What if someone told you that there was a way to put tens of thousands of people back to work on the cheap?
And that the result would be a much-needed upgrade in American infrastructure — without taxpayers having to foot a big bill.
You'd be intrigued, right?
If you're a left-leaner and learned such a plan was the brainchild of a Massachusetts Democrat, that might well lend it credibility with you. If you're a right-leaner and heard that it was an important priority of a top Texas Republican, you'd likely be reassured that it wasn't just a slice of progressive pie-in-the-sky.
And if you heard it was an idea backed by both the U.S. Chamber of Commerce and the AFL-CIO, you might say: impossible.
But all that is true of the plan Sens. John Kerry of Massachusetts and Kay Bailey Hutchison of Texas have put forward for an American Infrastructure Financing Authority, or, colloquially, a national infrastructure bank.
The federal government would fund the bank with $10 billion in seed capital and grant it the right to issue $160 billion in federal loans over a decade. The institution would then use loans and loan guarantees to help leverage private investments for projects that passed its strict vetting process.
By backing part of a project's cost, the bank would make it attractive for other investors to finance the rest. Only highway, water and energy projects would qualify — and to be eligible, the project would have to have a dedicated revenue stream like road or bridge tolls or water bills to finance the debt.
"You'd have the kind of revenue streams that people dream of for stability," says Kerry.
At a time when safe investment are much in demand, the bank would represent a real opportunity for global pension, sovereign wealth, private equity and mutual funds.
"If it is done right, it could expand exponentially the amount of infrastructure spending that we have," says Hutchison.
And this bank is designed right, she says. Professionally staffed, it would have conservative lending standards. Its board would be bipartisan, its process independent of political pressure.
In no case would it loan more than 50 percent of a project's cost, meaning the undertaking would have to attract significant other investment dollars before going forward.
If you consider that every $1 billion in infrastructure spending puts between 18,000 and 30,000 people to work, over time, such a bank could give employment a shot in the arm.
"For $100 billion, you get 1.8 million jobs," says Kerry. Based on the results from similar banks elsewhere, he thinks the bank could leverage up to $600 billion in total infrastructure spending during its first decade. Michael Lind, economic growth policy director for the New America Foundation, says Kerry's estimate is realistic.
Here's the obvious question: Why can't those projects simply tap the existing market for their financing? And here's the answer: The bank is designed for projects that, for various reasons — the size and duration of the loan required, for example, or the structure of the investment — don't fit well with traditional financing.
Although the idea may sound exotic, it's not.
"Infrastructure banks or development banks have been used worldwide for years," notes Janet Kavinoky, executive director for transportation and infrastructure at the U.S. Chamber of Commerce. Indeed, the EU's European Investment Bank has been in existence since the late 1950s, and has played a major role in modernizing European infrastructure. Brazil has one as well, as do a number of Asian countries, says Lind.
Mind you, this is not an immediate anti-recessionary plan. It would take time to get the bank established and operating. Still, President Barack Obama has now adopted the idea as part of his jobs plan.
But can it win approval from a Republican Party skeptical about expanding the role of government? Hutchison thinks her fellow Republicans will grow comfortable with the proposal once they become familiar with both the potential of, and protections in, the plan.
© 2011 Boston Globe