One Road to Republican Success

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Dig, if you will, a picture: Republicans, basking next month in the glow of victory, draw up a few broadly reasonable civic goals for the new Congress and agree to achieve them without doing anything dumb. Spending to shore up the country's public works -- bridges, ports, the electric grid -- should be near the top of their list.

Infrastructure investment boosts economic growth, increases competitiveness and greases the wheels of trade. It has substantial support from economists, politicians of both parties and the tax-paying public. And with interest rates low, now is a good time for the government to borrow.

It should. The infrastructure underlying the U.S. is in embarrassing shape. Spending on it as a share of the economy is at a 20-year low. And with some transformative new technologies on the horizon -- green energy, driverless cars, colossal new container ships -- staying competitive will require farsighted investment.

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So prudently expanding spending for public works should be a feasible goal for the 114th Congress, both houses of which -- you read it here first -- will be under Republican control. Achieving that goal, however, will be tricky.

With Washington otherwise occupied in recent years -- naming post offices, shutting down the government, yelling -- state and city governments have taken on a bigger role in funding infrastructure. Because they generally have to balance their budgets, however, many have been holding back on needed capital projects. Uncle Sam could help here by boosting federal programs that provide credit assistance to states and private companies that are undertaking big projects in the public interest.

Another approach worth considering is to charter a federal infrastructure bank, a government-owned corporation that could lend money cheaply for carefully vetted projects, fund itself by issuing bonds and charging fees, and provide a long-term -- and less politicized -- source of capital for public works.

Such a bank could attract investment from pension funds and foreign companies that don't pay U.S. taxes and thus see little appeal in tax-exempt municipal bonds. It could direct funding toward a more diverse set of projects than most federal loan programs allow. And its board of directors could ensure that approved projects will have a viable revenue source -- such as tolls -- and serve a real public need.

The rub, of course, is how to pay for such initiatives. Where possible, user fees, congestion pricing and public-private partnerships can help. But there's also the old-fashioned approach: Congress should appropriate money.

The U.S. has a long tradition of cooperation, across parties and among state and local governments, in paying for public works. And as a recent report from the International Monetary Fund shows, current economic conditions in the U.S. -- loose monetary policy, clear infrastructure deficiencies and a lack of demand -- are close to ideal for such investment. Failing to take advantage of that would be a shame.

Which doesn't mean it will happen. The odds of passing a substantive bill aren't especially good in Washington these days. But once Republicans control Congress, there's reason to hope that -- just maybe -- they'll be looking for a tangible accomplishment. Why not start with a new program of investment in public works? It's a goal that both parties agree on, has viable financing and can count on broad public support. Governing will only get harder from there.

--Editors: Timothy Lavin, Michael Newman.

To contact the editor on this story:
David Shipley at davidshipley@bloomberg.net