An Infrastructure Bank / Governance Commission (By Brett Frischmann and Robin Chase)

A second draft op ed, below the fold

President-elect Obama has expressed a firm commitment to massive federal spending on infrastructure. Beyond the infrastructure investments in the economic stimulus package, he is likely to administer the “single largest new investment in our national infrastructure since the creation of the federal highway system in the 1950s.” Among other things, he plans to invest in transportation, communications, and physical infrastructure. One of the most important infrastructures that the Obama administration could create would be an effective means for implementing and administering federal infrastructure investments.

Most people understand that infrastructure are important; that markets fail in numerous ways to meet societal demands for infrastructure; that government has a critical role to play in ensuring that the public’s needs for infrastructure are met. Yet most people also are incredibly skeptical of government infrastructure spending, and rightly so. Too much waste, corruption, and plain old politics has infected infrastructure policy and left the public wary and often downright hostile to allocating massive sums of money to infrastructure projects. The process of allocating funds, managing investments, evaluating progress, coordinating different types of infrastructure investments, and sustaining infrastructure needs to be fixed. In combination, two recent proposals show the way forward. The first, recommended by the Commission on Public Infrastructure, is to create a National Infrastructure Bank. Senators Christopher Dodd and Chuck Hagel introduced a bipartisan bill, the National Infrastructure Bank Act of 2007, that called for the creation of an independent governmental entity, modeled on the FDIC, with the flexible authority to build an organization capable of managing major federal infrastructure investments. The Bank would evaluate projects, develop financing package alternatives, report annually to Congress, and maintain a public database to catalog projects and track progress.

The second proposal is a recommendation found in the Final Report of the National Surface Transportation Policy and Revenue Study Commission, for the creation of an independent governance commission, the National Surface Transportation Commission (NASTRAC), to oversee the development of a national strategic plan and recommend funding levels for the plan. The beauty of NASTRAC is that it recommends development of a governance commission — like the Base Closure and Realignment Commission and the Postal Regulatory Commission — for the purpose of “depoliticizing difficult policy actions.”

This independent institution needs both “big picture” and project-specific expertise. It must be capable of strategic, long-term planning and policy coordination, and capable of managing a large but limited investment portfolio. It must prioritize and choose among proposed projects, design financing arrangements, allocate funds, and evaluate progress for each project. It must coordinate among many different stakeholders at the national, regional, state and local levels. And it must implement and help shape the comprehensive infrastructure policy discussed above. Of course, creating a new government entity raises a host of reasonable concerns about bureaucracy and industry capture, but such concerns already infect infrastructure policy and are dispersed across different political branches (e.g., legislators and funding agencies) and different political jurisdictions (federal, state, local), which makes economic and political accountability near impossible. The independent infrastructure bank could alleviate many of these concerns and improve coordination, transparency, and accountability.

During his campaign, Obama called for the creation of a National Infrastructure Reinvestment Bank. This important reform should go hand-in-hand with his plans to invest massive sums of money.