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Politics & Policy

What Hillary Clinton Gets Wrong About Infrastructure

There were many passages from Hillary Clinton’s recent address at the New School that I wasn’t crazy about, but for now I’ll just focus on one of them. In the course of describing the many ways she hopes to revitalize the American economy, Clinton turned to infrastructure:

Then there are the new public investments that will help establish businesses and entrepreneurs, create the next generation of high-paying jobs. You know, when we get Americans moving, we get our country moving. So let’s establish an infrastructure bank that can channel more public and private funds, channel those funds to finance world-class airports, railways, roads, bridges and ports. And let’s built those faster broadband networks and make sure there’s a greater diversity of providers so consumers have more choice.

I’m not necessarily averse to the idea of establishing an infrastructure bank. But does Clinton really want to establish an infrastructure bank and not an infrastructure slush fund? Back in 2011, Matthew Kahn and David Levinson released an excellent report on the future of the Interstate Highway System, and they contrasted their proposal for a new Federal Highway Bank with widespread calls for a National Infrastructure Bank. Kahn and Levinson noted that the Obama administration’s proposal for a National Infrastructure Bank failed to make a clear distinction between loans and grants, which raised the risk that it would simply offer “handouts without any clear mechanism or necessary requirement for direct repayment of loans.” If new infrastructure is to be financed with private capital, investors are going to expect spending discipline and, eventually, a meaningful return. Will this return be extracted from taxpayers or from users of the infrastructure service in question? The Obama administration, to its credit, supports allowing state government to collect tolls on their Interstate highway segments if they choose. Would Clinton favor giving states the freedom to make greater use of user fees? If so, she deserves our praise. If not, she’s blowing smoke. 

Notice how Clinton lumps together world-class airports, railways, ports, and faster broadband networks. Different infrastructure services require different kinds of expertise, in large part because they depend on different business models, some of which are more conducive to public investment than others. I’m a heretic on the subject of our highway system. I don’t think our main problem is that we’re not spending enough on highways, as Clinton seems to believe. If anything, I think our highway system is overbuilt. ​Beyond handing over responsibility over highways to states, which should in turn hand over responsibility to independent road enterprises that operate on sane, commercial lines, I’d say the federal government would do us all a favor by getting out of the way. The chief problem with our airports is not (pace Larry Summers) that they’re not as sleek and modern as the vast white elephants you’ll find in East Asia. Rather, it is that they are congested, and the reason they are congested is that the federal government doesn’t provide for market-rate pricing for take-off and landing slots. This straightforward reform would greatly increase the productivity, not to mention the pleasantness, of our aviation system. Yet it doesn’t involve spending billions of dollars and cutting ribbons, so politicians are by and large not interested. America’s freight rail system is wildly successful, and while it could stand to be expanded, it’s not at all clear that this is a job for the federal government. Passenger rail, meanwhile, needs labor reform more than it needs an infusion of funds. To upgrade U.S. ports, the best thing the federal government could do on that front is to repeal the Jones Act, which drastically raises the cost of dredging. And as for faster broadband networks, let’s not forget that as Michael Hendrix has reported, the spread of Google Fiber has spurred broadband incumbents in several metropolitan areas to make substantial investments in increasing broadband speeds. Lo and behold, private investors really are willing to step up if they’re faced with the threat of robust competition.

My fear is that Hillary Clinton’s approach to infrastructure is reflects a larger worldview: that there is no problem that the federal government, and in particular federal spending, can’t solve. It turns out, however, that the federal government is more of an impediment to high-quality infrastructure than an effective means of delivering it. 


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