Army Corps St. John's Bayou-New Madrid Floodway Project

Two posts down, I pointed you to an hour-long video of Princeton economists talking about the troubles on Wall Street.

Here is another long-form item I think is worth your time:

Felix Rohatyn, most famous for managing the fiscal bailout of New York City in the late 1970s, writes in the current New York Review of Books about developing an National Infrastrucuture Bank.

This concept is a constructive corollary to the anti-earmark movement. Infrastructure projects disparately need funding, but based on merit and value not the clout of local delegations or the institutional self interest of government bureaucracies.

This has to be true:

(A) consequence of having different government programs dedicated to different types of infrastructure—whether highways, water projects, or wastewater treatment—is the creation of bureaucratic fiefdoms that are inevitably held captive to the “iron triangle” of congresspeople, lobbyists, and thebureaucrats themselves, as has happened in the case of the Highway Trust Fund and the Army Corps of Engineers. As a result, these programs never compete with one another. No responsible body has the mission of impartially deciding whether we’d be better off with more mass transit and better train service and fewer major roads, because these are never compared when a specific proposal is under review. Moreover, the different agencies that analyze projects—if they do so—generally use different (and self-interested) criteria for determining such critical variables as the value of time, the value of new jobs created, the discount rate, the cost of capital, and so on. As a result, the public is left without the apples-to-apples comparisons that any rational investor would use to allocate a portfolio of billions of dollars of investment.

So the “modal” infrastructure programs, rather than competing efficiently for resources, all lurch forward without coordination or attention to the merits of the specific projects they choose to fund. And that is in cases when the programs are not directly muscled through by politicians. The term “earmark” became popular during the writing of the 2005 transportation bill, which contained over six thousand of them (with a total cost of $24 billion), compared to five hundred of them in 1991 and ten in 1982.

California Gov. Arnold Schwarzenegger sees infrastructure investment as the best bet for economic stimulus.  If you read the piece, you will see a lot of work has been done on this concept of an infrastructure bank, including on a bi-partisan basis by U.S. Sens. Chris Dodd and Chuck Hagel.

Sen. Barack Obama proposes $60 billion in funding such an enterprise over 10 years.

Anyone think it has a snowball’s chance? — or is it too good an idea?