Mort Zuckerman: The Case for a National Infrastructure Bank

America is breaking down, literally. Does that sound like an over-statement? Well, consider some of these facts:

• Nearly a third of our 600,000 bridges are functionally deficient or obsolete.
• More than 3,500 dams are unsafe.
• Deficient systems pour billions of gallons of untreated sewage into U.S. waters every year.
• Since 1980, vehicle miles traveled have doubled, but road capacity has increased by less than 5 percent. Traffic in virtually every metropolitan area will exceed highway capacity in the next 10 years.
• Mass transit is struggling with systems designed a hundred years ago.
• Half the locks on more than 12,000 miles of inland waterways are functionally obsolete.
• There are too few airport runways to cope with demand.
• Our coastlines are eroding.

The costs of long neglect of our infrastructure and our precious land—and the commensurate benefits of doing something about it—are manifest to every commuter, every driver, every airline passenger, every flood victim (think Katrina). Flight delays are estimated to cost travelers a couple of million hours and produce an economic loss of $30 billion by 2015. Severe highway bottlenecks, up by 40 percent during the past five years, cost us $60 billion in wasted time and fuel consumption. Motorists lose almost $1,000 every year in both time and fuel, leading to a net economic loss that exceeds $200 billion. Traffic congestion alone burns nearly $100 billion a year in wasted fuel. (You know about the stress.)

We use 25 barrels of oil per capita per year, compared with less than 15 in Western Europe and Japan. Why? Because they have more extensive and modern mass transit systems and more fuel-efficient vehicles. If we could lower our consumption to their levels, we would save about $200 billion a year. A comparison of the fuel consumption of freight trains and trucks suggests a fourfold advantage per ton-mile for trains over trucks.

This nation was once the envy of the world. We connected ports to the interior by canals. We invented high-pressure steam engines to navigate our rivers; we crossed a vast continent by cutting railways through mountains and swamps thought impassable; we built the first power stations and fed them into an electric grid providing cheaper power than anywhere else; we created the Interstate Highway System—and we went to the moon.

What's gone wrong? We underfund infrastructure spending and then, to make things worse, the programs we have are so skewed that they misdirect investments away from the best opportunities. The great achievements of our past harnessed the animal spirits of private enterprise to government vision, will, and money. Today, the vital rebuilding of America must begin with federal government money—but that money must be much better spent than it is today. The division of money and responsibilities between local, state, and federal governments ensures that the best intentions are frustrated by bureaucratic infighting, political fragmentation, horse-trading, waste, and corruption. We must have an institution that can assess the cost-benefit ratios of every dollar spent, not just in isolation but across a whole infrastructure program on a consistent and demonstrably rational basis.

The bulk of the federal infrastructure budget is spent on "modal" programs dedicated to specific types of infrastructure. Witness the Federal-Aid Highway Program, the Airport Improvement Program, the Transit Formula and Bus Grant Program, the Army Corps of Engineers' Water Resources Program, etc. They all work in a similar fashion. States and cities propose projects for each of these programs. Federal officials decide which projects to pursue, funding either all or most of their costs. The funds are then sent to the states. Some of these projects are boosted by selective patronage, the so-called earmarks—special requests for specific representatives' or senators' pet projects, like the infamous "bridges to nowhere"—or deals cut between Congress and the agencies. This does little to further projects of national scope or genuine economic value. And the process shortchanges repair and maintenance, even though repair is estimated to provide the highest economic returns among highways projects today, greater than those from building new roads.

The different agencies create bureaucratic fiefdoms and are vulnerable to members of Congress, lobbyists, and the bureaucrats themselves. The real explosion of earmarked projects pushed through by politicians began with the writing of the 2005 transportation bill, which contained more than 6,000 of them at a total cost of $24 billion, compared with just 500 in 1991 and 10 in 1982.

These programs never compete with one another to determine which provides the most benefits. There is no analysis of how much better off we might be with money for mass transit and better train service or any consideration, undistorted by accounting confined to isolated balance sheets, of how much benefit accrues, dollar for dollar, in a comparison of road, air, and rail options. Households set their spending priorities on a more rational basis.