Second, we should bring back Build America Bonds. The traditional approach to state and local infrastructure financing allows the interest on the bonds to be excluded from federal taxation. That approach has been shown to provide undue benefit to purchasers in the top marginal-tax bracket. Build America Bonds, in contrast, provide a direct subsidy to the borrowers, and thereby deliver more of the federal subsidy to the state and local governments.
More than 2,000 Build America Bonds were issued in 2009 and 2010, and the Treasury Department has estimated that state and local governments have saved $20 billion in present value as a result. It's time to bring the program back.
Third, federal policymakers should see how innovative programs such as the Chicago Infrastructure Trust work in practice. If Chicago can point the way for other cities to attract new forms of financing, it will have done a great service.
Finally, federal, state and local governments alike should expand the use of pricing to get the most out of existing roads, bridges and the like and to finance improvements. User fees for transportation, for example, should be expanded, as was recently recommended by Jack Basso, a former chief operating officer of the American Association of State Highway and Transportation Officials, and Tyler Duvall, a former assistant secretary at the Transportation Department. This approach, they noted in a paper for the Hamilton Project, has been successful in other countries but has been used much less in the U.S. A road-pricing system could raise as much as $55 billion a year to finance new investments or deficit reduction, the U.S. Transportation Department has estimated. It would also cut congestion and carbon emissions.
In the absence of such steps, our infrastructure will only become less safe and less productive. Although we may not be able to do much about our own aging, there's plenty we could do to keep public infrastructure young.
— Peter Orszag is vice chairman of corporate and investment banking and chairman of the financial strategy and solutions group at Citigroup, and a former director of the Office of Management and Budget in the Obama administration.