The estimated $2.2 trillion backlog of infrastructure spending refers to existing infrastructure improvement and does not address the probable costs of infrastructure needed to move the economy into a future with electric or hydrogen cars, efficient electrical distribution or full internet connectivity.

Members of Congress have offered bills to create a national infrastructure bank and various states and municipalities have created public-private-partnerships in order to fill the funding gap. But these solutions either require adding to the large federal deficit, or raising money at commercial rates, adding to the cost of the infrastructure spending they fund.

Is there another solution?

Suppose a national infrastructure bank were capitalized by tax advantaged 5-year bonds available to anyone with at least $500 to invest (in after-tax income) and that the proceeds (capital + interest) were returned to investors as non-reportable income (tax-free) at the end of five years. To attract offshore capital, corporations investing in the infrastructure bank would pay just 15% corporate profit tax on these bonds and, like any other investor, have the funds tax free after five years. The cost of capital raised this way would be low and sustainable enough to enable the infrastructure bank to make long-term loans at reasonably low rates. It would provide funding by the people, for the people, without more taxes or more debt. Borrowers would repay as they do now, with tax revenue or tolls and fees, but minus the costs of floating bond issues. And when federal budget times are better, Members of Congress or state legislators could work to secure grants to retire these debts.

We would have a sustainable means of underwriting economic growth, encouraging investment and stimulating innovation. All of us would benefit from a strengthening infrastructure and investors would benefit as well, and directly.

More information about the concept can be found here.

Infrastructure has been absent from the political dialogue
Proponents of more robust spending for infrastructure ignore the political realities. With mounting deficits and the shadow of a $16 trillion debt hovering over all fiscal decisions, Congress is not about to vastly increase spending on transportation. Concern about deteriorating infrastructure has failed to resonate with the electorate during the election campaign. The promise of transportation spending as a job creator proved to be illusory and to have little political credibility as a countercyclical remedy. Infrastructure projects have shown to be hardly "shovel ready." Nor have the presidential condidates bothered to mention transportation in their debates on domestic priorities, despite pleas by stakeholder groups to include infrastructure on the political agenda. The absence of transportation in the political dialogue has surprised and disappointed transportation advocates. Believers in the Infrastructure crisis decry this supposed "indifference" or "short-sightedness" on the part of the Congress and the general public. But their anger and frustration are misplaced. People recognize and acknowledge the need to modernize and expand the nation's infrastructure. They simply are not convinced by the "sky is falling" rhetoric employed by the alarmists---dire warnings of collapsing bridges and crumbling roads if government does not greatly increase spending on infrastructure.

No Signs of "Crumbling Infrastructure" As the Washington Post editorialized no too long ago, people see no signs of "crumbling infrastructure." They trust their own eyes more than they trust the unverified claims of the experts ---and what they see is highways and transit networks that are well maintained and functioning smoothly and reliably in most of the places most of the time. They suspect that warnings of catastrophic consequences if spending on infrastructure is not boosted, are overblown, self-serving, and more often than not inspired by liberal advocacy groups, lobbyists, professional associations and industry spokesmen who have a financial stake in pushing for more federal spending. As one senior congressional aide confided to us, "I don't see our constituents lobbying to raise the gas tax in order to spend more money on transportation." We suspect most lawmakers on Capitol Hill share this view. Moreover, the public is not sure that all of the billions of dollars that the federal government already devotes to transportation ($114 billion in FY 2012 for all modes) are spent wisely, nor that more money will make the transportation system perform any better. According to Sen. Tom Coburn (R-OK) who publishes an annual "Wastebook" report on government spending, "billions of dollars intended for transportation are wasted on questionable projects that do little to fix congestion or other transportation problems."

Transition to Short-term Authorizations The fiscal and political climate in the next few years will make the job of convincing the skeptical electorate to support higher transportation spending even harder. There is a broad bipartisan consensus that raising government expenditures must be subordinated to the overriding imperative to get the nation's fiscal house in order. Funding constraints will continue to make it difficult if not downright impossible for Congress to commit hundreds of billions of federal dollars in a single legislative package regardless of which party controls the purse strings. Unwilling to raise fuel taxes and unable to identify other sources of dedicated funding, Congress is likely to embrace short-term bills as a convenient way out of the dilemma. Short-term authorizations such as MAP-21 will require only modest transfers from the general fund ---especially if states are willing to step in with increased contributions of their own. On the other hand, a six-year bill would require an injection of nearly $90 billion in general revenue---and this just to maintain current (FY 2013) spending levels.

To be sure, some in the stakeholder community will contend that longer-term (i.e. five- or six-year) authorizations are necessary to allow for orderly planning and implementation of capital projects. They will argue that short-term bills will not provide the kind of funding certainty that major public works require. But large capital investments seldom figure any more on contemporary State DOTs’ and transit authorities’ agendas. "Frankly, many of the state DOT leaders don't remember what it was like to have a long-term funding program like we had in the 1990s," one highly respected former DOT director told us. To the extent that large infrastructure projects still appear on state DOTs' drawing boards, private capital, tolling, and credit instruments such as TIFIA and state infrastructure banks, will provide adequate alternatives to the funding stability that long-term congressional authorizations offered in years past.

From Funding to Financing The bottom line: regardless of the outcome of the November elections, do not expect a boost in federal transportation spending. Instead, look for a shift from funding to financing ---shift fueled by vastly expanded TIFIA lending authority (by more than 600 percent, from $122 million in FY 2012 to $750 million in FY 2013) and by large amounts of accumulated equity in pension funds and private infrastructure investment funds, numbering some 140 at the latest count. The likely prospect of public and private financing replacing dwindling federal funding dominated discussion among financial practitioners at ARTBA's Public-Private Partnership Conference held in Washington D.C. on October 10-11. Participants were encouraged to hear that eleven mega-projects worth $16.7 billion have already submitted letters of interest for TIFIA loans in the past three months. More applications are certain to follow as it becomes abundantly clear that the Highway Trust Fund can no longer serve as a source of capital for transportation infrastructure beyond fiscal year 2014. In sum, short-term transportation authorizations, supplemented by public and private financing of costly infrastructure projects seem like the most likely scenario in the post MAP-21 era.

Beyond sizable and important investments in physical infrastructure for transportation, we need to take a fresh look at the optimal ways transportation agencies function – the “people infrastructure” issues which are critical to transportation agencies. By having efficient, high-performing, accountable organizations -- which avoid a duplication of work, improve productivity, and are structured to meet transparent and compelling goals, transportation agencies can have dramatic impact on the nation’s overall infrastructure debate. Focus on managerial infrastructure provides better service for customers and vital support for the communities they serve.

Fawn, the thing we most need to place in our backpack to hike the metaphorical Pikes Peak is a copy of The Worst-Case Scenario Survival Handbook. This gift book that we often see around the holidays contains wonderful chapter headings like “How to Escape from Quicksand,” “How to Survive a Poisonous Snake Attack,” and “How to Fend Off a Shark.”

As we contemplate the fact, which you so elegantly stated, that “there has not been a scintilla of conversation in the presidential election about infrastructure,” I think we must be prepared to fend for ourselves. There is no deus ex machina that will miraculously appear and solve the infrastructure-ignoring drama in which we live. The narrative we transportation experts like to advance – the one that says we are in a deep funding crisis, the sky is falling, and we must do something NOW or all hell will break loose – simply is not working. My point is that the condition of our infrastructure and the level of funding for it are likely to get worse before they get better. So let’s prepare.

We can prepare by encouraging states, cities and counties to be more self-reliant. We can encourage the shift from gas taxes to tolls because tolls provide a more sustainable source of road funds that are not subject to the highly politicized annual appropriations process. We can encourage more public private partnerships that bring private investment into the transportation system to help offset shortfalls in government resources. We can encourage the use of loan programs like TIFIA that help transportation agencies obtain the gap funding they need to complete vital projects. And we can do many, many other things that don’t depend on waiting for the federal government to do what it isn’t likely to do for a long time: provide more money for transportation.

Climbing to the top of the mountain with a spartan backpack is challenging but not impossible. We just have to be smarter and more resourceful. Look here for additional resources.

The concerns about the debt crisis and looming fiscal cliff are appropriate and well-founded. However, the financial crisis that has received far too little attention is our infrastructure deficit, which is currently over $2 trillion and growing. It is hopelessly muddle-headed to think about further reductions in infrastructure investment as a way to decrease the deficit. Indeed, investing in critical improvements and repairs in transportation, energy, water, transit, and environmental cleanup is one of the best ways to accelerate the economic recovery and guarantee future prosperity.

The American Society of Civil Engineers has calculated a $2.2 trillion deficit between the investments needed for all infrastructure and what is currently allocated over the course of the next 5 years. This gap has been increasing as they periodically update their projections and represents a tangible threat to the current recovery and a serious peril to our future energy security, the environment, and our families and businesses.

Unlike the contentious issues that dominate the airwaves like taxation, defense, and healthcare, investments in rebuilding and renewing America’s infrastructure have broad, bipartisan support with the general public and, until recently, in Congress as well. There are thousands of worthy projects that need funding now that are not “Bridges to Nowhere,” but will protect the environment, the integrity of the electrical grid, the safety of our roads and bridges, and the health of our transportation network, including transit, bikes, and pedestrian facilities. In fact, bicycle investments should be at the top of the list. Investment in bike paths and trails create about 50% more jobs than road-only projects for every million dollars spent according to the Political Economy Research Group. It is the quickest way to solve problems of roadway congestion, because every person on a bike is someone who’s not in a car in front of you or competing for a scarce parking space.

In my home town of Portland, Oregon, experts are projecting that every dollar invested in cycling will generate $3.40 in savings in health care expenses over the next 30 years. That’s on top of the environmental, congestion, and economic benefits. These benefits are not just in places like Portland or college towns. This month I’ve been in two of the communities long thought of as car capitals of America : Houston, Texas and Los Angeles, California, where cycling is taking hold with a vengeance. In Los Angeles, earlier this month, over 100,000 people took to the streets in their CicLAvia celebration, and, in Houston, voters are poised to pass a bond measure that will be the foundation of 150 miles of bike and pedestrian trails.

Whether it’s cycling, streetcars, sewer and water pipes, or repairing critical roads and bridges, investing in infrastructure, dollar for dollar, is the best investment for our future and the best way to jumpstart the economy and generate future tax revenues. Communities across America are investing local resources in infrastructure, with more than 85% of local transportation ballot measures succeeding so far in 2012, according to the Center for Transportation Excellence. Just because local communities aren’t waiting for the federal government, however, doesn’t mean the federal partnership isn’t important. Congress should step up to provide strong support in rebuilding and renewing America for the sake of our economy, for our children, and to make our communities livable and our families safe, healthy, and economically secure.

As I noted in my response to last week's National Journal question, what we urgently need is reform. With scarce resources we need to have institutional structures and analytical procedures in place that will allow us to make better and wiser investment decisions. The provisions in MAP-21 that consolidate programs and that address goals and performance are important first steps, in moving in the direction of a more accountable federal surface transportation program, but the key will be building on these foundational steps through their implementation by the U.S. Department of Transportation, by state and local agencies, and by MPOs and through future rounds of legislation.

We need, also, to define more clearly the core federal role in transportation, to provide for sustainable funding for transportation investments, and to remove the federal barriers that constrain the flexibility and innovation of states and localities, in developing funding sources and in delivering pojects.

The "big ideas" are really the tedious and incremental, but necessary, steps to reform the way that we make investment and operational decisions and to understand what we are doing and why we are doing it.

It is imperative that we focus investments on landside and waterside connections to seaports. Failure to recognize the critical role seaports play in the nation’s economy not only impacts America’s ability to remain globally competitive, but also our ability to create high-paying jobs. Increased investment in waterways and seaports by the federal government would create thousands of jobs, result in billions of dollars added to the GDP and ensure a comprehensive transportation system that moves goods efficiently and effectively throughout the United States and beyond.

Recent data supports this argument and the numbers are too significant to ignore. A recent study by the American Society of Civil Engineers (ASCE), “Failure to Act: The Economic Impact of Current Investment Trends in Airports, Inland Waterways, and Marine Ports,” found that by 2020, there will be an estimated 738,000 fewer jobs created if the U.S. continues its current level of investment in seaports. By 2040, these job losses will amount to 1.4 million.

Furthermore, to accommodate growth in waterborne traffic, future spending needs are estimated to total $30 billion by 2020 and $92 billion by 2040—a funding gap of almost $46 billion by 2040 based on current spending levels and a significant discrepancy that will have major implications on our nation’s GDP and ability to remain competitive in a global marketplace. If current investment levels continue, losses will accumulate every year culminating in a total loss of nearly $4 trillion to the national GDP and $7.9 trillion in lost businesses sales through 2040.

The Army Corps of Engineers Institute for Water Resources just released a report “US Port and Inland Waterway Modernization: Preparing for Post-Panamax Vessels” looking at our marine highways and their ability to meet the needs of these larger vessels. This report clearly also identifies the need for additional Federal investment to remain competitive.

As the threat of sequestration and budget cuts loom ahead of us, investment in critical seaport related infrastructure must be a national priority— an essential, effective utilization of limited federal resources, will pay dividends through increased trade, jobs and tax revenues.

At the risk of illustrating the saying that “fools rush in where angels fear to tread”, I’ll have a shot at answering Fawn’s questions. Hopefully, the angels will guide me to the right path.

“What do we really need?” As part of our ‘Pursuit of Happiness’ (which many Americans consider an ‘unalienable Right’), many of us desire more travel, with door-to-door speeds being as high as possible. I am not able to identify the most urgent needs, but suspect they are in urban areas.

“Where should we focus our efforts, given the limited attention of the federal government?” Because of the “limited attention [and funds] of the federal government”, and in light of the principle of subsidiarity, we should define the federal role and look to states and local authorities to deal with matters that are not of federal priority.

“What should we be talking about?” Many things. For example, how to enable transportation users to pay for what they use and get the facilities they are prepared to pay for.

“Technology?” Yes! For example: how to switch to Mileage-Based User Fees for roads.

“Private-sector involvement?” Yes! Private investors pioneered the provision of transportation infrastructure in the 18th and 19th centuries in the UK and US, and could do so again in the easier conditions prevailing in the 21st.

“What are the big ideas?” There are many. One that interests me is getting the transportation sector into the market economy, to enable transportation infrastructure to be provided commercially in the manner of electricity, water, telecommunications, and other essentials.

“How can we shrink the big ideas”? No need to shrink ideas. But we might be able to shrink big projects by requiring them to be paid for by those who benefit from them.