Finally, a Hamiltonian Infrastructure Bank Bill
By Nancy Spannaus
June 14, 2020—On March 31, Representative Danny Davis (D-Ill) introduced a new bill calling for the creation of a National Infrastructure Bank. H.R. 6422 is cosponsored by Rep. Seth Moulton (D-Mass); it has been referred to a several Congressional Committees for deliberation.
The bill’s magnitude and import are reflected in the following section:
The establishment of a United States public deposit money bank would provide direct loans and other financing of up to $4,000,000,000,000 [four trillion dollars] for qualifying infrastructure projects. Such funding would be adequate to finance all of the United States identified infrastructure needs, in all parts of the country, according to strategic plans. At the same time, it would return the United States to its most recent ‘‘golden age’’ when a National Infrastructure Bank was in place (1933–1957), during which time total factor productivity advanced by 3.5 percent per year, the economy grew on average 5.5 percent per year, income inequality fell by one-third, and Federal and State tax receipts rose dramatically.
In line with the FDR policy referenced above, and its precedents under Presidents Washington, John Quincy Adams, and Abraham Lincoln, the NIB proposed by H.R. 6422 would be capitalized by existing U.S. government debt, and function as a commercial enterprise with specific government guarantees. This, along with its size, makes this proposal unique among other Infrastructure Bank proposals.
A Crying Need
Virtually no one will deny the need for Federal support for huge investment in upgrading and repairing the basic infrastructure of the United States. It’s been a miracle that we have not experienced a cataclysmic collapse already in areas where our transportation and water infrastructure dates from 50 to more than 100 years ago. Calls for investment of at least $1 trillion have come from the labor movement, the Association of Manufacturers, a wide swath of civil society groups, and the Trump Administration itself.
The urgency of the demand is further underscored by the current Depression levels of unemployment, and the abysmal level of productivity. Both of these can only be effectively addressed by a massive investment in high-technology infrastructure, and in the workforce required to build it.
One major roadblock to launching an infrastructure program has been the question of funding. Many have balked at a major government expenditure, given the crushing indebtedness of the United States at this time. Thus, most proposals have featured the government providing a very small capital base, along with provisions to attract the private sector into public-private partnerships, which are, by their very nature, limited in scope and often rip-offs of the public.
Yet, without trillions of dollars invested in major, technologically-advanced, multi-state infrastructure projects such as high-speed rail, advanced energy systems (especially nuclear), and upgraded water delivery and control systems, the United States economy and polity is facing further shrinkage and decline, if not total collapse. As the FDR precedent shows, such an infrastructure development program can bring U.S. productivity out of the basement, and provide the tens of millions of new well-paying productive jobs which the nation needs.
What Makes It “Hamiltonian”
In its Findings section, H.R. 6422 cites a series of precedents for its funding proposal:
Four previous national banks financed such infrastructure, each according to a development plan: The First (1791–1811) and Second (1816–1836) Banks of the United States, President Lincoln’s national banking system, and President Franklin Roosevelt’s Reconstruction Finance Corporation (1932–1957).
These national institutions were based on principles laid out by First Treasury Secretary Alexander Hamilton. They share crucial similarities. First, they were funded by U.S. government bonds, thus putting the full faith and credit of the U.S. government behind the institution. Second, they were responsible for the investments, often in collaboration with local institutions, that resulted in the greatest improvements in national infrastructure and productivity in our nation’s history: i.e., dams, canals, railroads, new industries, etc. Third, they were managed by private interests (although subject to Federal government oversight) and ended up in the black.
The NIB proposed by H.R. 6422 follows this model. It calls for capitalization up to $500 billion, to be made up of
outstanding Treasury securities of 3 years or greater maturity, or outstanding municipal bonds of States or municipalities of 5 years or greater maturity, who transfer such securities or bonds to the Bank in exchange for the capital stock; (B) paid-in share capital, paid in cash; and (C) the United States Treasury, as ‘‘on call’’ subscriber to the Bank, in an amount up to $100,000,000,000 in 30-year United States Treasury Bonds.
From this base, loans of up to $4 trillion can be made.
These elements cohere with Hamilton’s concept of using the nation’s credit to promote a technologically advanced manufacturing base and infrastructure. He, and those who followed his idea, were thus able to bring the country out of total bankruptcy, and put it on the road to prosperity.
H.R. 6422 also puts a major emphasis on the creation of well-paying jobs, and the need for investment to reach those communities hardest hit by poverty over recent decades. Davis-Bacon wages are mandated, as well as significant representation by labor on the Board of Directors. This aspect has made the bill particularly attractive to the labor movement, as reflected in recent endorsements in Virginia, and New York State.
The bill includes provisions to guarantee substantial investment in “disadvantaged communities,” which are defined by persistent poverty among a substantial portion of the population over time.
The full bill can be found on the Congressional website..
Nancy Spannaus is the author of the book Hamilton Versus Wall Street: The Core Principles of the American System, which can be found here.