Dissecting the National Infrastructure Bank Idea

Matthew Yglesias (writing for Vox) and Joe Cortright (writing for City Observatory take different approaches to their analysis of an infrastructure policy that would rely on a national infrastructure bank for some of its funding capability.

Yglesias mostly provides an explanation of the concept by way of a larger infrastructure platform proposed by presidential candidate Hillary Clinton a few weeks ago.

After pointing out a few of the way infrastructure bank proposals can differ, Yglesias notes a common characteristic of all of them: "All flavors of infrastructure bank, however, are designed to solve a fundamental mismatch between which kinds of investors want to buy municipal bonds and which kinds of investors are best suited to invest in projects whose payoffs are very long-term."

As for "Clinton's particular flavor of infrastructure bank," according to Yglesias, it "would focus on projects of regional and national significance, emphasizing investments in complex multi-modal projects like freight and port improvements, and in projects to modernize our energy, water, broadband, and transportation systems in urban and rural communities."

Cortright, however, provides a clear polemic about the shortcomings of the national infrastructure bank model. Cortight's argument, summed up generally, is that there are several practical considerations that will limit the effectiveness of the infrastructure bank. Cortright goes into a lot more depth on each of the considerations listed here:

• A bank has to be capitalized.
• Banks want to be paid back.
• A bank may mostly substitute for existing financing rather than prompting additional investment.
• Banks don’t design projects, DOTs do. 
• Cheap money creates its own incentive problems. 
• And it’s not like states haven’t figured out how to borrow money.

Cortright concludes his argument by following up on that last point—most states are already deeply in debt for large infrastructure projects.