Structuring infrastructure

Crumbling America demands smarter repair blueprint

Although the cause of a tragic Amtrak derailment on Tuesday isn't yet known, it is already stoking renewed conversations about the country's infrastructure. Only a day earlier, a group including Evercore founder Roger Altman was advocating for steps to fund new projects. If businesses and investors want to get them going, however, they'd be better off shouldering more of the costs.

To help the US accelerate repairs and upgrades to roads, bridges and transit systems, Altman along with Princeton economist Alan Krueger and Aaron Klein, from the Bipartisan Policy Center think tank, published a new policy paper this week. They push for a 10-fold increase in appropriations for a federal infrastructure programme, to $10 billion, which would back $400 billion in additional loans. More liberal accounting assumptions also would help, the trio write in their paper. And they have some good ideas about how to restructure user fees to make them fairer and fatter.

Other proposals, though, ask too much of consumers and too little of industry. For example, increasing the gasoline tax is a regressive way to collect revenue for roadwork. Likewise, renewing the Build America Bonds programme, which financed $181 billion worth of projects five years ago, provides investors with extra goodies: some get a tax break and others enjoy higher stock returns thanks to smoother commerce.

Businesses could be targeted more directly. For example, President Barack Obama's budget proposal to reform investor income taxation, which would boost the top capital gains rate by 4 percentage points, would bring in more than $200 billion over a decade. That's twice as much as a 9 cents-a-gallon gas tax hike would provide to help close the highway budget gap.

Even the more middle-of-the-road approach put forward by Altman, Krueger and Klein faces big hurdles in Washington. Congress seems alarmingly indifferent about infrastructure, with the Republican majority unlikely to humour any tax increase as it also angles for lean budgets. To have a chance to get projects going, the private sector may need to take the lead.