Now that Sens. Ben Nelson, D-Neb.; Jon Tester, D-Mont.; Jim Webb, D-Va.; Joe Manchin, D-W.Va.; and Joe Liebermann, I-Conn. have either voted against President Barack Obama’s American Jobs Act, or said they would if it came up for final passage, it is safe to say that the chief executive’s second stimulus program is dead.
Unfortunately, Sen. Chuck Schumer, D-N.Y., is trying to revive one of its worst big-spending provisions, creation of a national infrastructure bank to throw more billions of tax dollars at special interests favored by Democrats. It’s a terrible idea that should be rejected.
First, it should be noted that the proposed new bank, to be called the American Infrastructure Financing Authority, is guaranteed to create a mere trickle of jobs for at least its first year if it becomes law. Before a single dime could be spent, Obama would have to appoint and the Senate confirm a chief executive officer, who would then have to hire a chief financial officer, chief risk officer, chief compliance officer, general counsel, chief operations officer and chief lending officer. Besides all these chiefs, office space would have to be procured and furnished, then swarms of bureaucrats hired to shuffle paper. This process will take at least a year, probably two, and no money would be spent on infrastructure during that time.
Once the bank did get up and running — seeded with $10 billion in taxpayer money — it would essentially function the same way Fannie Mae and Freddie Mac did, as a government-owned corporation that subsidizes submarket-rate loans and loan guarantees for projects with politically influential backers. Just like Fannie and Freddie, there would be teams of government experts to ensure only “good bets” are funded. But as the American Enterprise Institute’s Peter J. Wallison has amply demonstrated (most recently in the Wall Street Journal), pressures from the forces of political correctness in the Clinton administration steered Fannie and Freddie to make horrible bets on billions of dollars in subprime mortgages. By 2008, some 70 percent of all subprime loans were guaranteed by Fannie or some other government entity. No wonder Bill Gale, scholar at the liberal-leaning Brookings Institution, told the Washington Post that “the notion that we’re going to do for infrastructure what Fannie and Freddie did for housing is not a particularly enticing prospect.”
The present administration has demonstrated just how lousy it is at picking winners and losers in the economy. After the Bush Energy Department denied a proposal for a tax-subsidized loan for the solar-panel manufacturer Solyndra, Obama’s crowd came to town and handed the now-bankrupt firm $535 million. SunPower, another solar power company, scored another $1.2 billion loan from White House experts. SunPower posted $150 million in losses in just the first half of this year and faces dire prospects for its future survival unless propped up with more government money. Bottom line: Washington politicians and bureaucrats can never pick winners and losers using other peoples’ money — ours — as efficiently and effectively as private investors spending their own money.