Yonah Freemark asks whether state infrastructure banks might succeed where efforts to create a national infrastructure bank have failed. Sen. Ron Wyden, one of the most innovative Democratic policymakers, has called for federal grants to promote the establishment of state infrastructure banks, perhaps as an acknowledgment of the virtues of decentralization. Yonah, who instinctively favors national solutions, seems somewhat skeptical after profiling the modest achievements of five existing state infrastructure banks.

I am increasingly convinced that state-based rather than federal approaches to improving the quality of infrastructure are the right way to go, but that this should flow from a revival of competitive rather than cartel (or cooperative) federalism. That is, instead of offering federal grants for the establishment of state infrastructure banks, let’s do something more drastic, e.g., either nationalize Medicaid or block grant the program, thus containing a crippling cost driver for state governments, and then allow states to pursue a wide range of different economic development strategies, some of which will be infrastructure-centric, others of which will be more human-capital-centric, etc. This is, of course, an oversimplification of very complex issues.