By Nancy Spannaus
Feb. 27, 2020—State legislators around the nation – from Arizona to Rhode Island – are campaigning for Federal action to build vital infrastructure. The campaign is taking the form of Memorials calling for the creation of a National Infrastructure Bank, crafted according to the principles established by Alexander Hamilton, Abraham Lincoln, and FDR.
The latest state to join the ranks is Rhode Island, where Senate Resolution 2359 was introduced on February 13. The resolution is called “Respectfully Requesting That the United States Congress Adopt an `American Economic Recovery’ Program”. The cited recovery program includes: 1) restoration of Glass-Steagall banking regulations; 2) the establishment of a new national bank to fund infrastructure and industry, as was done by Hamilton, Lincoln, et al.; 3) the use of the national credit from that bank to build high-technology infrastructure such as rail and upgraded ports; and 4) revitalization of the space program and work on scientific frontiers such as nuclear fusion power.
Legislators in some of the states have included all four elements of this program, while others, such as those in Pennsylvania, have specified calls for only the infrastructure bank and/or the Glass-Steagall restoration. The list of states with current bills, some of which were introduced in 2019, includes at least the following (in alphabetical order): Alabama; Arizona; Michigan; Minnesota; North Carolina; Pennsylvania; Rhode Island; and Virginia.
The legislators come from both major parties. And last year, these resolutions passed in one house in Alabama, Illinois, and South Carolina. In other words, the plea for action went to Congress and the President with the legislature’s endorsement.
Such as “grass roots” campaign for a national bank is not unprecedented in American history. No less a political leader than Abraham Lincoln made the call for restoring a national bank one of the three major planks of his electoral platforms. Broad campaigns of Memorials and petitions in favor of a national bank were also undertaken in 1811 and the early 1830s, when Congress and President Jackson, respectively, were considering closing down the first and second National Banks of the United States.
Americans had much cause to regret the failure of these campaigns to renew the Banks’ charters. The demise of the First Bank left the United States bereft of credit during the War of 1812, thus exacerbating the hardship during and after that conflict. President Jackson’s destruction of the Second Bank led to a period of banking chaos that many experts consider responsible for the devastating financial crash of 1837. The abandonment of that Bank’s American System policies also played a critical role in propelling the nation toward the Civil War.
Where are the candidates?
Given this rising tide of support for action to create a real recovery, is it not shocking that the ongoing round of presidential debates has barely seen a mention of the need to finance the kinds of high-technology infrastructure needed to address the infrastructure crisis? After all, many citizens of Flint are still forced to resort to bottled water; schools in major cities like Chicago, Detroit, and Newark, New Jersey have found lead in their pipes; and hundreds of thousands of travelers take their lives into their hands every day when they travel on the more than 100-year-old tunnels between New Jersey and New York City. Are the candidates so out of touch?
It is true that four Democratic candidates took part in a special forum on infrastructure on February 16, which was hosted by a group called United for Infrastructure. Joe Biden, Peter Buttigieg, Amy Klobuchar, and Tom Steyer were all given equal time to make opening presentations, and then respond to a number of questions from the Nevada audience.
All four claimed to have plans to pay for anywhere from $1.5 to $2 trillion investment in infrastructure upgrades such as light rail, “clean transport,” broadband, high-speed rail, and clean-water systems. The plans ranged from rolling back Trump’s tax cuts and increasing user fees, to various types of bonds.
Putting aside for the moment the fact that the urgency of the need for massive infrastructure upgrades and investment was sorely lacking in the candidates’ presentations, two other significant problems stand out. First, the monies being anticipated are pathetically small compared to the need, which ranges upwards of $4.5 trillion. Second, the funding plans involve either incurring new debt (in a situation where our national debt is exploding) or regressive user fees.
These problems are resolved by using the Hamiltonian principle of using already existing government debt as a capital base for a new infrastructure bank. Recall: The way Hamilton established the First Bank of the United States, and Madison established the Second Bank, was by insisting that investors pay three-quarters of their stock purchase with “public debt” (i.e., existing government bonds). Clearly, there is sufficient Federal government debt outstanding today to utilize this same principle, thus guaranteeing not only that the debt holders receive a reasonable return, but, more importantly, that the debt becomes available as a source of credit for investing in the increasing productivity of the nation.
And the Administration?
The situation on the Republican side is arguably worse. To the surprise of many, President Trump’s proposed budget – which is a wish list indicating priorities but is considered, as usual, to have little chance of being implemented as is – included a call for $1 trillion in infrastructure spending from the Federal budget. This represents a significant contrast with the President’s previous plan for infrastructure funding, which saw the Federal government paying only 20% of proposed projects, with the rest to be raised by localities. The bulk of the spending is anticipated to be for surface transportation, specifically highways.
Where does the President plan to get even this inadequate sum of money? He proposes no tax increases, not even the gas tax, and no infrastructure bank. And his budget otherwise includes dramatic cuts in such crucial areas as Amtrak, the nation’s premier rail carrier; the Army Corps of Engineers civil works program (by 22%); and EPA water infrastructure projects. (That’s in addition to drastic cuts in social safety net programs such as Medicare, education, food stamps, and farm aid.) In other words, the idea seems to be to simply shift existing funding around.
It is particularly notable that the New York/New Jersey Gateway project, which has been a major bone of contention between New York and the White House, is still not funded. And beyond the laudable call for the Artemis project of returning to the Moon, no projects of advanced technology (such as high-speed rail), without which national productivity will stay in the basement, are anticipated.
On the Edge
It is only a matter of time before the lack of investment in vital infrastructure – clearly including the hospitals and other means for dealing with the coronavirus epidemic – creates a major crisis for the American people. That crisis could be the collapse of a 100 year-old-bridge, devastation of the food supply due to flooding, the collapse of the one major bridge crossing the Ohio River shutting down the major artery between the Gulf Ports and the northern states, or any one of a number of other disasters. State legislators, city and county elected officials, and others are demanding action to deal with these looming disasters before they occur. When will our national politicians join them?
Tags: Alexander Hamilton, candidates, infrastructure bank, Nancy Spannaus, state legislators
Excellent article, Nancy! Well done. How was the Reconstruction Finance Corp funded? Somehow that seems mysterious to me still.
I’m going to ask a friend of mine to write about that in some depth. I don’t have time to do so now, but will get on it.