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An Easy Way to Get Smarter on Infrastructure Finance

by Rebecca Strauss
March 20, 2014

Vehicles drive on the new eastern span of the San Francisco-Oakland Bay bridge in San Francisco, California September 2, 2013 (Stephen Lam/Courtesy Reuters). Vehicles drive on the new eastern span of the San Francisco-Oakland Bay bridge in San Francisco, California September 2, 2013 (Stephen Lam/Courtesy Reuters).

“The United States has an infrastructure investment problem,” so starts CFR Senior Fellow Heidi Crebo-Rediker’s compelling new policy innovation memo released yesterday. As we lay out in our report on federal transportation policy, the country should be spending one-third more than current levels just to be able to maintain the infrastructure we alrady have. Using more private money is one way to plug the gap. But many state and local governments, who are responsible for paying for and managing most of the nation’s infrastructure, do not have the expertise of using innovative financing structures that share risk, channel private money effectively, and give taxpayers value for money.

Crebo-Rediker argues there is a politically easy and inexpensive way the federal government can help to solve this “knowledge gap” by creating a small unit of experts to advise these policymakers. The unit would be called, simply, “Infrastructure USA.”

The United States is late-to-game when it comes to using private finance in infrastructure. Many other countries that are further along have entites like “Infrastructure USA” to spread know-how to government officals tasked with financing infrastructure projects. Indeed, a small but hugely successful model already exists within the federal government at the Treasury Department, but the unit only advises foreign governments. And they get the job done on the cheap. If such a unit helps policymakers make decisions that have more cost-effective outcomes, the unit would pay for itself, and then some.

In an added bonus, Obama potentially could get the unit up and running, at least initially, without going to Congress and having to slog through any legislative gridlock. But we can safely assume, she writes, that the unit would not generate serious political opposition; Democrats and Republicans alike want to get more private money in the game while protecting taxpayer interests.

The release of Crebo-Rediker’s memo could not be more timely. Infrastructure funding has been making the headlines. In February, Obama set an ambitious goal of funding transportation spending at more than current levels for the next four years. Policymakers are thinking more creatively about how to fund transportation spending, with shortfalls predicted in coming years as gas-tax revenues continue to slide downward. Both Obama’s and Republican David Camp’s tax reform proposals recommended using revenues raised from corporate tax reform for infrastructure investment. Transportation spending could be a bright point of bipartisanship.

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