Geithner (l.) said that there is "a very good economic case" for infrastructure spending. (Photo: WaPo)

But the president’s proposed $4 billion fund aimed at attracting private capital to public works projects met with skepticism from a key House Democrat, raising the specter of an internal dispute over crafting a national infrastructure bank.

Spending on the built environment is "good policy for the long run and it’s very good policy for the
short run, because it’s one of the most employment-intensive forms of
government investments that we can make," Geithner told the House Appropriations Committee yesterday during broader testimony on the state of the economy.

"We’ve got to do it, though, in a way that’s fiscally responsible," Geithner added, describing the White House’s 2011 budget request as a step in that direction.

That budget plan seeks $4 billion from Congress for a National Infrastructure Innovation and Finance Fund (I-Fund) that would be used to promote more public-private partnerships on big-ticket transportation projects. The I-Fund is often likened to a National Infrastructure Bank (NIB) but differs from congressional efforts on that topic in one major respect — the White House would house its fund within U.S. DOT rather than make it an independent entity.

Rep. Rosa DeLauro (D-CT), the lead House sponsor of NIB legislation, has previously resisted the lack of independence for the White House I-Fund and reiterated that skepticism yesterday. DeLauro told presidential budget chief Peter Orszag and Council of Economic Advisers Chairman Christina Romer:

With all due respect, $4 billion in the Department of Transportation is not a national
infrastructure development bank under the Treasury Department that has
the ability to borrow in the capital markets and so that we can
leverage private funds. We are not going to get serious investment for
the long-term future of this country until we do what the Europeans
have done in setting up a European investment bank.

Orszag defended the administration’s approach, describing the full-scale European-style approach as "something that we continue to explore" and the I-Fund concept as "a first step in that direction."

But DeLauro, a longtime ally of White House chief of staff Rahm Emanuel and House Speaker Nancy Pelosi, aired specific qualms with the notion of an I-Fund located at U.S. DOT when pressing needs exist in the areas of "water systems, energy, environment, broadband and telecommunications." She is not alone in stressing the value of an NIB separate from the federal government; pro-transport reform thinkers have raised similar concerns.

House Transportation Committee Chairman Jim Oberstar (D-MN) has a brewing battle with the administration on his hands. Photo: Jonathan Maus

But Oberstar's early outline of the bill, which could get a vote in the committee as soon as next week, is already available. And it suggests that the Minnesota Democrat and Rep. Pete DeFazio (D-OR) have made good on their promises for a sweeping re-organization of the often debilitating federal transportation bureaucracy. Here are the highlights:

• The $450 billion price tag, which represents a 57 percent increase over the $286.5 billion bill approved in 2005, includes $87 billion in highway trust fund money for transit and $12 billion in transit cash from the Treasury's general fund. The 2005 bill gave transit less than $44 billion in highway trust fund money and $9 billion from the general fund.

• Oberstar isn't about to quietly accept Transportation Secretary Ray LaHood's admonition that the 18-month extension is necessary to "face reality." In fact, the committee's outline of its bill warns that an extension could be devastating to state DOTs that have "been unwilling to invest in large, long-term projects until enactment of the reauthorization act."

• Highway funding would be consolidated into four funding categories, as would transit -- effectively eliminating 75 funding categories from the current system.
  

• Oberstar's bill would establish the National Infrastructure Bank proposed by Rep. Rosa DeLauro (D-CT) and other senior lawmakers, making the bank part of a broader metropolitan access program that would support urban areas in achieving "improved transit operations, congestion pricing, and expanded highway and transit capacity."

And that's not all. More details of the forthcoming House bill follow after the jump.

Oberstar also appears poised to support "complete streets" principles in his bill, although his outline uses the phrase "comprehensive street design principles." The forthcoming House bill would also ask the Environmental Protection Agency to set national emissions reductions targets for the transportation sector, thus requiring state and local official to keep climate change in mind when planning future projects.

Oberstar's outline also attaches a number to the transportation funding gap that would result if existing law were relied on. Extending the 2005 federal bill for the next six years would result in $326 billion in funding, according to the House transportation committee -- about $125 billion less than the new bill Oberstar wants.

Of course, the missing piece is how to pay for that increased infrastructure investment. The revenue puzzle falls under the jurisdiction of House Ways and Means Committee Chairman Charles Rangel, however, meaning that Oberstar's will to fight LaHood on an extension may come down to how many allies the transportation chairman can find outside of his own committee.

Stay tuned.

Rep. Rosa DeLauro (D-CT) (Photo: America2050 via Flickr)

[T]here was a development in Congress last week that should have been seen as significant but could not elbow its way into the media precincts obsessed with Rush Limbaugh, Dick Cheney and swine flu.

Representative Rosa DeLauro, a Connecticut Democrat, introduced a bill to establish a national infrastructure development bank that would use public and private capital to fund projects of regional and national significance. These are projects that are badly needed and would be a boon to employment.

DeLauro's plan would give the final say over which transportation, energy and telecom projects receive assistance from the development bank to an independent board of directors. Separate risk management and audit committees would keep an eye on the bank's balance sheet, which would get a $5 billion annual infusion of taxpayer money to help attract more capital from private investors.

The development bank has won backing from a collection of strange political bedfellows, including the U.S. Chamber of Commerce, the AFL-CIO and Felix Rohatyn, the investment-banking magnate who helped New York City avert insolvency in the 1970s.

Still, the risk-management aspect of the plan appears particularly crucial. Why? The development bank would be able to "purchase and sell infrastructure-related loans and securities on the global capital market," according to DeLauro's summary. That phrase sounds innocuous enough, but several communities that issued infrastructure-related bonds to pay for recent improvement projects have found themselves facing bankruptcy after making risky bets to help keep pace with fluctuating interest rates.

With the municipal bond market on shaky ground right now, it's easy to envision the infrastructure bank taking -- to use a euphemism -- creative measures on the market to help convince private investors to participate. It's important, therefore, for the bank to ensure states and localities aren't getting talked into overly complex financing arrangements.

Does the infrastructure bank proposal have a real future in Congress? Its current 27 co-sponsors in the House are all Democrats, but former GOP senator Chuck Hagel signed onto a similar plan in 2007, and its appeal is undeniably bipartisan. Transportation Secretary Ray LaHood also has spoken approvingly of the bank, meaning that it has a strong chance of appearing in the federal transportation bill slated for introduction this summer.

So Herbert could soon get his wish for more media coverage of DeLauro's proposal ... if the House pushes forward to a final vote on its transportation bill.

You know, John McCain is my friend. And I know you hear that phrase used all the time in politics. I mean it. John McCain is my friend.

We've traveled the world together. It's a friendship that goes beyond politics. And the personal courage and heroism demonstrated by John still amazes me.

But I profoundly disagree with the direction John wants to take this country, from Afghanistan to Iraq, from Amtrak to veterans.

Meanwhile, earlier in the week, a panel of Democratic pols and economists seemed to agree that new investment in American infrastructure -- including freight and commuter rail -- is sorely needed, but came up short on the subject of funding. Roll Call reports:

They all expressed the need for a private-public partnership, but the question of where to raise federal funding caused anxiety among the elected officials.

One key issue was that the current system for infrastructure funding, implemented in the Federal Aid Highway Act of 1956, relies on gas taxes for revenue. Rep. Rosa DeLauro (D-Conn.) called any attempt by Congress to raise the gas tax “dead on arrival.”

But Gov. Ed Rendell (D-Pa.) said that with or without the gas tax something had to be done to bridge the funding gap, noting that the $1.6 trillion cited by the ASCE report would only cover maintenance, not new projects.

“When I became governor I had to raise $2.4 billion in taxes,” Rendell said. “When re-election came around — people aren’t stupid — one incumbent lost and she voted against the tax increase.

“This is the time we have to challenge the American people. Folks, you get what you pay for.”

Photo: Associated Press via CNN