June 13th, 2011
12:50 PM ET

Zakaria: U.S. needs an infrastructure bank

By Fareed Zakaria, CNN

President Obama has proposed a number of specific policies to tackle the jobs crisis, but they have gone nowhere because Republicans say that their top concern is the deficit and debt.

Those of us worried about the debt - and I would strongly include myself - need to remember that if unemployment doesn't go down fast, the deficit is going to get much worse. If you're serious about deficit reduction, the single most important factor that will shrink it is to have more people working and paying taxes.

I want to focus on one of Obama's proposals because it actually would add very little to the deficit, it has some Republican supporters and it would have an immediate effect on boosting employment and growth. Plus, it's good for the country anyway.

We need a national infrastructure bank to repair and rebuild America's crumbling infrastructure. The House Majority Leader, Eric Cantor, has played down this proposal as just more stimulus, but if Republicans set aside ideology, they would actually see that this is an opportunity to push for two of their favorite ideas - privatization and the elimination of earmarks. That's why Republicans like Kay Bailey Hutchison and Chuck Hagel are strongly in favor of such a bank.

The United States builds its infrastructure in a remarkably socialist manner. The government funds bills and operates almost all American infrastructure.

Now, in many countries in Europe and Asia the private sector plays a much larger role in financing and operating roads, highways, railroads, airports and other public resources. An infrastructure bank would create a mechanism by which you could have private sector participation.

Yes, there would be some public money involved, though mostly through issuing bonds. And with interest rates at historic lows, this is the time to use those low interest rates to borrow money and rebuild America's infrastructure. Such projects have huge long-term payoffs and can genuinely be thought of as investments, not expenditures.

A national infrastructure bank would also address a legitimate complaint of the Tea Party - earmark spending. One of the reasons federal spending has been inefficient is that Congress wants to spread the money around in ways that might make political sense but are economic nonsense.

An infrastructure bank would make those decisions using cost-benefit analysis in a meritocratic system rather than spreading the wealth around and basing these decisions on patronage, politics and whimsy.

Let's face it, America's infrastructure is in a shambles. Just a decade ago, we ranked sixth in infrastructure in the world according to the World Economic Forum. Today we rank 23rd and dropping. We will not be able to compete with the nations of the world if we cannot fix this problem.

Is it too much to ask that Republicans and Democrats find a way to come together on this?

That moment of bipartisanship might actually be the biggest payoff of all.

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Topics: Economy • From Fareed • Ideas • Politics

soundoff (85 Responses)
  1. MikeBell

    The tax funds for infrastructure maintenance and expansion should be hands of to the political cronies. Funds are there but they're being pilfered by politicians for their pet projects and political kickbacks.

    June 14, 2011 at 12:40 pm | Reply
  2. Sharon

    America is in trouble–this idea of nfrastructure will further make America fade away until our country will not be separate-NO WAY SHOULD AMERICANS BUY THIS TAKE!

    June 14, 2011 at 4:57 pm | Reply
  3. Robert

    Now, that is an original idea and the best one I have heard for months. Independent thinking and pragmatism are what sets realists apart from the dogmatically rigid and politically irrelevant GOP base.

    June 14, 2011 at 6:25 pm | Reply
  4. Wasabiwahabi

    Democrats are just as rigid in standing for nothing as the GOP is at good ideas. Independent thinking is Donkey-speak for gibberish. Pragmatism is Donkey speak for the GOP accomplishing what a pack of infighting liberals in control of the government could not accomplish when given an uninterrupted chance.

    June 14, 2011 at 6:39 pm | Reply
  5. MikeBell

    Infrastructure had its own tax revenue source to maintain and expand it. The trouble is that it has gotten pilfered by political cronies for pet projects and kickbacks.
    There are no new FDR projects to do again. The ones that were done opened up free enterprise and interstate commerce. That infrastructure is now in place but deteriorating due to government bureaucracy and negligence.

    June 14, 2011 at 8:39 pm | Reply
  6. Wasabiwahabi

    It's due to the strangle hold hold of unions holding the Country hostage. Teachers claim, rightly so, that ignorance is more costly than education. Labor blackmail is even more costly than education, as our profits have gone overseas.

    June 14, 2011 at 9:26 pm | Reply
  7. Charles Obieze

    It's a good idea to have a Central Bank to fund our infastructure.Capitalism is good but the free market has fail us with personal and cooperate interes above the interst of the Amerian peoplet.The real problem is at the Capitol Hill.Nothing can't be done unless their is a compremise with the Democrate and Republican.It will become difficult even if the Republican win the White House,just word and word on what they will do about the ecomomic.it will be another fail economic policy to advance the economic.Remember the U.S.A is the greatest Nation on Earth and we must preserve our role as a place where people can lives their American dream.

    June 15, 2011 at 1:26 am | Reply
    • American Patriot

      We already have a Central Bank you dork.
      And the federal Reserve and the IMF and the department of Treasury and Mega Banks and you want another one.

      Give it time, they will come for you house, your car, your money and guns.

      If I control a Countries Currency, I care not who makes their laws.

      Mr DaRothchilds.

      June 15, 2011 at 10:58 am | Reply
      • Marx

        I think he meant a central bank solely devoted to infastructure needs, which by definition is not a central bank. It is merely a pool of funds which are distributed for various projects like the IMF or World Bank. Also, I apologize if English is a second language to either of you...but you really got to work on your grammar to be taken seriously in a place like this.

        June 16, 2011 at 1:53 pm |
  8. a.g.

    After the collapse of two small bridges in the Province of Québec, the provincial government made an exhaustive review of all infrastructures all across the Province. The Results were not good at all. And so took the decision to start investing massively in order to repair, rebuild, and reconfigure all its infrastructures. Fortunately for us, they started this just before the 2008 financial crisis. We barely felt the financial crisis impact, in part because of these massive investments which created jobs and still continue to create jobs all across the Province. In Québec, house value has not drop, they actually have increase, in Québec, many enterprise are looking to hire employee. It seems that our government decided to focus on the concrete such as its infrastructures and its people rather than on a abstract neo-liberal right wing ideology which focuses on what actually? Well, the only answer I can give to this, is that right wing ideology, republican ideology only focus on one thing, and this thing is its own abstract ideology, which put them into a vicious circle. No wonder American economy stagnate! They look for solutions within their own ideology, which brought them where they are now to start with. Some light I think will start appearing when many of those people will start thinking beyond their own ideological boundaries, and truly feel in their gut that the government should work for the people, real people, concrete people and not abstract statistical numbers on pieces of paper.

    June 15, 2011 at 3:43 am | Reply
  9. American Patriot

    This article and Job Creation in U.S. false hope to prevent massive civil unrest and Riots and marches on Washington.

    Outsourcing is going stronger than ever while the nation BEGS for work.
    Your President, Senate and Congress refuse to address Outsourcing or revoke the Trade Agreements giving Companies huge tax breaks to ship jobs overseas.

    There is NO job creation only massive Outsourcing.

    They are saying nothing of bringing the Millions of jobs back.

    Job Creation is a joke and does not exist unless you want minimum wage.

    Wait until your Government starts issuing Austarity Mesaures on you , people are going to lose it and rage.

    Let the REVOLUTION BEGIN NOW.

    Before your all broke and homeless.

    The federal Reserve is going to destroy the Country and steal what wealth is left.

    If you do not rise up, you will be left with nothing

    June 15, 2011 at 10:55 am | Reply
  10. Wasabiwahabi

    American Patriot, Do you mean "You're" rather than "your?" You are no patriot to grammar. "Your" is a possessive, as in, "Your grammar is awful." "You're" is a contraction of "You are," as in, "You're an idiot."

    June 15, 2011 at 8:56 pm | Reply
    • José M. Pulido

      Wasabiwahabi: The Mad Grammarian stroke again.

      June 16, 2011 at 10:06 am | Reply
      • Marx

        struck again. sorry if you were joking.

        June 16, 2011 at 1:47 pm |
  11. desert voice (troubledgoodangel or Nathanael or Voiceinthedesert)

    Ey! Zacharia has good ideas when he rises with the right foot from his bed. I have been proposing the same for decades, If China build the most modern infrastructure, without even thinking where will the money come from, why not the U.S.? Is not infrastructure building a solution for unemployment and national debt? It is! The taxes will start flowing to the Nation's coffers if people are working! I would add to Zacharia's bright ideas: build your own manufacturing! Don't buy China's! This will also be good for unemployment and the national debt! Do something right right now, or we will be in big trouble!

    June 16, 2011 at 4:45 am | Reply
  12. José M. Pulido

    Yeah right, that's what we need, another bank to we can bail it out of banrupcy with a trillion dollars. If we have so many banks already, why to creat another one? That is Bush tactic: To duplicate entities when the originals already can provide the intended service, which is a waste of time, money and resources.

    June 16, 2011 at 10:05 am | Reply
    • Marx

      Ummmmmm....it's not that kind of bank....its the other kind.

      June 16, 2011 at 10:17 am | Reply
  13. Marx

    The U.S. is in dire need of 2 things to be relevant in the next 50 years; jobs and infastructure improvements. This proposed bank would create jobs through construction of roads, schools, medical research, farming subsidies, IT and other government technology investments, green energy research amongst many other things, and should have been done a long time ago, as the original stiumulus package. Thanks Fareed, your choice of content is great and comments have just the right amount of bias.

    -Marx

    June 16, 2011 at 10:14 am | Reply
  14. junaid ahmad

    The United States already has a set of infrastructure banks - Fannie Mae and Freddie Mac. These are government sponsored entities that create government guarantees and contingent liabilities that basically displace real risk taking private investment. Worse still they are highly politicized. The role of Freddie Mac and Fannie Mae as the "ground zero" of the financial crisis is a real warning about the dangers of advocating another Government sponsored financial intermediary like an infrastructure bank. The solution lies less in financial engineering of financial markets but more in restructuring how cities and state manage and govern the delivery of infrastructure. For example, bidding out transport authorities and water utilities to the private sector or ensuring that they are credit worthy to raise resources directly from the capital and finacial market which is already the pre-existing infrastructure bank in the US! It would be useful for Mr. Zakaria to have a show dedicated to the idea of an infrastructure bank by comparing it with the experience of Fannie and Freddie and reflecting the global experience of different approaches to boosting infrastructure that avoids the trap of Ponzzi Schemes that are inherent in government sponsored financial intertmediaries. It is surprising that Mr.Zakaria did not refer to a deep academic and analytical work that exists which empirically refute the idea of government sponsored financial intermediaries. More importantly, this literature outlines the very political nature of these organizations which rival the politics of earmarked funding which Fareed Zakaria is concerned about.Mr. Zakaria has identified a critical issue - infrastructure funding - but unfortunately failed to do the analysis that is characteristic of his commentaries which would have shown the pros and cons of his specific proposal.

    June 18, 2011 at 1:53 am | Reply
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    June 19, 2012 at 11:34 am | Reply
  16. M Brown

    Someone please propose to President Obama for a limited time of maybe ninety days. There is a 15% or 20% “Amnesty” of $2 trillion in offshore accounts to stimulate the U.S. economy? Or option allows return of $2 trillion in offshore accts at 5% or even 0% if they invest in the 2011 Presidents proposed U.S. National Infrastructure ‘Job’ Bank. Please Democrats come up with it first before just 5% or 0% “Amnesty” is proposed for his friends at the debates by Willard Romney. In order to refund Sheldon Alderson, the Koch Brothers and others back their investment for his campaign? Oh, wait hopefully someone just did!

    September 24, 2012 at 4:10 pm | Reply
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