There are competing theories about what makes for good economic stimulus, and there are practices that work well and which don’t work very well. We know that tax cuts are not very stimulative, because they take a long time to show up in people’s bank accounts, and they are comprised of money that was already there to begin with. New money, extra money, is more stimulative. So food stamps, for instance, can return 70% to 100% gain in stimulus, above and beyond cost.
But we aren’t looking to fix the long recovery by using food stamps for stimulus. And we can’t really do any tax cuts that would help to expand GDP. If we want to spur a more vibrant recovery, we have to find a way to put new money, extra money, in people’s pockets, and it has to be more than they need to meet the ever-rising costs of living. It makes sense, then, that intelligent investment in high-growth activities would be the best way to make that happen.
There is a mythology circulating around statehouses and governor’s mansions across the country, which holds that developing new ways to harvest carbon-based fuels is the best way to do this, because it is a high-growth activity with lots of job-creation potential. The fact is, it is more often a way to steer massive profits, aided by massive taxpayer assistance, to already wealthy interests, that create relatively few new local jobs and which manage this by helping local governments pay for infrastructure improvements.
None of that is healthy for a local or regional economy, over the long term, and the profits tend not to stay local or lead to long-term permanent new jobs. We do, however, have a problem with long-neglected infrastructure, on which the general health and vibrancy of our economy depend, and we have budget shortfalls at the state and local level.
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:
1. 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.
2. It would allow for large-scale direction of public funds to high-yield infrastructure projects, without imposing massive new costs on the federal budget.
3. 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.
4. 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.
5. It would pay significant dividends in terms of laying the groundwork—literally—for a robust, world-leading, smart-grid-enabled clean energy economy.
6. 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.
7. It would stimulate massive new investment in technological innovation, possibly the strongest point in the 21st century US economy.
8. 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.
9. It would encourage more constructive, more affordable, more spontaneous mobility, increasing economic opportunity for people across the nation.
10. 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.
But maybe the best part of a National Infrastructure Innovation and Reinvestment Bank, in terms of revolutionary public policy that can help to build a vibrant, free and prosperous 21st century for the American people, is that there is nothing to exclude it from either major party’s ideological vision. It is not a partisan approach, not an ideological approach, does not give bureaucracy control of our economy, and does not privilege the already privileged over hard working people with the best new ideas.