We have a growing national debt problem.
Since 2016, the national debt has grown from $19.6 trillion to $33.2 trillion in 2023, a staggering $13.6 trillion or 70%. As the government adds $1 trillion of debt every three months, the total national debt will nearly double from 2016 to $38 trillion by the end of 2025. This matters because government spending fueled by debt has become a larger part of the gross domestic product, growing from 103.9% of GDP in 2016 to 120.6% in 2023. Both factors are not good for the domestic economy.
An increasing national debt that funds growing federal budget deficits, saps the economy of private investment capital as the debt service component of the federal budget grows, choking off private sector investment that could be used for badly needed infrastructure. Additionally, growing national debt puts upward pressure on interest rates, which causes an inflation premium for goods, services, and rentsthe economic phenomenon we are currently experiencing. However, regardless of growing construction costs, our public infrastructure problem remains.
In 2021, the American Society of Civil Engineers estimated that $6.1 trillion will be needed over 10 years just to bring the domestic infrastructure up to a good state of repair. Included in the $6.1 trillion is $2.6 trillion for currently unfunded infrastructure such as roads, bridges, freight corridors, mass transit, electric grids, schools, dams, levees, waterways, ports, airports, rail, drinking water, wastewater, public parks and recreation, and hazardous waste. Other bigger picture needs include intercity high-speed rail links, broadband access and affordable housing. While the infrastructure need grows, the financing provided by the federal, state and local governments fails to keep pace. But this doesn’t have to remain the case.
For example, in 2021, the United States invested less for roads, rail, inland waterways, maritime ports and airports than 10 other industrialized nations. China, which spent 4.8% of its GDP on infrastructure invested more than Australia, Norway, Japan, Sweden, United Kingdom, France, Italy, Germany and Canada. The U.S. spent the least, only .5% of our GDP. The commonality with the countries spending more than the United States on infrastructure was they all employ national or international development banks to finance their infrastructure projects. In fact, when I visited China four years ago, almost every town we traveled through had a development bank to finance the endless construction projects we saw.
With the $6.1 trillion infrastructure needs of the United States, financing these needs from the federal budget is unrealistic, considering the 2023 federal budget is already $6.1 trillion. With our nation’s spending on infrastructure at the lowest level in 70 years, the time seems right for the national infrastructure development bank Congress is considering.
HR 3339, supported by 35 members of Congress, will create a $5 trillion National Infrastructure Bank. The NIB will be a separate entity from the federal budget, set up as a federally established mixed-ownership, incorporated bank, capitalized by privately owned existing treasury bills and private sector. This concept was used by Alexander Hamilton’s First Bank of the United States and later by Franklin Delano Roosevelt’s Reconstruction Finance Corporation.
The NIB will generate infrastructure funds and create millions of jobs, while not increasing the national debt. Makes too much sense not to pursue.
Martin Cantor is director of the Long Island Center for Socio-Economic Policy and former Suffolk County economic development commissioner. He can be reached at EcoDev1@aol.com.
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