Why We Need a National Infrastructure Bank
Earlier this week, Amtrak announced the adoption of a comprehensive plan to upgrade and replace the Northeast Corridor in order to achieve the sort of high-speed rail standards seen in western Europe and east Asia. The fairly cursory plan borrows largely from this summer’s University of Pennsylvania design study, one that would connect Philadelphia to New York in 30-45 minutes and Washington to Boston in 3.5 hours at speeds in excess of 150 mph. Both studies predict a tripling of ridership and profits in excess of $1 billion per year if the plan is carried out, which is stunning but certainly not hard to believe.
The cost, however, is staggering: $117 billion – at least $4 billion a year – over 30 years. Considering that federal capital outlays for passenger rail are as little as $10 billion, for which state and regional governments compete fiercely, the amount of time and money it would require to complete this vision greatly frustrate and complicate the project. Meanwhile, Europe and Asia forge ahead on HSR with visions that already supersede this: a Chinese bullet train just reached 415 km/h (258 mph) on a standard run from Shanghai, breaking a previous record China Railways had itself set only months ago. Under the Amtrak plan, US trains will take an entire generation to reach speeds three-fifths of what its international competition is already exceeding.
Fortunately, there do exist alternatives to such a piecemeal financing plan. Chief among them are proposals for a national infrastructure bank, which would reduce the complexity of projects like this by a significant margin: for example, the $117 billion cost of the NEC upgrade would be reduced to $40 billion, realizing the project decades sooner, employing workers immediately and realizing a cost reduction of nearly two-thirds on savings from inflation alone.
Funding for an infrastructure bank could be provided by numerous sources, from the federal government to associations of state and local governments to even foreign lenders. Importantly, a new financial model would supplant or replace the transportation trust fund established for the Interstate Highway System in the 1950s. Drawn from a flat per-gallon gasoline tax, revenues for the trust fund have fallen and demands have grown so rapidly that the Federal Highway Administration has begun deficit spending to replace it, borrowing against the general fund in hopes that the “GreenTEA” transportation reauthorization will replenish their loss.
The state of California and Los Angeles County, which ahve have large, unfunded infrastructure requirements pending for their famously cash-strapped states and localities, already realize the need for alternative infrastructure funding methods. LA Mayor Antonio Villaraigosa has made much hay of his “30/10” plan, which is expected to fund and produce thirty years’ worth of Measure R transit projects in less than ten – but in order to do so, the county must procure bonds from sources that are currently undetermined. Governor Arnold Schwarzenegger recently junketed to East Asia, appealing directly for Chinese and Japanese foreign development aid to the state to meet these and other obligations, including California’s own high-speed rail plan.
A national infrastructure bank would enable not only these proposals, but potentially many billions of dollars’ worth of plans like these, getting them to “shovel-ready” status decades sooner than was previously feasible. Given the necessity focus on jobs creation in a stagnant economy, it would be wise for Congress, the Obama administration, and perhaps the Federal Reserve to work together to create such a fund. It would not only allow the funding for domestic projects to remain in American hands; it would also provide for the creation of thousands of jobs when they are needed most, as well as helping to revitalize many of our declining cities by connecting them to creative hubs, building on a major cornerstone of our future economic competitiveness. When it comes to the choices American cities have for financing the infrastructure that will allow them to compete on quality and talent, a penny saved is much more than a penny earned.