts by 10.5 percent or $236 million. The statutory school funding formula is designed to ensure adequate funding for lower-income and underperforming schools. According to the Mississippi Department of Education, the state’s failure to meet that requirement over the past three years has resulted in 2,060 school employee layoffs (704 teachers, 792 teacher assistants, 163 administrators, counselors, and librarians, and 401 bus drivers, custodians, and clerical personnel).[11] Missouri is freezing funding for K-12 education at last year’s levels. This means that for the second year in a row, the state has failed to meet the statutory funding formula established to ensure equitable distribution of state dollars to school districts. Nebraska altered its K-12 school aid funding formula to freeze state aid to schools in the coming year and allow very small increases thereafter, resulting in a cut of $410 million over two years. New Mexico cut K-12 spending by $42 million (1.7 percent). The governor is requiring school districts to spare “classroom spending” from the cuts, which means greater proportional cuts to other areas of K-12 education like school libraries and guidance counseling. The operating budget of the state education department is being cut by more than 25 percent. New York cut education aid by $1.3 billion, or 6.1 percent. This cut will delay implementation of a court order to provide additional education funding to under-resourced school districts for the third year in a row. Beyond cutting the level of education aid in FY12, the budget limits the rate at which education spending can grow in future years to the rate of growth in state personal income. North Carolina cut nearly half of a billion dollars from K-12 education in each year of the biennium compared to the amount necessary to provide the same level of K-12 education services in 2012 as in 2011. Both the state-funded prekindergarten program for at risk 4-year-olds and the state’s early childhood development network that works to improve the quality of early learning and child outcomes were cut by 20 percent. The budget also reduces by 80 percent funds for textbooks; reduces by 5 percent funds for support positions, like guidance counselors and social workers; reduces by 15 percent funds for non-instructional staff; and cuts by 16 percent salaries and benefits for superintendents, associate and assistant superintendents, finance officers, athletic trainers, and transportation directors, among others. Ohio is cutting state K-12 education funding 7.5 percent this year, a cut of $400 per student and equivalent to nearly 14,000 teachers’ salaries. Oklahoma is cutting funding for school districts by 4.5 percent, and makes additional cuts to the Department of Education’s budget. The Department of Education has voted to eliminate adult education programs, math labs in middle school, and stipends for certified teachers, among other things. Pennsylvania cut K-12 education aid by $422 million, or 7.3 percent, bringing funding down nearly to FY2009 levels. The budget also cuts $429 million dollars in additional funding that the state provides to school districts to implement effective educational practices (such as high quality pre-kindergarten programs) and maintain tutoring programs, among other purposes. Overall state funding for school districts was cut by $851 million or 13.5 percent, a cut of $485 per student. South Dakota cut K-12 education by 6.4 percent, next year, an amount equal to $416 per student, and 8.8 percent in 2013. Texas eliminated state funding for pre-K programs that serve around 100,000 mostly at-risk children, or more than 40 percent of the state’s pre-kindergarten students. The budget also reduces state K-12 funding to 9.4 percent below the minimum amount required by the state law. Texas already has below-average K-12 education funding compared to other states, and this cut would depress that low level even further at a time when the state’s school enrollment is growing. This would likely force school districts to lay off large numbers of teachers, increase class sizes, eliminate sports programs and other extracurricular activities, and take other measures that undermine the quality of education. Utah cut K-12 education by 5 percent, or $303, per pupil from the prior year’s levels. Washington is taking over $1 billion from state K-12 education funds designed to reduce class size, extend learning time, and provide professional development for teachers — a cut equal to $1,100 per student. Wisconsin reduced state aid designed to equalize funding across school districts by $740 million over the coming two-year budget cycle, a cut of 8 percent. The budget also reduces K-12 funds for services for at-risk children, school nursing, and alternative education. Higher Education At least 25 states have made large, identifiable cuts in funding for state colleges and universities, with direct impacts on students. Arizona cut funding for public universities by nearly one-quarter, or $200 million. This would add to deep previous cuts: from 2008 through 2011, state support for universities fell by $230 million, resulting in the elimination of more than 2,100 positions (an 11 percent reduction in the workforce). Universities have raised tuition significantly, closed eight extended campuses, and merged, consolidated, or disestablished 182 colleges, schools, programs, and departments. Combined with those previous cuts, the FY12 reduction brings per-student state funding down to 50 percent below pre-recession levels.[12] Arizona also cut community college funding for operating expenses by about $73 million. The cut amounts to 6.2 percent of total community college operating revenues and half of all state support for community colleges. California is increasing fees at community colleges starting this fall by 38 percent; for the average student, this means an annual fee increase of $300. The state also is reducing funding for the University of California (UC) and the California State University (CSU) systems by $1.3 billion ($650 million each). Since FY2008 California has cut funding for the UC system by 27 percent and has cut funding for the CSU system by almost 28 percent. In response to cuts in funding, the CSU will increase annual tuition by 29 percent, or $1,242 for full time undergraduate students (relative to the tuition rate that was in place at the beginning of last school year). UC will increase annual tuition by 18 percent, or over $1,800 for resident undergraduate students. UC tuition has grown by more than 80 percent since the 2007-08 academic year. Colorado cut state university spending by 11.5 percent over the prior year, which is expected to be offset with tuition increases of 9 percent, on average. The budget also cuts a means-tested stipend program for undergraduate students by 21 percent from what was budgeted for the current year. Florida cut state higher education spending and raised state university tuition for undergraduates by 8 percent. State universities are increasing tuition by another 7 percent to offset cuts in funding. This comes on the heels of tuition hikes equaling over 30 percent since the 2009-10 school year. The state has also cut a university merit-based scholarship program by 20 percent. Georgia cut funding for a popular merit-based college scholarship program serving hundreds of thousands of students by about one-fifth, university funding by 10 percent, and funding for technical colleges by 4 percent. Iowa is cutting state funding for public universities by $20 million, or around 4 percent. This brings state support below fiscal year 2007 levels. Louisiana enacted a 10 percent tuition increase for the state university system, or an average increase of around $600 more per year per student, in order to make up for the loss of federal and state dollars. Technical colleges will raise tuition by an average of $700 for full-time students. Massachusetts cut funding for higher education by $64 million, or 6.3 percent. Since FY2009, after adjusting for inflation, the state has cut funding by $185 million, or 16.3 percent. Michigan cut by 15 percent state support for public universities, and will increase the cut to about 20 percent for universities that raise tuition by more than 7 percent. Universities are already announcing tuition increases just under that limit, amounting to $600 - $900 tuition increases for in-state undergraduate students. The state also cut funding for community colleges by 4 percent. Minnesota is cutting state funding for higher education 12 percent below 2011 levels. This includes a $194 million cut to the University of Minnesota system and a $170 million cut to the Minnesota State Colleges and Universities system. Missouri cut state support for higher education by 7 percent. The cuts continue a trend of declining state support for Missouri’s universities and community colleges; over the last decade, state support for universities has fallen by 28 percent per student and support for community colleges has fallen by 12 percent. Nevada reduced state funding for the higher education system by 15 percent, which will result in an increase in undergraduate tuition of 13 percent in FY12 and an increase in graduate school tuition of 5 percent in FY12 and again in FY13. New Hampshire cut support for the university system almost in half in a single year, from $100 million to $52 million. University officials have announced that they will raise tuition 8.7 - 9.7 percent, eliminate around 200 positions, reduce employee benefits, dip into reserves, and take other measures as a result. Community colleges also face a 37 percent cut and will raise tuition 6.5 percent for the coming year, which will cost full time students up to $360 per year. New Mexico reduced by 8 percent state funding for public universities, which will result in a 5.5 percent tuition increase ($304 per student). New York cut state funding for the State University of New York (SUNY) by 7.6 percent, and reduces state funding for the City University of New York (CUNY) by 4.4 percent. To help them absorb the funding cuts, the legislature passed a bill that allows SUNY and CUNY to raise tuition by about 30 percent over the next five years. These tuition increases would affect 220,000 students in the SUNY system and 137,000 in the CUNY system and come on top of increases already imposed since the recession began. At SUNY, for example, substantial reductions in state support resulted in a 14 percent tuition increase in 2009. North Carolina cut nearly half of a billion dollars from higher education in each year of the biennium compared to the amount necessary to provide the same level of higher education services in 2012 as in 2011. The cuts mean that full-time resident community college students could see their tuition increase to $2,128 in FY12 and $2,208 in FY13 from the current $1,808 per year. Funds for community college basic education courses were cut by 12 percent. North Carolina is also forcing the university system to find more than $330 million in savings in each year of the biennium. The state also is reducing by 59 percent (or $26 million each year) the state subsidy to university hospitals to offset the costs of uncompensated care, which the hospital system estimates at $300 million this year. Oklahoma is cutting state funding for higher education by nearly 6.7 percent. Partially as a result, tuition and fees were increased by an average of 5.9 percent, or about $225 per student. The budget also cuts a career and technical education training program by about 6.5 percent. Ohio cut higher education funding 10 percent for FY12, amounting to $590 per student. Students at public universities face a 7 percent tuition increase as well as an undetermined (and uncapped) amount of fee increases. Pennsylvania cut funding for the state’s system of higher education by $91 million, or 18 percent. The budget also cuts funding for the state’s four “state related” universities (Penn State, the University of Pittsburgh, Temple, and Lincoln University) by roughly 20 percent. As a result, the University of Pittsburgh will increase in-state tuition by 8.5 percent and Temple University will increase in-state tuition by almost ten percent. Other state universities will see tuition increases of 7.5 percent. South Dakota cut higher education (and most other agencies) by 10 percent. The Board of Regents voted to raise tuition by 6.9 percent, or $490 per student, on average. The tuition increase covers only part of the loss of state funding, and each university has to determine how it will make up for the remaining loss of funds. Tennessee cut funds for the University of Tennessee system by 25 percent compared to 2011. Tuition within the system will rise 6 to 10 percent. Texas reduced general revenue spending on higher education by 9 percent over two years. This includes a cut of 5 percent to college and university formula spending, a cut of 10 percent in formula spending for health institutions, such as nursing schools, and a cut of 25 percent to funds for university research centers, graduate programs, and other non-operations spending. Enrollment growth is not funded for any higher education institution. The budget also cuts by 10 percent financial aid awards under the Texas grant program, which combines state and institutional money to cover tuition and fees for public school students with financial need and good academic records. The cut will likely result in smaller awards. Utah is cutting its higher education budget by about 1 percent below last year’s level, bringing the total decline in state spending to 2 percent since 2009. These funding cuts come despite rapidly rising enrollment. For example, enrollment in Utah’s system of higher education in the spring 2011 semester was 4 percent above enrollment the previous year. The failure of state funding to keep up with enrollment growth will result in an average tuition increase of 7.5 percent. Washington is cutting state funding for colleges and universities by more than $500 million and raising tuition in the upcoming school year by anywhere from 11 percent to 16 percent compared with last year. Wisconsin is cutting $250 million from the state university system, with nearly $100 million of that cut coming from funds for UW-Madison. The budget freezes financial aid at current levels despite expected tuition increases of 5.5 percent system-wide and a recently approved tuition increase of 8.3 percent for UW-Madison, creating an even larger funding gap that students and their families will have to fill. The budget also cuts state support for technical colleges by about $70 million over the biennium, or 25 percent, and places a two-year freeze on local property tax levies that allow communities to raise funds for technical colleges.
Education is key to retaining primacy
NAS, 07 (Committee on Prospering in the Global Economy of the 21st Century: An Agenda for American Science and Technology Committee on Science, Engineering, and Public Policy, 7/2007, “RISING ABOVE THE GATHERING STORM Energizing and Employing America for a Brighter Economic Future,” National Academy of Sciences, National Academy of Engineering, Institute of Medicine, )
China and India indeed have low wage structures, but the United States has many other advantages. These include a better science and technology infrastructure, stronger venture-capital markets, an ability to attract talent from around the world, and a culture of inventiveness. Comparative advantage shifts from place to place over time and always has; the earth cannot really be flattened. The US response to competition must include proper retraining of those who are disadvantaged and adaptive institutional and policy responses that make the best use of opportunities that arise. India and China will become consumers of those countries’ products as well as ours. That same rising middle class will have a stake in the “frictionless” flow of international commerce—and hence in stability, peace, and the rule of law. Such a desirable state, writes Friedman, will not be achieved without problems, and whether global flatness is good for a particular country depends on whether that country is prepared to compete on the global playing field, which is as rough and tumble as it is level. Friedman asks rhetorically whether his own country is proving its readiness by “investing in our future and preparing our children the way we need to for the race ahead.” Friedman’s answer, not surprisingly, is no. This report addresses the possibility that our lack of preparation will reduce the ability of the United States to compete in such a world. Many underlying issues are technical; some are not. Some are “political”—not in the sense of partisan politics, but in the sense of “bringing the rest of the body politic along.” Scientists and engineers often avoid such discussions, but the stakes are too high to keep silent any longer. Friedman’s term quiet crisis, which others have called a “creeping crisis,” is reminiscent of the folk tale about boiling a frog. If a frog is dropped into boiling water, it will immediately jump out and survive. But a frog placed in cool water that is heated slowly until it boils won’t respond until it is too late.Our crisis is not the result of a one-dimensional change; it is more than a simple increase in water temperature. And we have no single awakening event, such as Sputnik. The United States is instead facing problems that are developing slowly but surely, each like a tile in a mosaic. None by itself seems sufficient to provoke action. But the collection of problems reveals a disturbing picture—a recurring pattern of abundant short-term thinking and insufficient long-term investment. Our collective reaction thus far seems to presuppose that the citizens of the United States and their children are entitled to a better quality of life than others, and that all Americans need do is circle the wagons to defend that entitlement. Such a presupposition does not reflect reality and neither recognizes the dangers nor seizes the opportunities of current circumstances. Furthermore, it won’t work. In 2001, the Hart–Rudman Commission on national security, which foresaw large-scale terrorism in America and proposed the establishment of a cabinet-level Homeland Security organization before the terrorist attacks of 9/11, put the matter this way:4 The inadequacies of our system of research and education pose a greater threat to U.S. national security over the next quarter century than any potential conventional war that we might imagine. President George W. Bush has said “Science and technology have never been more essential to the defense of the nation and the health of our economy.”5 US Commission on National Security. Road Map for National Security: Imperative for Change. Washington, DC: US Commission on National Security, 2001. A letter from the leadership of the National Science Foundation to the President’s Council of Advisors on Science and Technology put the case even more bluntly:6 Civilization is on the brink of a new industrial order. The big winners in the increasingly fierce global scramble for supremacy will not be those who simply make commodities faster and cheaper than the competition. They will be those who develop talent, techniques and tools so advanced that there is no competition.
Loss of primacy results in great power wars
Zhang & Shi, 11 (Yuhan- a researcher at the Carnegie Endowment for International Peace, Washington, D.C. AND*** Lin- Columbia University PhD candidate, independent consultant for the Eurasia Group and the World Bank, 1/22/2011, “America’s decline: A harbinger of conflict and rivalry,” )
Over the past two decades, no other state has had the ability to seriously challenge the US military. Under these circumstances, motivated by both opportunity and fear, many actors have bandwagoned with US hegemony and accepted a subordinate role. Canada, most of Western Europe, India, Japan, South Korea, Australia, Singapore and the Philippines have all joined the US, creating a status quo that has tended to mute great power conflicts.¶ However, as the hegemony that drew these powers together withers, so will the pulling power behind the US alliance. The result will be an international order where power is more diffuse, American interests and influence can be more readily challenged, and conflicts or wars may be harder to avoid.¶ As history attests, power decline and redistribution result in military confrontation. For example, in the late 19th century America’s emergence as a regional power saw it launch its first overseas war of conquest towards Spain. By the turn of the 20th century, accompanying the increase in US power and waning of British power, the American Navy had begun to challenge the notion that Britain ‘rules the waves.’ Such a notion would eventually see the US attain the status of sole guardians of the Western Hemisphere’s security to become the order-creating Leviathan shaping the international system with democracy and rule of law.¶ Defining this US-centred system are three key characteristics: enforcement of property rights, constraints on the actions of powerful individuals and groups and some degree of equal opportunities for broad segments of society. As a result of such political stability, free markets, liberal trade and flexible financial mechanisms have appeared. And, with this, many countries have sought opportunities to enter this system, proliferating stable and cooperative relations.¶ However, what will happen to these advances as America’s influence declines? Given that America’s authority, although sullied at times, has benefited people across much of Latin America, Central and Eastern Europe, the Balkans, as well as parts of Africa and, quite extensively, Asia, the answer to this question could affect global society in a profoundly detrimental way.¶ Public imagination and academia have anticipated that a post-hegemonic world would return to the problems of the 1930s: regional blocs, trade conflicts and strategic rivalry. Furthermore, multilateral institutions such as the IMF, the World Bank or the WTO might give way to regional organisations.¶ For example, Europe and East Asia would each step forward to fill the vacuum left by Washington’s withering leadership to pursue their own visions of regional political and economic orders. Free markets would become more politicised — and, well, less free — and major powers would compete for supremacy.¶ Additionally, such power plays have historically possessed a zero-sum element. In the late 1960s and 1970s, US economic power declined relative to the rise of the Japanese and Western European economies, with the US dollar also becoming less attractive. And, as American power eroded, so did international regimes (such as the Bretton Woods System in 1973).¶ A world without American hegemony is one where great power wars re-emerge, the liberal international system is supplanted by an authoritarian one, and trade protectionism devolves into restrictive, anti-globalisation barriers. This, at least, is one possibility we can forecast in a future that will inevitably be devoid of unrivalled US primacy.
Scenario 2 is Biopower
State budget cuts cripple bioterror readiness
Ahlers, 11 (Mike, Senior producer of transportation and regulation for CNN, 12/20/2011, “Bioterror security at risk,” )
Recent and proposed budget cuts at all levels of government are threatening to reverse the significant post-9/11 improvements in the nation's ability to respond to natural diseases and bioterror attacks, according to a report released Tuesday. "We're seeing a decade's worth of progress eroding in front of our eyes," said Jeff Levi, executive director of the Trust for America's Health, which published the report with the Robert Wood Johnson Foundation. Budget cuts already have forced state and local health departments to cut thousands of health officials, the report says. Cuts are jeopardizing the jobs of federal investigators who help states hunt down diseases, threatening the capabilities at all 10 "Level 1" state labs that conduct tests for nerve agents or chemical agents such as mustard gas, and may hurt the ability of many cities to rapidly distribute vaccines during emergencies, it says. The "upward trajectory" of preparedness, fueled by more than $7 billion in federal grants to cities and states in the past 10 years, is leveling off, and the gains of the last decade are "at risk," the report says. The 2011 report departs slightly in tone from the nine previous reports prepared by the two health advocacy groups. Earlier reports, while focusing on gaps in the nation's preparedness for pandemics and bioterror attacks, showed a "steady progression of improvement," said Levi. "Our concern this year is that because of the economic crisis... we may not be as prepared today as we were a couple of years ago," he said. Once lost, medical capabilities take time and money to rebuild, the report says. "It would be like trying to hire and train firefighters in the middle of a fire," Levi said. "You don't do that for fire protection, and we shouldn't be doing that for public health protection." There are few expressions of assurance or optimism in the 2011 report. The report says: – In the past year, 40 states and the District of Columbia have cut funds to public health. – Since 2008, state health agencies have lost 14,910 people through layoffs or attrition; local health departments have lost 34,400. – Federal PHEP grants - Public Health Emergency Preparedness grants - were cut 27 percent between fiscal 2005 and 2011, when adjusted for inflation. – Some 51 cities are at risk for elimination of Cities Readiness Initiative funds, which support the rapid distribution of vaccinations and medications during emergencies. "Two steps forward, three steps back," said Dr. F. Douglas Scutchfield of the University of Kentucky College of Public Health, in an essay accompanying the study. "As certain as the sun will rise in the east, we will experience another event that will demonstrate our inability to cope, as the resources for public health are scarce, and it will prompt the cycle of build-up, neglect, event, build-up, etc." Federal aid to state and local governments for health preparedness peeked in 2002 at about $1.7 billion, and fell to $1.3 billion in fiscal 2012, Levi said. But the impact of cuts were masked when Congress allocated more than $8 billion in emergency funds to fight the H1N1 flu in 2009, Levi said. "Now that money is gone. And so we're seeing the real impact of these cuts," he said. The TFAH report comes just two months after another report concluded that the United States is largely unprepared for a large-scale bioterror attack or deadly disease outbreak.
Bioterror risks extinction.
Ochs, 2002
[Richard, Naturalist – Grand Teton National park with Masters in Natural Resource Management – Rutgers, “Biological Weapons must be abolished immediately” 6-9, ]
Of all the weapons of mass destruction, the genetically engineered biological weapons, many without a known cure or vaccine, are an extreme danger to the continued survival of life on earth. Any perceived military value or deterrence pales in comparison to the great risk these weapons pose just sitting in vials in laboratories. While a "nuclear winter," resulting from a massive exchange of nuclear weapons, could also kill off most of life on earth and severely compromise the health of future generations, they are easier to control. Biological weapons, on the other hand, can get out of control very easily, as the recent anthrax attacks has demonstrated. There is no way to guarantee the security of these doomsday weapons because very tiny amounts can be stolen or accidentally released and then grow or be grown to horrendous proportions. The Black Death of the Middle Ages would be small in comparison to the potential damage bioweapons could cause. Abolition of chemical weapons is less of a priority because, while they can also kill millions of people outright, their persistence in the environment would be less than nuclear or biological agents or more localized. Hence, chemical weapons would have a lesser effect on future generations of innocent people and the natural environment. Like the Holocaust, once a localized chemical extermination is over, it is over. With nuclear and biological weapons, the killing will probably never end. Radioactive elements last tens of thousands of years and will keep causing cancers virtually forever. Potentially worse than that, bio-engineered agents by the hundreds with no known cure could wreck even greater calamity on the human race than could persistent radiation. AIDS and ebola viruses are just a small example of recently emerging plagues with no known cure or vaccine. Can we imagine hundreds of such plagues? HUMAN EXTINCTION IS NOW POSSIBLE.
The plan is key to solving state budget concerns
COEA, 3-23 (Council of Economic Advisers @ The Department of Treasury, 3/23/2012, “A NEW ECONOMIC ANALYSIS OF INFRASTRUCTURE INVESTMENT,” )
President Obama’s FY 2013 Budget proposes a bold plan to renew and expand America’s infrastructure. This plan includes a $50 billion up-front investment connected to a six-year $476 billion reauthorization of the surface transportation program and the creation of a National Infrastructure Bank. The President’s plan would significantly increase investment in surface transportation by approximately 80 percent when compared to previous federal investment. The plan seeks not only to fill a long overdue funding gap, but also to reform how Federal dollars are spent so that they are directed to the most effective programs. This report contributes to the ongoing policy dialogue by summarizing the evidence on the economic effects of investments in transportation infrastructure. Public infrastructure is an essential part of the U.S. economy. This has been recognized since the founding of our nation. Albert Gallatin, who served as President Jefferson’s Treasury Secretary, wrote: “The early and efficient aid of the Federal Government [emphasis in article] is recommended by still more important considerations. The inconveniences, complaints, and perhaps dangers, which may result from a vast extent of territory, can no otherwise be radically removed or prevented than by opening speedy and easy communications through all its parts. Good roads and canals will shorten distances, facilitate commercial and personal intercourse, and unite, by a still more intimate community of interests, the most remote quarters of the United States. No other single operation, within the power of Government, can more effectually tend to strengthen and perpetuate that Union which secures external independence, domestic peace, and internal liberty.” 1 Gallatin spoke in terms of infrastructure shortening distances and easing communications, even when the only means to do so were roads and canals. Every day, Americans use our nation’s transportation infrastructure to commute to work, visit their friends and family, and travel freely around the country. Businesses depend on a well-functioning infrastructure system to obtain their supplies, manage their inventories, and deliver their goods and services to market. This is true for companies whose businesses rely directly on the infrastructure system, such as shippers like UPS and BNSF, as well as others whose businesses indirectly rely on the infrastructure system, such as farmers who use publicly funded infrastructure to ship crops to buyers, and internet companies that send goods purchased online to customers across the world. A modern transportation infrastructure network is necessary for our economy to function, and is a prerequisite for future growth. President Eisenhower’s vision is even more relevant today than it was in 1955, when he said in his State of the Union Address, "A modern, efficient highway system is essential to meet the needs of our growing population, our expanding economy, and our national security." Today, that vision would include making not only our highways, but our nation’s entire infrastructure system more efficient and effective. Our analysis indicates that further infrastructure investments would be highly beneficial for the U.S. economy in both the short and long term. First, estimates of economically justifiable investment indicate that American transportation infrastructure is not keeping pace with the needs of our economy. Second, because of high unemployment in sectors such as construction that were especially hard hit by the bursting of the housing bubble, there are underutilized resources that can be used to build infrastructure. Moreover, states and municipalities typically fund a significant portion of infrastructure spending, but are currently strapped for cash; the Federal government has a constructive role to play by stepping up to address the anticipated shortfall and providing more efficient financing mechanisms, such as Build America Bonds. The third key finding is that investing in infrastructure benefits the middle class most of all. Finally, there is considerable support for greater infrastructure investment among American consumers and businesses.
= HSR Add on =
Infrastructure bank includes high-speed rail
MSNBC ’11 (7/6/2011, “ Bank plan would help build bridges, boost jobs”,)
A bill wending its way through Congress looks to change that, and by doing so create jobs and fund projects, such as a high-speed rail line. American has fallen to 23rd in infrastructure quality globally, according to the World Economic Forum. It will take about $2 trillion over the next five years to restore the country’s infrastructure, says the American Society of Civil Engineers. Given America's weak economy and rising national debt, the government can’t promise anything close to an amount that dwarfs most countries' total economies. But a national infrastructure bank could help. The idea of such a bank has been around since the 1990s but has never gained significant attention until now. In March a bipartisan bill was introduced in the Senate that gained the support of the US Chamber of Commerce, America’s leading business lobby, and the AFL-CIO, the country’s largest labor federation — two groups on opposite sides of most debates. The BUILD Act, proposed by Sens. John Kerry, D-Mass., Kay Hutchinson, R-Texas, and Mark Warner, D-Va., would create a national infrastructure bank that would provide loans and loan guarantees to encourage private investment in upgrading America’s infrastructure. There are other similar proposals circulating in Congress, but the BUILD Act has gained the most traction. The bank would receive a one time appropriation of $10 billion, which would be aimed at sparking a total of $320 to $640 billion in infrastructure investment over the course of 10 years, Kerry's office says. They believe the bank could be self-sustaining in as little as three years. “Federal appropriations are scarce in this difficult budget environment, and there is increasing attention on inefficiencies in the way federal dollars are allocated,” wrote Kerry spokeswoman Jodi Seth in an e-mail. Advocates offer a laundry list of benefits for an “Ibank.” At the top of the list, they tout the bank’s political independence. The bank would be an independent government entity but would have strong congressional oversight. Bank board members and the CEO would be appointed by the president and confirmed by the Senate. Kerry says this structure would help eliminate pork-barrel earmark projects. If, for example, private investors wanted to invest in a project, under the BUILD Act they could partner with regional governments and present a proposal to the bank. The bank would assess the worthiness of the project based on factors like the public’s demand and support, and the project's ability to generate enough revenue to pay back public and private investors. The bank could offer a loan for up to 50 percent of the project’s cost, with the project sponsors funding the rest. The bank would also help draft a contract for the public-private partnership and ensure the government would be repaid over a fixed amount of time. If the Ibank funded something like the high-speed rail project, it would become another investor alongside a state government, a private equity firm or another bank. The project sponsors' loans would be repaid by generating revenue from sources such as passenger tickets, freight shipments, state dedicated taxes. Relies on loans Under previous proposals, which never have gained much momentum, an infrastructure bank would have offered grants, which would be more costly to taxpayers. The BUILD Act relies on loans instead, and project borrowers would be required to put up a reserve against potential bad debt. The bank would make money by charging borrowers upfront fees as well as interest rate premiums. The bill’s supporters say this type of public-private partnership model has been successfully applied to the Export-Import Bank of the United States, which has generated $3.4 billion for the Treasury over the past five years. The Export-Import bank finances and insures foreign purchases. It’s important to note that the infrastructure bank is only meant to jump-start infrastructure investment, not fund every project, said Michael Likosky, a senior fellow at NYU's Institute for Public Knowledge and a long-time proponent of a national infrastructure bank. Supporters hope the bank also would jump-start the job market. Former President Bill Clinton endorses the idea of an Ibank, although he has not necessarily thrown his weight behind the BUILD Act. “I think there are enormous jobs there,” he said in an interview last week on CNBC. “Every manufacturing job you create tends to create more than two other jobs in other sectors of the economy and it makes America more competitive, more productive.” According to the Department of Transportation's 2008 numbers, every $1 billion invested in transportation infrastructure creates between 27,800 and 34,800 jobs. And they tend to be well-paying, middle-class jobs construction jobs that cannot be outsourced offshore, said Scott Thomasson with the Progressive Policy Institute. Likosky said the support the BUILD Act has garnered so far has surprised almost everyone involved. “This infrastructure bank is the first thing on the table where we can start to talk about growing the economic pie, an approach toward moving toward prosperity," he said. Advocates say a national infrastructure bank could be the way to take on major projects, such as upgrading America’s power grid, repairing damaged roads and bridges and building high-speed rail lines, an idea that has been discussed for more than 40 years. High-speed rail High-speed rail has become something of a lightning rod issue. President Barack Obama has proposed spending $53 billion over six years to build high-speed rail lines in busy corridors across the country, an idea endorsed as recently as two weeks ago by the United States Conference of Mayors. House Republicans have criticized the plan, saying private investment, not government spending, should be used to build the rail systems, Reuters reported.
HSR reduces carbon emissions
USHRA NO DATE “Sustainability” ()
Electric high speed rail is the most energy efficient of all trains. A national high speed rail system is the centerpiece of a sustainable America, and will significantly reduce congestion and our dependence on cars and oil, while cutting our carbon emissions by epic proportions. The entire system can be powered by clean, safe renewable energy including wind, solar, geothermal, and ocean/tidal. Clean electric trains are a major form of daily transportation in numerous countries, and are the single most powerful transportation choice that can solve serious mobility, energy, environmental, economic, health, and social problems simultaneously - on a global scale. A 2006 study by the Center for Clean Air Policy and the Center for Neighborhood Technology concluded that building a high-speed rail system across the US could result in 29 million fewer car trips and 500,000 fewer plane flights each year, saving 6 billion pounds of carbon dioxide emissions – the equivalent of removing a million cars from the road annually.
HSR sets up an energy efficiency mindset
Samantha Longshore, Certification Analyst at Transwestern ’10, " Putting the Brakes on High-Speed Rail"
A high-speed rail system could be the centerpiece to a sustainable United States. Trains are a sustainable form of transportation, and electric high-speed rails are the most energy efficient among them all. Not only could high-speed rails reduce road and airway congestion, they would decrease our carbon emissions and dependence on oil and automobiles.¶ While electricity is still largely produced using coal, electric high-speed rails align the country with a move toward clean, renewable energy such as wind, solar, and geothermal. Creating an integrated, national high-speed rail system would help establish a commitment to using renewable energy as the future of fossil fuel use becomes increasingly bleak.¶ The debate over installing high-speed rail systems to link major metropolitan areas across our country is picking up steam. Now in heated discussion throughout the country, many Democrats see the high-speed rail as the key to a sustainable future for the United States, while Republicans view these projects as poor investments. It’s causing mixed feelings in states like Ohio and Wisconsin, where the proposed high-speed rail project has come to a halt. At the request of Wisconsin’s outgoing governor, work has been suspended, given election results and concern over consequences that might result from cancellation of the project once work has begun. Wisconsin’s governor-elect has reaffirmed his commitment to stopping the Milwaukee-Madison rail, stating that he believes this project will not help enough people and will cost too much. The governor-elect has returned the $810 million in federal grant money that was awarded to the project in early October from the Federal Railroad Administration for American Recovery and Reinvestment Act (Recovery Act). In Ohio, the same story has played out as the governor there sent federal funds back. Similar projects like the Virginia rail, part of the Southeast corridor high-speed rail project, are causing controversy of their own as those opposed are voicing concern over how “high-speed” these rails will actually be, doubting their efficiency. The question lingers – what would it take to make the high-speed rail work for both parties throughout the country?¶ A Profitable Option¶ Those opposed to high-speed rails often see more good in existing infrastructure investment, such as roadwork. They believe this investment will serve more people than a high-speed rail might. However, high-speed rails may become a popular idea with this audience if they can serve not only individuals but national productivity. The executive director for the American High-Speed Rail Alliance, Mary Ellen Curto, sees high-speed rails as a means of productivity and global competitiveness. She claims that as roadways and air travel become more congested, a high-speed rail could relieve some tension on distribution channels. High-speed rails may not be effective in every part of the U.S., but in densely populated areas, a national high-speed rail system could develop into part of a positive business model, becoming not only a sustainable option but a profitable one.¶ A Sustainable Option¶ According to a 2006 study by the Center for Clean Air Policy and the Center for Neighborhood Technology in 2006, “building a high-speed rail system across the US could result in 29 million fewer car trips and 500,000 fewer plane flights each year, saving 6 billion pounds of carbon dioxide emissions – the equivalent of removing a million cars from the road annually.” The suggestion that high-speed rails would not only thin out traffic but also significantly reduce the environmental impact of travel makes a strong case for their implementation.¶ Moving toward a sustainable national infrastructure is a great undertaking for our country, but it will create energy independence, promoting a healthy environment and economy - a sustainable future. This movement has to start somewhere, and that’s why city-to-city projects like the Madison-Milwaukee proposal raise important debates. The Wisconsin Department of Transportation is currently holding open house public meetings around the state so that residents can learn more and voice their opinions on the high-speed rail. There are 54 similar projects occurring in 23 states, so visit the U.S. Department of Transportation website to learn more about high-speed rail projects in your area and get involved in the discussion. It could mean the difference between serving our present and preserving our future.
Auto emissions are the main contributor to global warming
Larry West 12, 20-year professional writer and editor who has written many articles about environmental issues for leading newspapers, magazines and online publications, “U.S. Autos Account for Half of Global Warming Linked to Cars Worldwide,”
U.S. automobiles and light trucks are responsible for nearly half of all greenhouse gases emitted by automobiles globally, according to a new study by Environmental Defense.The study, Global Warming on the Road [PDF], also found that the Big Three automakers—General Motors, Ford and DaimlerChrysler—accounted for nearly three-quarters of the carbon dioxide released by cars and pickup trucks on U.S. roads in 2004, the latest year for which statistics were available.“Cutting greenhouse gas emissions from U.S. automobiles will be critical to any strategy for slowing global warming,” said John DeCicco, author of the report and senior fellow at Environmental Defense, in a press release. “To address global warming, we’ll need a clear picture of what sources are contributing to the problem. This report details, by automaker and vehicle type, the greenhouse gas contributions from America's auto sector, for the first time.”Carbon dioxide emissions from personal vehicles in the United States equaled 314 million metric tons in 2004. That much carbon could fill a coal train 55,000 miles long—long enough to circle the Earth twice. Cars and trucks made by GM gave off 99 million metric tons of carbon dioxide or 31 percent of the total; Ford vehicles emitted 80 million metric tons or 25 percent; and Daimler Chrysler vehicles emitted 51 million metric tons or 16 percent, according to the report.
US is key on warming and necessary to avert extinction
Cummins and Allen ‘10 (Ronnie, Int’l. Dir. – Organic Consumers Association, and Will, Policy Advisor – Organic Consumers Association, “Climate Catastrophe: Surviving the 21st Century”, 2-14, )
The hour is late. Leading climate scientists such as James Hansen are literally shouting at the top of their lungs that the world needs to reduce emissions by 20-40% as soon as possible, and 80-90% by the year 2050, if we are to avoid climate chaos, crop failures, endless wars, melting of the polar icecaps, and a disastrous rise in ocean levels. Either we radically reduce CO2 and carbon dioxide equivalent (CO2e, which includes all GHGs, not just CO2) pollutants (currently at 390 parts per million and rising 2 ppm per year) to 350 ppm, including agriculture-derived methane and nitrous oxide pollution, or else survival for the present and future generations is in jeopardy. As scientists warned at Copenhagen, business as usual and a corresponding 7-8.6 degree Fahrenheit rise in global temperatures means that the carrying capacity of the Earth in 2100 will be reduced to one billion people. Under this hellish scenario, billions will die of thirst, cold, heat, disease, war, and starvation. If the U.S. significantly reduces greenhouse gas emissions, other countries will follow. One hopeful sign is the recent EPA announcement that it intends to regulate greenhouse gases as pollutants under the Clean Air Act. Unfortunately we are going to have to put tremendous pressure on elected public officials to force the EPA to crack down on GHG polluters (including industrial farms and food processors). Public pressure is especially critical since "just say no" Congressmen-both Democrats and Republicans-along with agribusiness, real estate developers, the construction industry, and the fossil fuel lobby appear determined to maintain "business as usual."
= Russian Relations Add on =
****( THIS IS A JOKE, DON’T ACTUALLY READ IN ROUND )
Lack of Transportation Infrastructure dissuades al-Qaeda attacks
Media Watch 11 (July 28th, 2011, MEDIA WATCH, AL-QAEDA CLAIMS U.S. TRANSPORTATION INFRASTRUCTURE MUST IMPROVE BEFORE ANY TERRORIST ATTACKS, )
WASHINGTON—In a 30-minute video released Thursday, al- Qaeda leader Ayman al-Zawahiri criticized the mass transportation infrastructure of the United States, claiming significant repairs and upgrades would need to be implemented before the militant group would consider destroying any roads, bridges, or railways with terrorist attacks. Reading from a prepared statement, al-Zawahiri blasted the U.S. government for its lack of foresight and admonished its leaders for failing to provide Americans with efficient and reliable modes of public transport to reduce traffic congestion, lower carbon emissions, improve air quality, and supply suitable targets for terrorists. “The al-Qaeda network is fully prepared to continue the jihad against the American infidels by launching deadly attacks, but your outdated and rusting transportation infrastructure needs to be completely overhauled for those strikes even to be noticed,” al-Zawahiri said. “We want to turn your bridges into rubble, but if we claimed credit for making them collapse, nobody would ever believe us.”
U.S.-Russian relations are on the brink- only terrorism can bring the countries back together.
Hooson, 08 , (Paul, former lobbyist and writer for Progressive Values “New Wave of Terrorism may Draw Russia & U.S. closer again,” 11-30,
Interestingly, VOICE OF RUSSIA, the Russian news-service … violence, then this may well provide the common ground required for better relations between the states. Interestingly, VOICE OF RUSSIA, the Russian news-service which is a virtual mouthpiece for the Russian government Putin regime and the Putin dominated United Russia political party seems to be taking a much less confrontational opinion of the U.S. in the last few days since the violence in Mumbai, India as well elsewhere in the world. Since the Russian military offensive in Georgia in August, American and Russian relations had been greatly strained, but now Russia views a recent uptick in international terrorism as evidence that the United States, Russia and the EU must work together as allies to prevent a spread of this epidemic of violence around the world. Russia might also be realizing that with a fresh administration coming into power in Washington soon, that it might just be more pragmatic to paper-over the recent bad relations since Georgia, and work together for a better relationship with Washington. And the shared international fears of terrorism just might give both Washington as well as Moscow good enough of a reason to forget each nation's problems with the other somewhat, and work together to stem rising international terrorism. Besides the terrorist violence in Mumbai, terrorism in Georgia claimed the life a pro-Moscow mayor, and a U.S. embassy in Kabul was attacked as well. VOICE OF RUSSIA notes that these actions came recently when Russian-Western relations have suffered in the wake of the Georgia conflict. Russia seems to be opening the door to improved relations with Washington and the EU by running such a feature on VOICE OF RUSSIA, where it appears that they are inviting an improvement in relations, perhaps viewing the incoming Obama Administration as less confrontational to Russia than the Bush administration. Interestingly, the news coverage on VOICE OF RUSSIA appears to be far less anti-Washington in tone as well in recent days, a sharp contrast from the more heated opinions in Russia around the time of the August actions in Georgia. Surprisingly, it appears as though Moscow might have blinked first here. And if anything, this is an important signal to the incoming Obama Administration that better relations with Russia built on common ground issues such as combating international terrorism are very possible. An improvement in relations with Russia is very important because it is the only nation in the world with a nuclear weapons force large enough to battle the U.S. to draw or worse. The two world military superpowers. Russia and the U.S. need to work together on many issues, and not allow events like Georgia to put the two nations at dangerous odds with other, especially when world terrorism just might be on the rise once again, taking some advantage of the problems that Washington and Moscow have been having since the Georgia incident. There is the saying that the, "Enemy of my enemy is my friend". And since Russia, the U.S. and the EU are all three disgusted with worldwide terrorist violence, then this may well provide the common ground required for better relations between the states.
Rebuilding high level ties prevents a war of miscalculation that would cause extinction
Cirincone 7 (Joseph Cirincione, Center for American Progress expert in nonproliferation, national security, international security, U.S. military, U.S. foreign policy July 23rd, 2007, “Nuclear summer”)
The first jolt came June 3, when Russian President Vladimir Putin said that Russia will point its nuclear missiles toward Europe if the United States constructs anti-missile bases on his borders. Putin warned that placing new American weapon systems in Poland and the Czech Republic “increases the possibility of a nuclear conflict.” Beyond the fact that Putin actually used his nuclear arsenal as a lever to alter U.S policy, the conflict underscored the threat from the 25,000 nuclear weapons the two countries still deploy, with thousands on hair-trigger alert ready to fire in 15 minutes. With Russian early-warning capabilities eroding, we increasingly rely on good relations between the White House and the Kremlin to ensure that no Russian president will misinterpret a false alarm and make a catastrophic decision. This summer, behind the smiles at the “Lobster Summit" in Maine, that good will was in short supply, weakening an important safety net crucial to preventing an accidental nuclear exchange. Later in July, the mutual diplomatic expulsions between Russia and the United Kingdom, which fields 185 nuclear weapons, ratcheted tensions up another notch and should shake current complacent policies that take good relations for granted and scorn any further negotiated nuclear reductions.
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