NRO’s eye on debt and deficits . . . by Kevin D. Williamson.

The Infrastructure Bank Is the FDA Is Fannie Is Lehman Bros.


The New Republic on the “wildly important” infrastructure bank proposal:

A well-designed infrastructure bank’s benefits could go even farther, says [Brookings infrastructure expert Emilia] Istrate. “The current type of investment is … more like spreading peanut butter,” she says. “It’s not really based on strategic economic criteria.” She argues that, assuming the bank is truly independent and decisions are actually made by experts, it will lead to a projects being selected “based on a cost-benefit analysis,” and their “national and regional importance.”

That’s how the system’s supposed to work now, isn’t it? Well, yes, but that hasn’t been how things have actually turned out in Congress. Remember the infamous “bridge to nowhere” we almost funded or the even more senseless “road to nowhere” that got built with some of the money that had been intended for the bridge? They were a result of the appropriations process and pork-barrel politics run amok, not any kind of reasonable economic analysis.

A national infrastructure bank would, in theory, mean less money spent on these projects—and more spent on investments that actually make the country productive. Even Republicans can get behind that idea. Or so you would think.

About that, two thoughts:

First: Another way of saying this is: The bank will work better the more robustly and pitilessly undemocratic it is. The problem with the appropriations process is that it is too democratic, dominated, as it is, by the House, our most democratic organ of government. I do not disagree with that analysis. In fact, I’d like to extend that line of thinking to all sorts of other sectors of economic and national life, too: Really, why should the gentleman-scholars in Congress be making decisions about energy policy, what kind of jobs Americans should have, how we manage schools, the agriculture markets . . . management of banks, hedge funds, health insurance? If Alexander C. Hart of The New Republic believes that it is best to keep democracy’s grubby paws off of infrastructure decisions — and I’m with you, Hart! — why not these other areas as well?

Second: “Assuming the bank is truly independent and decisions are actually made by experts . . . .” Who wants to place a bet on whether that happens? How much of your own money, as opposed to the taxpayers’ money, would you wager on that being the outcome? And what if it isn’t? The SEC and Fannie and Freddie and the Fed and the banks and the hedge funds and the REITs and such were just chock flippin’ full of experts — including a lot of highly paid genius quants in the private sector — which did what, exactly, for the housing/CDO bubble? (Don’t worry, I’ll wait. Cue Jeopardy! theme: What is absolutely nothing, Alex?)

The FDA is full of experts who make extraordinarily stupid and destructive decisions on a regular basis. They don’t do it because they’re bad people or because they are being corrupted by corporate money or because they are closet Maoist revolutionaries. They do it because you cannot repeal the fatal conceit. Is there any reason — a single one — that makes us think that the infrastructure bank experts will be immune to the defects that plague experts on Wall Street, experts in Washington, experts in the federal agencies, experts in the states, the experts to which Congress has all the access it could possibly desire?

The answer to this question is not: In the ideal world, things work out ideally.

If only there were a process by which economic decisions could be made on economic criteria, by the parties with the most knowledge about the questions at hand and the strongest incentives to seek rational financial outcomes. What might such a process look like? Somebody should write a book about that. (Or, at least, a book about the opposite.)

Tags: Barack Obama , Debt , Deficits , Fatal Conceit , Fiscal Armageddon , General Shenanigans , Hayek


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