issue: Fiscal Policies

Build This: A Real Infrastructure Policy for America

Posted on by The Progressive Policy Institute

Imagine boarding a sleek new bullet train and rocketing from Washington, D.C. to Richmond, VA in under an hour. Imagine creating thousands of durable new blue-collar jobs to build and maintain railways, construct and fine-tune railcars, and help design the electrical grid that would support high-speed rail. Imagine a new architecture for concentrating development around sophisticated new urban centers — and a hungry new customer for clean energy.

Imagining high-speed rail in the U.S. has often just been the province of dreams. The idea has been bedeviled by various lobbying groups hostile to sustainable transportation, beset by internecine warfare between different states and federal agencies, and bereft of a long-term infrastructure policy. As one grizzled and skeptical railway executive told me at a conference held last week by the new U.S. High Speed Rail Association at the H.W. Marriott Hotel in Washington, D.C., “I attended my first high-speed rail conference thirty years ago.”

But these dreams are about to leave the ether and descend to earth, in the form of concrete, steel, and electrical lines, as the U.S., thanks to the Obama administration, prepares to invest $8 billion in actually building high-speed rail. On the heels of the administration’s announcement of $3.4 billion in grants to drive the creation of a “smart grid” in the country, the time is right to think about an infrastructure policy not just for next year but the next generation.

The U.S. High Speed Rail Association is a broad coalition of domestic and international partners working to drive American investment in high-speed rail. There’s good reason to think it’s an idea whose time has finally come, after eight years of the George W. Bush administration, during which federal funding for rail was essentially scaled to zero. The challenge will be to ensure that the initial $8 billion is not frittered away in a series of pork-barrel pilot projects, but instead becomes the first investment in the long-term infrastructure strategy the U.S. has been sorely lacking.

The organization estimates that a fully functioning, 17,000-mile, national high-speed rail system would cost at least $600 billion over 30 years. In his panel presentation, Gov. Ed Rendell (D) of Pennsylvania, a long-time advocate of high-speed rail, urged participants to take the long view on such an infrastructure investment. “We need a capital budget run through an infrastructure bank,” Rendell urged. “It’s the only way to do this.” Rendell emphasized that thousands of “tough, blue-collar work” would be created by high-speed rail, citing an estimate by a Pennsylvania steel plant that makes rail ties that its work force would triple if high-speed rail were to become reality.

John Krueger, a staff attorney with the U.S. Public Interest Group who advocates for new federal budget priorities on transportation, argued that grassroots public opinion will ultimately change our infrastructure policies. “Why high-speed rail?” he asked the conference. “It’s what the people want….The opposite of NIMBY (Not In My Backyard) is PIMBY—Please In My Backyard.” Over 220 states and localities have submitted applications for the $8 billion the Obama administration has allocated to high-speed rail. And in the budget request for 2010, the House of Representatives approved an additional $4 billion of high-speed rail funding, surpassing an initial administration request of only $1 billion.

Presenting on the second day of the conference, Norm Anderson, who heads the consulting group CG/LA Infrastructure, emphasized a series of gaps in the nation’s long-term infrastructure strategy. He highlighted the urgent need for a clear focus on the competitiveness and job creation dimensions of high-speed rail. With competitive nations such as China aggressively investing in high-speed rail, we risk losing our edge in technology, concentrated urban development, low-carbon transportation, and a stable employment base for thousands. Anderson also emphasized the need for a strong funding mechanism — the national infrastructure bank also advocated by Gov. Rendell — and a federal entity that would “own and understand” infrastructure, opening it to both competition and public-private partnerships.

Inspired by events such as the U.S. High Speed Rail Association conference and the Obama administration’s $8 billion commitment, the Progressive Policy Institute’s new E3 Initiative in the coming months will be developing and driving policy proposals on infrastructure and other areas central to rebuilding the nation’s economy around clean technology. It’s an exciting time — and we need to ensure that the excitement does not fade into a passing fancy, but rather leads to real steps that revitalize the U.S.’s economic dynamism.

This item is cross-posted at The Huffington Post.

At State, a New Budgeting Plan Takes Shape

Posted on by The Progressive Policy Institute

The State Department is involved in a massive project — the Quadrennial Diplomacy and Development Review — that is designed to address a serious “funding imbalance” between the civilian and military institutions involved in American national security.

Says Anne-Marie Slaughter, Director of Policy and Planning at the State Department and in charge of the review:

“This is not an abstract planning exercise that goes into a report and sits on a shelf,” she said. “It’s a planning exercise that does connect to the budget, that’s very important, but the implications go far beyond the budget. The budget is the tool to implement what we’re going to come up with. This is really what I think secretaries of state should be doing, which is a kind of farsighted look into how the United States is going to implement its foreign policy agenda in the 21st century.”

It is designed to roughly model the Pentagon’s Quadrennial Defense Review, which similarly connects threats to strategies to resources to budgets.

What’s more, it’s exactly what the State Department needs — with a budget hovering around $40 billion, or well less than 10 percent of the Pentagon’s, it’s quite fair to say that in 2009, Foggy Bottom is responsible for well more than 10 percent of the national security of the United States. Now it just needs the bureaucratic proof to justify that need to Congress. Et voila — the QDDR!

Defusing the Debt Bomb

Posted on by The Progressive Policy Institute

When it comes to federal spending, America faces a dilemma that St. Augustine might have appreciated.

It was the young Augustine who prayed that God would make him chaste, only not now. Likewise, Washington must rein in its galloping deficits and debt, but not now — not when nearly 10 percent of Americans are jobless, long-term unemployment has reached new highs, and many have stopped looking for work altogether.

This isn’t the moment to impose fiscal austerity. But, as a group of smart Senate Democrats insist, it’s not too soon to start laying the groundwork for a return to fiscal responsibility once the economy recovers. Otherwise, our mountainous public debts will drain capital from the private economy and quite possibly scare off the foreign lenders who are keeping the U.S. economy afloat.

The Hill reports today that nine Senate Democrats and Independent Joe Lieberman (CT) have sent Majority Leader Harry Reid a letter urging him to set up a special legislative process to defuse the debt bomb. “We do not believe that action on these important issues will occur under the regular order in Congress,” they wrote.

The Senators, including such pragmatic progressives as Evan Bayh (IN), Mark Warner (VA), and Mark Udall (CO), are dead right. The key to getting Washington’s finances under control is curbing the unsustainable spending growth of Medicare, Medicaid, and Social Security. As entitlements, these programs grow automatically each year, propelled by medical cost inflation and the baby boom retirement. This happens by formula, outside of the normal Congressional budgeting and appropriations processes.

It’s instructive that the last serious effort at entitlement reform came in 1983, when President Ronald Reagan and House Speaker Tip O’Neill agreed to create a special panel (chaired by Alan Greenspan) to fix Social Security. They understood that lawmakers are unlikely to tackle the politically explosive issue of entitlement reform without both parties having skin in the game.

Other forward-looking Democrats, such as Sen. Kent Conrad (ND) and Rep. Jim Cooper (TN), have proposed a bipartisan commission to identify the spending and tax changes necessary to start winding down the nation’s deficits over time. The Obama administration would be wise to embrace this approach. It would be seen by investors here and abroad as a kind of promissory note, a sign that U.S. political leaders are determined to deleverage the federal government and boost national savings.

Some liberals dismiss worry about deficits (which reached an astronomical $1.4 trillion this year, up from $455 billion in 2008). They say Democrats ought to focus on creating jobs and speeding economic recovery, which means more government spending. It’s a false choice. Maybe we need to spend more — we’ll have a better idea once the original stimulus package is spent.

Even so, the U.S. cannot afford to let its national debt rise to 80 or even 100 percent of national output, as some budget experts predict. We can’t build lasting prosperity on fiscal quicksand.

So it’s not a matter of choosing between more Keynsian stimulus and deficit reduction, it’s a matter of doing both — and getting the sequence right. As the Senate pragmatists recognize, that means starting now on the difficult work of building a broad political consensus for modernizing the big three entitlements.

Baucus Delivers Finance Bill

Posted on by The Progressive Policy Institute

After a long and difficult gestation, the Senate Finance Committee has finally given birth to its plan for overhauling the nation’s health care system. Like many newborns, it may not be particularly pretty, but it has potential.

Although it’s the last entry into the health reform sweepstakes, the plan fashioned by Committee Chair Max Baucus is widely seen as the most important. That’s because Baucus, with President Obama’s explicit blessing, tried harder to win Republican backing for comprehensive health care reform. Even if he didn’t immediately succeed, his bill lies nearer the nation’s center of political gravity.

In today’s rancorous climate, that naturally means that Baucus is getting hammered from both ends of the political spectrum. Liberals hate his bill because it embraces (costly) nonprofit health care coops rather than the public option. Senator GOP leader Mitch McConnell wasted no time blasting the bill as partisan and senseless, even though three of his fellow Republicans were part of the “gang of six” who labored with Baucus for months to find common ground.

One of them, Sen. Chuck Grassley, was more circumspect than McConnell. Noting that the “chairman’s mark” is merely the starting point for committee deliberations on the plan, he added, “So if you don’t have the whole thing worked out yet, it would be intellectually dishonest for me to say, you know, I couldn’t vote for it or vote for it. Let’s see what the final package is.”

Whether any Republicans wind up supporting the bill, however, is less important than holding together the coalition of insurance companies and other key players in the health industry who this time around have lined up behind reform. His bill is also calculated to appeal to the moderate Democrats Obama will absolutely have to win in order to pass any reform of consequence.

With a price tag of $856 billion, the Baucus blueprint is cheaper than other Congressional plans. Best of all, it’s paid for — though the particulars will spark fierce debate. The financing package includes $507 billion worth of cuts in public health programs, mainly Medicare and Medicaid. Hospitals will take a big hit, and some providers may stop taking Medicare patients if reimbursements are cut. The bill also envisions $349 billion in new taxes. Most of that would come from taxing the most expensive health insurance policies, though medical device makers would also get nicked.

Complaints about these and other provisions of the bill are piling up thick and fast. Democrats say it doesn’t extend subsidies for buying taxes far enough up the income scale, forcing many families with modest incomes to pay more for coverage or face penalties if they couldn’t. That’s because most people will be required to buy insurance, regardless of how much subsidy they receive.

Republicans don’t like this mandate, or another one on larger businesses that don’t provide their employees with coverage. And with consummate chutzpah, given his party’s ferocious opposition to government-run health care, McConnell has shed crocodile tears over the bill’s Medicare cuts.

The Baucus bill will be, and should be, substantially modified as it runs the gauntlet of the Finance Committee, the full Senate and then a House-Senate conference. But it contains the insurance market changes, subsidies and mandates that are the guts of health reform, and it meets President Obama’s demand that reform seek to restrain health care cost growth while adding nothing to the federal deficit. And conservatives can sleep easy in the knowledge that it contains no death panels, no abortion funding and no insurance for illegal immigrants.

Most important, it moves the arduous legislative process forward, giving critics not only a target to attack, but a mark to beat.