Disastrous denial

Megastorm shows scope for US infrastructure bank

Frankenstorm Sandy could have a positive outcome if it shames US politicians into fixing the nation’s crumbling infrastructure. Any traveller knows America’s transport network is dilapidated. But the storm’s devastation makes the problem of under-investment undeniable. A public infrastructure bank could provide the best bang for federal bucks.

Images of flooded New York subways and the shredded New Jersey shoreline are only the beginning of the damage inflicted across the eastern United States. A preliminary estimate of up to $50 billion in total economic losses from IHS Global Insight suggests spending smaller — though still large — sums on preventive measures might make good sense.

The destructive force of an enormous storm can’t be blocked completely. But stronger infrastructure could have reduced the impact. For example, flood protection for the New York subway system might have cost less than cleanup and repair.

Modernised grids and systems would surely have helped avoid electrical outages for more than eight million Americans, or at least reduced the downtime. Large-scale flood barriers, like the one on the tidal River Thames downstream from London, could have limited the high-tide surge.

The Thames Barrier, completed in 1982 at a cost of £1.4 billion at 2007 prices (then $2.8 billion), was funded by UK central and local governments. Any similar project undertaken today in the United States would probably cost much more. In 2009, the American Society of Civil Engineers estimated that more than $1 trillion of spending on infrastructure is needed over the next five years, in addition to what’s already happening.

Unfortunately, despite America’s wealth, its governments have little spare cash. One solution is to spend far less on, say, overseas wars. But another approach is to leverage public dollars. An infrastructure bank could marshal private sector funding provided its credibility can be insulated from everyday favour-peddling in Washington.

The idea didn’t make it into President Barack Obama’s $787 billion stimulus package in 2009. Something similar was also considered in late 2011, but failed because funding the bank would have meant raising taxes on the wealthy.

A national infrastructure lender would require careful design. Awarding funds for projects based only on their economic benefit, for instance, would favor wealthy financial centers like New York over rural communities. But done right, an infrastructure bank could be a start toward ensuring that Mother Nature’s next tantrum isn’t so costly.