The President's New Gamble

President Obama's call yesterday for $50 billion in new transportation spending is politically risky, given public worries about government spending and debt. But if linked to a strategic and sustained strategy for modernizing the nation's infrastructure, it could signal the start of America's economic comeback.

Even more important than the money, however, is an Obama initiative that didn't get as much media play: a proposed National Infrastructure Bank. It is the key not only to leveraging business capital -- U.S. companies are sitting on $2 trillion in potential "private stimulus" money -- but also to making sure we invest that money wisely.

The president said he would ask the lame-duck Congress next month to approve the $50 billion measure, which would front-load money that otherwise would be spread over the life of a six-year surface transportation bill. He left little doubt his immediate goal is to goose the pace of the agonizingly slow economic recovery.

"Nearly one in five construction workers is still unemployed and needs a job. And that makes absolutely no sense when so much of America needs rebuilding," Obama told reporters at the White House on Memorial Day. Attempting to preempt Republican objections that infrastructure spending is simply stimulus drag, Obama noted that "Investing in infrastructure is something members of both parties have always supported."

Maybe so, but it's worth noting that the word "infrastructure" appears nowhere in the GOP's 48-page Pledge to America. What's more, Republicans are likely to over-interpret likely midterm gains as vindication of their attacks on Obama as a big spender, so good luck getting them to vote for infrastructure in the lame duck.

That's a shame, because spending on infrastructure is both stimulus and investment. It could get more Americans working now, but it is also essential to building our country's long-term capacity to compete in fast growing global markets for high speed rail, civilian nuclear energy, clean cars, intelligent transport systems and renewable fuels.

The federal government, of course, is constrained by enormous deficits and a growing national debt. That's why we need a National Infrastructure Bank, which would structure public-private deals to fund big capital projects that can generate real economic returns. As noted by an economic analysis the White House released yesterday:

There is currently very little direct private investment in our nation's highway and transit systems due to the current method of funding infrastructure, which lacks effective mechanism to attract and repay direct private investment in specific infrastructure projects... A National Infrastructure Bank would also perform a rigorous analysis that would result in support for projects that yield the greatest returns to society and are most likely to deliver long-run economic benefits that justify the up-front investments.

An infrastructure bank, along with new public seed capital and a third element of the Obama infrastructure initiative -- merging the many stovepiped "modal" transportation funding streams so public dollars can be used strategically -- begin at last to push the economic debate in a constructive direction. The two great challenges America faces now are reviving our economic dynamism and shrinking a massive overhang of public debt. To meet them, the Obama administration needs to fashion an ambitious, "cut and invest" strategy aimed at slowing health care and entitlement spending generally, and using public dollars to leverage massive private investment in productivity-enhancing infrastructure.

That's why President Obama should press ahead with his infrastructure plan, despite the political fallout from the midterm election. If Republicans want to frame the economic debate as a choice between more tax cuts and rebuilding the common foundations of American prosperity, so much the better. That's one progressives can win.

This item is cross-posted at Progressive Fix.