A:  Our nation’s spending on infrastructure has fallen to its lowest level in 70 years: to 2.5% of our nation’s GDP.  That’s half the comparable level in Europe, and 1/3 the level in China.  As a result, we are loosing our world-wide competitive edge. 

Over our 240-year history, infrastructure spending has largely accelerated only when a National Infrastructure Bank has been place (there have been four major ones in the past, starting with the First Bank of the United States created in 1791 by Treasury Secretary Alexander Hamilton, and ending with FDR’s Reconstruction Finance Corporation (RFC). Similarly, infrastructure spending has fallen when the charters for those four banks – all of them successful – were permitted by Congress to lapse. 

A:  For two reasons. First, infrastructure development needs long-term planning, and a reliable source of long-term funding, in order to succeed.  That’s just not possible under a system of uncertain annual appropriations (unreliable funding for the Eisenhower Highway Trust Fund is a case in point), and politicians’ short-term horizons of from 2 to 4 years.  Second, the Federal budget, and many State budgets, are in financial disarray, with dwindling tax receipts, rising debts/bond issues, and ever-increasing spending on other budget items that crowd out any plans to increase infrastructure spending in the future.

A:  There are some 33 SIBs – revolving funds, actually –but because they were established with very small Federal and State grants (totaling $661 million), they are simply too small to finance very much of America’s infrastructure needs.

There is one notable exception, however: The Bank of North Dakota is the only state-owned deposit-money Bank in America, and it is dedicated to investing only in North Dakota’s infrastructure. It is no accident, therefore, that North Dakota has the highest rate of infrastructure spending of any state in the nation (21% of that state’s budget, or twice the national average), and that its spending as a percent of state GDP has fallen the least of any state since 2002 (in fact, it actually grew).  We need a scaled-up version of the Bank of North Dakota to fund all of our country’s infrastructure needs.

A: For one thing, that claim has not been conclusively proven, while experience in the U.S. shows that many P3s have run into financial, monopoly pricing, and other operational and contractual problems. For another, P3s simply have not stepped in to fill the infrastructure financing gap.  The American Society of Civil Engineers (ASCE) estimates, in its 2017 report, that $4.6 trillion is needed just to repair our nation’s infrastructure, of which $2.1 trillion is currently NOT funded (see Table 2 below). Meanwhile, only about 1.5% of the country’s infrastructure projects are paid for through P3s, using private capital, despite banks having plenty of liquidity (cash on hand) to fund them. If P3s could have financed critical infrastructure projects over the past 60 years (since the RFC was wound down), they would have done so already. This observation is echoed by the House Committee on Transportation and Infrastructure, in a 2014 study of P3s, that concluded: “… given the limited number of high-cost, complex projects, P3 projects have the potential to address only a small portion of the Nation’s infrastructure needs.”