Federal action needed to rebuild US

T he word “infrastructure” has to be one of the most unfortunate of the English language. While it is intended to represent America’s most important public assets, it does not convey any real meaning of its importance. “Infrastructure” comprises our bridges, roads, water lines, sewers, dams, air traffic control system and electrical grid. It is vital to our economy and to our physical security, but it is neglected by our political leaders.

The American Society of Civil Engineers, which audits the state of our national infrastructure, reported that it would take $1,600bn to bring it up to an acceptable standard over a five-year period, and gave it an overall grade of C-minus. The shortfall increased by $300bn in the past three years.

Tragedies, local or national, remind us occasionally of these looming dangers but are soon overtaken by other more pressing interests. The levees of New Orleans, the underground steam pipes of New York City and the bridge collapse in Minneapolis are only some of the more recent catastrophes. It is easier for our government to spend hundreds of billions of dollars in Iraq than to raise $250m for Minneapolis.

Since the beginning of the republic, transport, infrastructure and education have played a central role in advancing the American economy. The canals of upstate New York and the railroads that linked our heartland to our industrial cities played a role. So did the GI bill and the foundation of land-grant colleges, which opened up education to average Americans. More recently, the interstate highway system ultimately connected all regions of the nation.

None of this happened by chance. It was the result of big investments financed by the federal and state governments over the past century and a half, as well as the commitment of far-sighted political leaders. We need to make similar investments now before it is too late.

A modern economy needs a modern platform, and that platform is the infrastructure. The productivity of an ­economy is linked to the quality of its infrastructure; it is also the source of hundreds of thousands of jobs.

Of course, we also have an “intangible” infrastructure – education. This is usually treated separately, but is equally critical and must be viewed as such.

In order to begin a process of new investment, as well as better maintenance of existing facilities, senators Chris Dodd and Chuck Hagel have submitted the National Infrastructure Bank Act of 2007 to the US Senate. Their proposal is a bipartisan measure that will create a bank specifically tasked with addressing the critical needs of our nation’s main infrastructure systems. The legislation establishes a new method through which the federal government can finance projects of substantial regional or national significance more effectively using public and private capital. The bank’s initial ceiling to issue bonds would be $60bn. The bank’s participation, however, would bring in billions of additional dollars from outside investors and other partners.

The bank should have the authority to issue bonds with maturities of up to 50 years, among its other financing capabilities. The bonds could be guaranteed by the federal government. Such long-lived bonds would align the financing of infrastructure investments with the benefits they create. Their repayment would allow the bank to be self-financing.

In Europe, the European Investment Bank finances infrastructure in a similar fashion; it has created a superb and efficient European infrastructure, including a high-speed rail network, which is an enormous asset.

While the private sector drives our economy, our government has had a historical role as the indispensable investor in the country’s development. The administration and Congress must now undertake the big effort needed in rebuilding America. In order to do so we must counteract the present theology that all public investment is wasteful and that neither taxes nor borrowing can be justified for that purpose.

The nation’s infrastructure crisis is no less serious for being silent. Federal action is needed to fix it, but that action must be reconceived and refinanced. Success will improve our quality of life, our standard of living and our competitiveness. That will require a government big enough and smart enough to be effective.

Presidents Jefferson, Lincoln, Franklin Roosevelt and Eisenhower proved that public investment can generate vast returns. Our elected representatives can continue in the footsteps of great American leaders by adopting a different perspective on our national wealth and how to increase it. It is an issue that should be debated in this Congress and throughout the country in next year’s presidential election. It is a worthy cause.

Felix Rohatyn is senior adviser to the chairman of Lehman Brothers.

Warren Rudman is a former US senator from New Hampshire