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Friday, December 23, 2011

National Infrastructure Bank: Overview and Current Legislation

William J. Mallett
Specialist in Transportation Policy

Steven Maguire
Specialist in Public Finance

Kevin R. Kosar
Analyst in American National Government

Several bills to establish a national infrastructure bank have been introduced in the 112th Congress. This report examines three such bills, the Building and Upgrading Infrastructure for Long-Term Development Act (S. 652), the American Infrastructure Investment Fund Act of 2011 (S. 936), and the National Infrastructure Development Bank Act of 2011 (H.R. 402). These proposals share three main goals:

  • increasing total investment in infrastructure by encouraging new investment from nonfederal sources;
  • improving project selection by insulating decisions from political influence; and
  • encouraging new investment with relatively little effect on the federal budget through a mostly self-sustaining entity.
The federal government already uses a wide range of direct expenditures, grants, loans, loan guarantees, and tax preferences to expand infrastructure investment. A national infrastructure bank would be another way to provide federal credit assistance, such as direct loans and loan guarantees, to sponsors of infrastructure projects. To a certain extent, a new institution may be duplicative with existing federal programs in this area, and Congress may wish to consider the extent to which an infrastructure bank should supplant or complement existing federal infrastructure efforts.

It is unclear how much new nonfederal investment would be encouraged by a national infrastructure bank, beyond the additional budgetary resources Congress might choose to devote to it. The bank may be able to improve resource allocation through a rigorous project selection process, but this could have consequences that Congress might find undesirable, such as an emphasis on projects that have the potential to generate revenue through user fees and a corresponding de-emphasis on projects that generate broad public benefits that cannot easily be captured through fees or taxes.

As with other federal credit assistance programs, the loan capacity of an infrastructure bank would be large relative to the size of the appropriation. The bank is unlikely to be self-sustaining, however, if it is intended to provide financing at below-market interest rates. The extent to which the bank is placed under direct congressional and presidential oversight may also affect its ability to control project selection and achieve financial self-sufficiency.

More generally, Congress may wish to consider the extent to which greater infrastructure investment is economically beneficial. Advocates of increased investment in infrastructure typically assert that high-quality, well maintained infrastructure increases private-sector productivity and improves public health and welfare. Congress may want to weigh the benefit of the increased spending on physical infrastructure against the benefit generated by alternative types of spending.

Date of Report: December 14, 2011
Number of Pages: 31
Order Number: R42115
Price: $29.95

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