Showing the kind of bipartisan leadership that has become all too rare these days, Senators John Kerry and Kay Bailey Hutchison have announced a new proposal to improve the way we fund infrastructure and unlock hundreds of billions in much-needed financing for new projects across the country. Their bill has one of those great acronym-friendly names that congressional staff labor to perfect: The Building and Upgrading Infrastructure for Long-Term Development Act of 2011, or for short: The BUILD Act.

Kerry and Hutchison announced the BUILD Act today in a packed Senate hearing room, flanked by the heads of the U.S. Chamber of Commerce and the AFL-CIO, who both endorsed the proposal and spoke about the shared need that business and labor have for Washington to move beyond its political dysfunction to address the urgent needs for building and maintaining the backbone of our economy and help create jobs. Senator Mark Warner is as an original co-sponsor of the bill and also joined the press conference. Senator Warner issued a similar warning that he delivered at PPI’s infrastructure conference last fall, explaining that we must reverse the decline in U.S. infrastructure investment to make our country a more competitive place for attracting capital investment and jobs in the global economy.

The BUILD Act represents an entirely new approach to the idea of creating a National Infrastructure Bank, one that goes a long way to reconcile the huge levels of needed investment with the very real spending constraints facing the current Congress. Given the realities of the current political environment, their proposal launches the bank on a fiscally responsible scale, while preserving the best principles of political independence and economics-based decision making that make the bank worth doing in the first place. They do this by structuring their bank as a financing authority under the Federal Credit Reform Act, a model used by the U.S. Export-Import Bank and other existing federal lending entities, that allows the bank to shift enough lending risk to borrowers to keep the burden on the government and taxpayers low, which avoids the large capital requirements of traditional infrastructure bank proposals.

By combining a smart financing structure with a 50% cap on the federal share of any project’s total funding, the BUILD Act avoids the high price tag that other infrastructure financing bills often carry. That makes it an innovative approach that needs to be a part of the upcoming debates on the already underfunded transportation bill. As Chamber President Tom Donohue said today, it’s an invaluable part of the solution to how we pay for maintenance and improvements that we can’t afford to ignore, but it can only work if added to a strong foundation of spending in the transportation bill, which he said will also require increasing our 17 year-old gas tax, to meet our current needs and adjust to lower fuel consumption by more efficient vehicles.

PPI has long supported the idea of a National Infrastructure Bank, including the current House bill sponsored by Rep. Rosa DeLauro, the long-time champion for infrastructure in Congress. DeLauro joined other top political, business, and labor leaders to discuss the bank proposal at our infrastructure conference last fall. Economist and infrastructure heavyweight Ev Ehrlich released an excellent paper at that conference laying out some of the key benefits to the bank approach. The experts who participated in that conference agreed that there were many approaches to structuring a bank that would be acceptable and achieve the benefits Ehrlich described, with the caveat that we could not afford to abandon the principles of independence and project selection based on economics, not political logrolling. Senators Kerry and Hutchison have managed to apply those principles in crafting a workable proposal during this time of fiscal austerity, and we at PPI applaud them for their resourcefulness and leadership.

If there’s any hope for making headway this year against America’s debt crisis, it lies with the bipartisan “Gang of Six” in the U.S. Senate. This group is filling the political vacuum created by House Republicans’ lemming-like rush to the ideological cliffs, and President Obama’s reluctance to commit himself on tough fiscal choices.

Led by Virginia Democrat Mark Warner and Georgia Republican Saxby Chambliss, the Gang of Six has picked up where the President’s Fiscal Commission left off. They’ve embraced the commission’s main political breakthrough – a hard-won bargain in which some key conservatives like Sen. Tom Coburn agreed to cut tax expenditures, while liberals such as Sen. Dick Durbin agreed to constrain Social Security costs.

This is the only bipartisan game in town, and it makes the Senate the main arena in Washington’s three-ring budget circus. What’s happening in the GOP House is essentially a sideshow, though it could turn into a very destructive bit of political theater.

Despite the jobless recovery, the House proposes to cut $61 billion in domestic spending this year – the largest immediate spending cut in U.S. history. Everyone knows there’s no way such a draconian measure gets through the Democratic Senate or past a presidential veto. Senate Democrats have countered with $6 billion in domestic program cuts, but that’s not likely to clear the filibuster-proof 60-vote threshold either.

So we’re in for a game of budgetary chicken in which both sides maneuver to blame the other if the federal government runs out of money in two weeks. Even if there is a federal shut-down, however, it’s unlikely to go on for very long, given how fed up U.S. voters already are with the antics of Washington politicians of all stripes.

But what’s really dumb, if not tragic, is to expend all this political blood and energy in a battle over domestic programs, which account for only 12 percent of the federal budget. Yes, their growth needs to be constrained too, but there just isn’t enough money there to make a sizeable dent in our fast-growing national debt, now $12 trillion and inexorably rising toward 90 percent of GDP if we don’t act soon. In the real world, stabilizing the debt at a sustainable level and eventually whittling it down means putting everything on the table – defense spending, taxes and entitlements.

That’s why the deal struck within the Fiscal Commission is so significant. It targets over $1 trillion in tax expenditures, like the tax exclusion for employer-paid health and scads of smaller business subsidies. To Senate conservatives like Chambliss, Coburn and Gang of Six member Mike Crapo of Idaho, these are essentially back-door spending programs administered through the tax code. And unlike many House Republicans and self-appointed tax commissar Grover Norquist, the GOP Senators don’t regard closing loopholes as tantamount to raising taxes. That brave departure from anti-tax fundamentalism is crucial to any bipartisan budget deal, because no self-respecting Democrat is going to negotiate deficit reductions on the spending side of the budget alone.

In a reciprocal show of political courage and country-first patriotism, commissioners Durbin and Kent Conrad of North Dakota signaled their willingness to entertain reforms in Social Security, notwithstanding all the overheated blather in the lefty blogosphere and cable TV land about the “cat food commission.”

According to today’s Washington Post, the Gang of Six is trying to recruit other Senators to join their center-out coalition. Let’s hope they succeed – and that President Obama enters the lists soon. Obama did the Fiscal Commission he created no favors by declining to endorse any of its recommendations. Worse, top White House aides lately have dropped hints that the administration may try to separate Social Security reform from negotiations over deficit reduction. If true, it would represent backsliding from Obama’s forthright pledges on taking office to confront Social Security’s problems.

In a recent op-ed, OMB Director Jack Lew argued that “Social Security does not cause our deficits,” and added: “Strengthening Social Security is an important, but parallel, issue that needs to be addressed as quickly as possible. But let’s not confuse it as either the cause of or a solution to our short-term fiscal problems.”

It’s true that health care costs are a far bigger problem, but Social Security also faces a long-term spending gap that will contribute to our mounting national debt as the baby boomers retire. The fact that it’s more easily fixed than Medicare or Medicaid is no reason to put that chore off. On the contrary, Democrats’ willingness to get serious about entitlement reform is an indispensible element of any plausible bipartisan deal for getting our fiscal house in order. It’s also the best way to take the heat off domestic programs, including progressive investments in education, infrastructure and social mobility that Democrats rightly defend.

If Durbin, the Democrats’ Senate whip, understands this, then surely President Obama does as well. His reticence on the specifics of a bipartisan budget deal may be purely a matter of tactics, but Durbin, and the Gang of Six, deserve his unequivocal support.

Over in the New York Times, Carl Hulse writes notes that one of the many unique aspects of this year’s unfolding budget clash is that this will be first budget battle without earmarks.

Generally, the disappearance of earmarks been seen as positive development, since everybody loves to hate earmarks. But say all you want about earmarks being wasteful or corrupt (even though that’s a debatable claim), they helped broker compromise. By giving enough members a stake in an omnibus appropriation bill, earmarks were mechanism whereby leaders could assemble a winning coalition to pass a budget bill, a powerful tool to avoid a government shutdown.

Here’s Diana Evans, a professor of political science at Trinity College, from a book about earmarks called Greasing the Wheels:

Pork barrel benefits, the most reviled of Congress’s legislative products, are used by policy coalition leaders to produce the type of policy that is most admired: general interest legislation. This book makes the case that buying votes with pork is an important way in which Congress solves its well-known collective action problem.

And here’s Scott A. Frisch and Sean Q. Kelly, writing in the National Journal last November:

The reality, as we see it, is that without earmarks it will be much more difficult to get moderate and liberal members to go along with spending cuts that may be necessary to reduce the deficit – one of the major goals of the tea party movement.  By eliminating earmarks, tea party supporters may have lost one of their most effective tools for building coalitions to make painful cuts in spending. Earmarks can be viewed as the spoonful of sugar that makes the bitter medicine of deficit reduction go down; without earmarked projects, enacting tough legislation will be even more difficult.

(Frisch and Kelly are the authors of a book called Cheese Factories on the Moon: Why Earmarks are Good for Democracy.)

Remember, even at their height, earmarks accounted for roughly two percent of all appropriations expenditures. And that two percent hasn’t necessarily been cut out of the budget – it’s just been transferred the executive branch for allocation instead of being Congressionally-directed.

Now, I understand that there were some lobbying abuses in the world of earmarks, but my sense is that most offices were actually remarkably transparent about their earmarks (and indeed happy to brag about their projects). I never saw any reason for banning them and thought it was all silly red-herring type politics that distracted us from more difficult but far more consequential fights over entitlements.

Maybe the folks in Congress will figure out how to come to some sort of eventual budget agreement without a bunch of earmarks to grease the wheels, and we’ll all be better off because of it. But I’m beginning to wonder if, when budget negotiations grind to a standstill, the good folks running Congress might wish that they hadn’t prevented themselves from sweetening the pot with a few special district spending programs.