WASHINGTON — Now is the time for the federal government to invest heavily in infrastructure, including a reauthorization of the Build America Bond program, according to a report issued Friday by the Treasury Department.
The report, entitled “A New Economic Analysis of Infrastructure Investment,” touts plans within the Obama administration’s fiscal 2013 budget as an important investment in transportation infrastructure. The report argues that a large-scale investment in infrastructure has tremendous economic benefits in both the near and long term, and the availability of labor in the aftermath of the recession makes now the right time to make that investment.
“Because of the availability of underutilized resources (especially labor), the opportunity cost of infrastructure investment is currently well below its normal level,” the report finds.
The report is very supportive of one of the major aspects of the Obama proposal, a reauthorization of the highly-successful BAB program. BABs were created as part of the federal economic stimulus program. Issuers of the taxable bonds received an interest subsidy from the federal government.
“BABs had a very strong reception from both issuers and investors,” the report reads. “From the inception of the program in April 2009 to when it expired on December 31, 2010, there were 2,275 separate BABs issues, which supported more than $181 billion of financing for new public capital infrastructure projects. State and local governments saved an estimated $20 billion in borrowing costs, on a net present-value basis, from issuing BABs. On average, a Build America Bonds issuer saved 84 basis points on interest costs for 30-year bonds and also received significant savings on shorter maturities, as compared to traditional tax-exempt bonds.”
The report concludes that infrastructure investments included among Obama’s budget proposals — including BABs and the creation of a national infrastructure bank — would help state and local governments leverage funding more effectively and result in wide-ranging benefits to many Americans.
“This report highlights the need for critical investments in transportation to help ease the burden on middle-class families trying to make ends meet, create jobs where workers would especially benefit, and also strengthen our competitiveness and support business infrastructure over the long term,” said Treasury assistant secretary for economic policy Jan Eberly.
Critics of the BAB program said it encouraged excess borrowing. Despite widespread support from state and local governments and industry stakeholders, a BABs reauthorization has failed to gain footing in Congress since the program expired. Lawmakers have tried other approaches, including proposals for historically less warmly-received tax-credit bonds.