Infrastructure Si, Infrastructure Bank No

In his Forbes column, James Glassman provides a counterpoint to the Obama proposal to create a national infrastructure bank. Rather than direct funds through a new federal bureaucracy, he proposes, government should lift the barriers that are holding back private infrastructure investment.

[T]two of the largest prospective infrastructure investments in America are being blocked, or at least delayed, by government. One would result from the merger of AT&T and T-Mobile, which I discussed earlier on The merger would accelerate deployment of a nationwide LTE 4G wireless network that would bring high-speed broadband to 97 percent of Americans.

The second investment involves energy. Wood Mackenzie, a consulting firm, recently released a report that showed that if the U.S. government allows further sensible energy development projects to go ahead, the results of building and benefiting from the new infrastructure would be over 1 million new jobs by 2018 and over $800 billion in extra government revenues by 2030.

Part of the problem is President Obama’s steadfast clinging to the notion of government spending as job creator. Obama unwittingly revealed the failure of that vision, as Glassman notes.

In his speech to a joint session of Congress, President Obama outlined a different set of taxpayer-funded infrastructure spending:

“The American Jobs Act will repair and modernize at least 35,000 schools.  It will put people to work right now fixing roofs and windows, installing science labs and high-speed Internet in classrooms all across this country.  It will rehabilitate homes and businesses in communities hit hardest by foreclosures.  It will jumpstart thousands of transportation projects all across the country.”

The problem is that, no matter how well-meaning such projects may be, spending on them will be determined by political considerations.

The politicized nature of an infrastructure bank is underscored by the fact that, as The Bond Buyer notes today, “The bank would be run by a chief executive officer and a seven-member board of directors, all of whom would be appointed by the president and confirmed by the Senate.”

Another problem is that, if Obama’s remarks are anything to go by, none of the projects he mentions (except for the passing mention of his bill’s intent to “rehabilitate homes and businesses”) has much wealth-creating potential. He seems more focused on handing out more government contracts than on giving businesses the freedom to grow — and hire.

Infrastructure always needs money, but the choice is not funding si o no, but over which is a better way to provide funding over the long term: increasing direct government spending — and  the cost of government on the private sector with it — or allowing businesses to flourish and therefore expand the tax base, by keeping taxes low and regulation light.