The Scouting Report Web Chat: Innovation and Infrastructure

One year ago, Bruce Katz, vice president and director of the Brookings Metropolitan Policy Program, recommended that President Barack Obama invest in infrastructure in order to drive long-term prosperity. In the wake of the economic crisis, infrastructure projects have made up a significant share of the American Recovery and Reinvestment Act. But, Katz argues, we need an innovation-focused national strategy to incentivize a new, stronger economy—with high-speed rail, clean energy technology and grants to projects with strong potential to boost economic growth and create jobs.

On Wednesday, January 20, as part of a Brookings project to assess the president’s performance in 2009 on a range of policy issues, Katz was on hand to discuss President Obama’s progress on infrastructure projects and innovation. POLITICO Senior Editor Fred Barbash moderated the discussion.

12:28 Fred Barbash-Moderator: One year ago, Bruce Katz, vice president and director of the Brookings Metropolitan Policy Program, recommended that President Barack Obama invest in infrastructure in order to drive long-term prosperity. In the wake of the economic crisis, infrastructure projects have made up a significant share of the American Recovery and Reinvestment Act. But, Katz argues, we need an innovation-focused national strategy to incentivize a new, stronger economy—with high-speed rail, clean energy technology and grants to projects with strong potential to boost economic growth and create jobs.

Bruce Katz is with us to day to assess the administration’s performance over the past year.

Welcome Bruce and welcome readers.

12:28 [Comment From Gary: ] Why is investing in infrastructure so important?

12:30 Bruce Katz: Thanks Fred. Let me start with a general proposition. Infrastructure is a key ingredient to economic growth. In some respects, infrastructure acts as the veins for national and metro economies … critical to moving people, goods, ideas and energy efficiently and effectively.

12:32 Bruce Katz: In past periods of growth, significant infrastructure investments …in rail, in ports, in roads, in telecommunications … helped usher in decades of productive growth. Coming out of the rubble of this recession, it is critical to think anew about how infrastructure investments fuel an economy that is export oriented, lower carbon and innovation fuelled. That means we need to invest in new kinds of infrastructure as well as new technologies for making infrastructure more efficient.

12:32 [Comment From Shawn: ] Do you think ARRA was successful? Where did it fall short?

12:34 Bruce Katz: ARRA was successful in that it showed a renewed federal commitment to infrastructure investments … particularly investments in next generation infrastructure like high speed rail, the smart grid, broad band and health care information technology. But a portion of the ARRA dollars were run through legacy systems, primarily state departments of transportation, which tend to allocate funds with a greater focus on political rather than market and environmental returns.

12:35 Bruce Katz: Going forward, we should take the best of ARRA .. greater focus on competitive allocations, greater commitment to transformative investments, sustained commitment to transparency and performance measures … and apply it to the mainstream infrastructure programs.

12:35 [Comment From Bill in Va: ] Hi, I read Tom Friedman a lot and he’s always going on about how great the trains and airports are in China and how they make, say, Amtrak and LaGuardia look shabby. (A) is this a valid criticism and comparison and (B) is it an argument that Americans (if they read Friedman) would care enough about to support more $$ in this area?

12:38 Bruce Katz: I agree with Friedman. To a large extent, we have a first class economy with a third class infrastructure. It is jarring to compare the quality of our airports, rail systems and mass transit with the quality of comparable infrastructure in China, Japan and most European countries. Competing in the 21st century will require not just greater investment (public and private) in the US, but serious reforms to ensure that infrastructure investments advance national economic, environmental and social goals.

12:38 [Comment From Tom: ] Do you think it’s a good idea to spend so much federal money on roads and bridges? Shouldn’t we really be encouraging mass transit?

12:40 Bruce Katz: Clearly we need to maintain and preserve a substantial portion of the traditional infrastructure we have built. This is the challenge of mature economies (unlike China). The system, however, is too geared to traditional investments … and actually penalizes and impedes investments in next generation infrastructure. I believe mass transit (rapid bus, light rail, commuter rail) is a competitive and environmental necessity in this century.

12:40 [Comment From monica: ] The President’s economic stimulus package (ARRA) has drawn a lot of criticism. You and Robert Puentes gave the President an A- for his first year performance on economic prosperity. How would you respond to the criticism and what would you say to the doubting public?

12:43 Bruce Katz: Most respected economists agree that ARRA has already made a substantial contribution to stopping further job losses (e.g., fiscal stabilization funds for states) and generating job growth in certain sectors. But ARRA has a dual purpose, particularly with regard to infrastructure. On one hand, it needs to deliver job growth in the short term. On the other hand, it needs to invest in infrastructure which will help restructure the US economy towards exports, towards low carbon, towards higher innovation. Too often infrastructure investments focus on the short term only and ignore the long term.

12:43 [Comment From David: ] Should a proposed national infrastructure bank be a standalone entity or an element of the transportation department?

12:47 Bruce Katz: I think it should be separate. The US needs to make infrastructure decisions based on sound data and solid evidence … so we can get the productive and sustainable gains needed for long term growth. A small, lean, new entity can operate in that way … as well as leverage and align its investments more seamlessly with the private sector. Infrastructure is too dominated in the US by politics and pork … its high time we governed in a manner dictated by real returns on investments, rather than the political dictates of the moment.

12:47 [Comment From Phil: ] Please elaborate on how a government run planned system of infrastructure could be more efficient than the free market?

12:48 Bruce Katz: The US is no different than any other mature economy. Infrastructure is a public private investment …. the only question is what is delivered by the public sector and what is delivered privately. The notion that the free market will exclusively deliver the infrastructure a competitive nation needs is fanciful and counterproductive.

12:48 [Comment From Tim: ] If you had the chance to authorize one major infrastructure project project in 2010, what would it be? In other words, what’s the #1 most needed improvement in America right now?

12:52 Bruce Katz: I am more focused on structural reform than the one silver bullet. Our system for allocating transportation resources, for example, is fundamentally broken. We need an Infrastructure Bank to work with the private sector and make the kinds of evidence driven infrastructure investments needed for long term growth. And we need more routine federal, state and local investments in transportation to be driven by data and subject to performance measures. Investment without reform would fail to recognize the significant challenges we face as a nation.

12:53 [Comment From Sally: ] What do you think of the controversy about how many jobs the stimulus bill “created or save?” Can we ever get a firm answer to questions like that? Do cities and states keep track?

12:55 Bruce Katz: I think we actually do know the job outcomes of the stimulus bill. What we don’t know is the broader impact of the jobs created. A job filling a pothole on a rarely used road does not have the same effect as a job created by building a transit extension in a highly congested corridor. We need more sophisticated information than we have to compete and deal with challenges with climate.

12:55 [Comment From monica: ] Critics of high speed rail contend that it will be a waste of taxpayer money, and the system will not draw enough passengers to offset the capital and operating costs. What is your reaction to it?

12:58 Bruce Katz: It depends where we place the high speed. We should not be spreading high speed funds across the US like peanut butter … the same way most states allocate their transportation funds. So lets start first with some congested rail corridors, like the Northeast, or other corridors where short haul air travel could be replaced with high speed rail. Frankly, I don’t think there should be a separate high speed rail program. An Infrastructure Bank would sort out which regions of the country need high speed rail and which regions of the country need different forms of investment. When we compartmentalize, we only increase the potential for political log rolling.

12:58 [Comment From Joe: ] would you say Obama made any major missteps in 2009 in the realm of infrastructure reform?

12:59 Bruce Katz: Generally speaking, he didn’t put as much emphasis on “reform” as “investment”. Several small steps on reform were taken in ARRA, but they are dwarfed by the dictates of the traditional system.

1:02 Bruce Katz: In the same vein, I think that the Administration needs to place more emphasis market mechanisms like congestion pricing. We are laggards in the world on this front … which is surprising for such a technologically advanced economy. Congestion pricing would both save substantial resources (by making unnecessary certain investments) … and also raise substantial revenues (which could be dedicated, as in London, to extending transit in all forms). Congestion pricing is a 21st century act … and we need to embrace it as soon as possible.

1:03 [Comment From Phil: ] I haven’t heard you cite any specific examples of what a government planning committee could accomplish that the private sector could not. It sounds like you have a philosophy that says, “yeah, sure, give us the money and we will figure out what the best way to spend it is.” Am I missing something?

1:06 Bruce Katz: Lets have a reality check. The public sector has responsibilities for designing, financing (in part) and maintaining certain forms of infrastructure in the United States. The question is whether the public sector carries out these responsibilities in market sensitive, forward leaning ways. Thats why an Infrastructure Bank is needed. The current system …. of primarily operating through the 50 states … is not capable of delivering the game changing, multidimensional investments we need. The private sector has a role here … but, for many forms of infrastructure, an aligned role.

1:07 [Comment From Marge: ] Do you think we’ll see any movement toward “green” energy and transportation in 2010?

1:09 Bruce Katz: We are already seeing movement … both through public investments (eg the implementation of ARRA) and the private sphere (eg shifts in VC funding towards clean tech (solar, wind, energy efficiency, water efficiency). The issue is whether we are smart enough to scale up markets. Shifting to low carbon will affect every aspect of our economy (energy, infrastructure, products, homes) and lead to an innovation revolution. In an economy as large as ours, policy needs to set some standardized ground rules for markets to flourish.

1:09 [Comment From David: ] What kind of interagency collaboration n would you like to see in future national strategic planning? Do you see a role for DHS along with the EPA and DOT?

1:12 Bruce Katz: One of the most important advances this year under Obama is the move towards interagency collaboration. The HUD/DOT/EPA collaboration on Sustainable Communities is one of the most important initiatives taken by the new Administration, with Congressional support. But this is only the beginning. If we are going to move to a more export oriented economy, we need Commerce, DHS and DOT to be constructing a national freight strategy for the safe and efficient movement of goods …. and particularly address the serious challenges presented by our major air, rail and sea hubs.

1:14 Bruce Katz: We are the only mature economy which tells our major ports “you deal by yourselves with the congestion and challenges caused by global trade.” We need to get our act together. All of our major hubs need a level of multimodal investment if we are going to address not just the trade today, but the explosion in trade likely given the urbanization of emerging economies and the restructuring and potential of our own economy.

1:15 [Comment From Phil: ] I just don’t see where our infrastructure is really failing, and you haven’t given us any example. The creation of a Bank or otherwise sounds like overhead we don’t need to spend taxes on. It is one more government institution sliding us further into the Planned Economy. One doesn’t have to look very far back into the past to see the perils of that.

1:16 Bruce Katz: The failures are obvious and well documented. Just visit a state (and there are many) which allocates transportation funds pursuant to the makeup of its state legislature and barely invests in the myriad infrastructure needs of its major metropolitan areas (the disproportionate engines of growth).

1:17 [Comment From David: ] If you could decide “must have” elements in a new surface authorization bill, what would you want to see?

1:19 Bruce Katz: 1. Emphasis, first and foremost, on the national priorities (economic, environmental, social) that transportation is designed to advance

2. Infrastructure Bank for transformative investments

3. Greater devolution of flexible funding and hard responsibility to metropolitan areas

4. New forms of transparency and accountability for state decisions.

5. Overhaul of the US Department of Transportation

1:19 [Comment From David: ] What are your feelings on the House version of the surface transportation authorization?

1:22 Bruce Katz: There are many positive elements to the House bill: (a) National Transportation Strategic Plan; (b) Metropolitan mobility and access program; (c) Performance standards; and (d) level the playing field between transit and highways.

But there are weaknesses primarily associated with revenue sources and funding allocations. We also need to join up all elements of transportation authorization, so an Infrastructure Bank can be seamlessly integrated with more traditional programs and elements.

1:23 [Comment From Daniel: ] Can I switch topics to innovation? In addition to an infrastructure bank and high speed rail, what else should the national government do to prepare for the post-recession global economy? We seem to have lost the knack for job creation and global competition.

1:24 Bruce Katz: This is the essential question. The recession was a wake up call for the country. We had an economy dangerously out of whack … frenzied with consumption, wasteful in its use of energy. So we need to get back on track.

An affirmative vision for the next economy is one were export more and waste less, where we innovate in what matters, where we produce and deploy what we invent, where the US is at the cutting edge not only of idea generation but market creation.

1:26 Bruce Katz: We have a main challenge here. We compete in a fiercely competitive world where established nations like Germany and rising nations like China are marking strategic and ultimately transformative investments in renewable energy, in modern ports, energy grids and high speed rail, in the 21st century information highway.

1:26 [Comment From David: ] For a city like Detroit which has lost more than half of it’s previous population, are there any innovative solutions you see for reengaging the unemployed there or experimenting with new aspects of urban planning?

1:28 Bruce Katz: Last question. There is a “nothing left to lose quality” with Detroit … and we should be experimenting there not just with infrastructure, river reclamation and urban form but with schools and other basic delivery systems. A recent article I coauthored in the new republic gives a road map. Thanks for listening.

1:29 Fred Barbash-Moderator: That’s it for today folks. Thanks for participating. And Bruce..thanks for answering all the questions. Until next week…….