Homeland Security and Economic Recovery

by Phil Leggiere

Homeland security, resiliency linked to economic revitalization. As the depth and magnitude of the global financial crisis becomes apparent, calls to retrench public spending can be expected to accelerate, regardless of which party controls Congress and the White House. Understandable as this reflex may be, there are also costs of not spending. Perhaps nowhere are the long-term costs of not spending so potentially momentous as in the area of infrastructure. Last year, after the collapse of the I-35 bridge in Minneapolis, author and homeland security analyst Stephen Flynn outlined 5 Disasters Coming Soon If We Don’t Rebuild U.S. Infrastructure in an article in Popular Mechanics. Click here to see full story Flynn envisioned the impact a magnitude 6.7 earthquake in the Sacramento-San Joaquin River Valley could cause the 30 outdated, inadequate levees in the area. “Sixteen Delta islands would drown under 300 billion gallons of salt water from San Francisco Bay,” he wrote. “It would not only spell disaster for the residents, but also cause problems farther afield, contaminating the fresh water supply for two-thirds of California. Some 10 million people would face severe shortages over the many months the water supply took to recover.” Another Flynn scenario involved seepage through the numerous holes that have been discovered in the foundation of Kentucky’s 55-year-old Wolf Creek Dam. In a worst-case scenario, Flynn said, the mile-long structure, which holds back the largest manmade reservoir east of the Mississippi, would release a wall of water, inundating towns and cities downstream along the Cumberland River, including Nashville. Flynn further imagined a major earthquake in Los Angles or a terrorist attack at its harbor, which he calculated could lead to an extended closure of America’s largest port complex. If that occurred, Flynn said, Southern California’s inventory of refined fuels would be exhausted in two to three weeks, and 18 million people literally run out of gas. A shutdown also would disrupt the flow of 40 percent of the nation’s maritime containers, idling factories everywhere and leaving retailers with bare shelves within days. Truly renovating infrastructure would go beyond protecting existing infrastructure from attack. As Jena Baker McNeill, a homeland security policy analyst at The Heritage Foundation, wrote in a recent paper entitled Building Infrastructure Resiliency: Private Sector Investment in Homeland Security: “As Americans have become increasingly obsessed with protecting infrastructure from terror¬ist attacks, they have focused less and less on keep¬ing that same infrastructure in good condition. The idea persists that installing ever more guns, gates, and guards is critical, and will prevent all threats. When everything is critical, however, nothing is critical. As a result, any security gains garnered by threat prevention are jeopardized, while adequate upkeep, the less glamorous of the two, is largely abandoned.” Click here to see report. “What we need instead is resiliency,” McNeill declared. “Resiliency,” she added, “does not mean that we need to forget the prevention-of-terrorism aspect of infrastructure. It simply means that prevention is not the end of the equation. We must change the infrastructure mis¬sion to one that aims to improve infrastructure ade¬quacy across the board while protecting high-risk targets. If we lack the ability to accommodate the infrastructure needs of the population, a cata¬strophic event would stymie the transportation and delivery of essential aid—whether goods or people. Well-maintained infrastructure can lessen or largely eliminate damage from an attack—minimizing loss of lives and property.” While McNeill’s points are compelling and increasingly acknowledged, positive economic arguments for infrastructure resilience have been sparse. In an essay in the current New York Review of Books entitled A New Bank to Save Our Infrastructure, investment banker Felix Rohatyn and Everitt Erlich, Senior Vice President and Director of Research for the Committee for Economic Development assay such an argument, outlining the case for a National Infrastructure Bank. They suggest that homeland security needs and economic recovery may be far more closely linked than is commonly acknowledged. Click here to see full article. “These are rare times of ferment in one of the most neglected fields of public policy—the nation's infrastructure, or what used to be known as public works, including roads, mass transit, bridges, ports and airports, flood control systems, and much else. We have been confronted with spectacular and tragic evidence of the inadequacy of these facilities in the failure of the levees in New Orleans and in the collapse of the I-35 bridge in Minneapolis,” they write. Putting the problem of aging, increasingly vulnerable infrastructure in historical context the authors recall that “Throughout US history, competent public investment decisions have been an essential complement to private investment, from the Louisiana Purchase and the Land Grant Colleges to the Interstate Highway System and the Internet. And the functions of infrastructure are still as essential as they have ever been, if not more so.” Contrasting that record with the present they note that China will spend $200 billion on its railways between 2006 and 2010—the largest investment in railroad capacity made by any country since the nineteenth century—while the US rail system continues to become more and more degraded at a time of great potential renewal. The Chinese also plan over the next twelve years to construct 300,000 kilometers of roads in rural China, as well as ninety-seven new airports. “The Chinese understand that economic power depends on these investments,” they conclude. A key problem in developing a coherent national plan for infrastructure renewal, Rohatyn and Ehrlich believe, is that responsibility for the nation's infrastructure is currently spread across federal, state, and local governments. For example, they say, “the federal government is responsible for maintaining wastewater systems, while states and municipalities handle drinking water. The federal government helps states, cities, and towns build and operate mass transit systems; and it builds bridges that are part of the Interstate system, while local governments build local roads and the picturesque covered bridges that appear on tourist postcards.” One key lesson of Hurricane Katrina, according to the authors, was the devastating consequences of these failures of coordination. “The state of Louisiana and its municipalities built flood control systems around levees while ignoring the deterioration of fragile wetlands in the Mississippi Delta,”, while “ Louisiana's congressional delegation steered federal funds toward navigation projects instead of flood control.” To begin to address the growing infrastructure crisis the authors argue in favor of “a new and different approach to selecting, financing, and managing infrastructure” conceptually laid out last year in a report by Commission on Public Infrastructure at the Center for Strategic and International Studies (CSIS) in Washington, DC, a commission co-chaired by Rohaytn, along with former Senator Warren Rudman. The core idea of the CSIS commission proposal is to establish a National Infrastructure Bank, an institution that the authors describe as being similar to the World Bank, “an entity that evaluates project proposals and assembles a portfolio of investments to pay for them.” The bank, as they conceive it, “ would replace the various "modal" programs for highways, airports, mass transit, water projects, and other infrastructure, streamlining them and folding them together into a new entity with a new culture and purpose. Any project seeking federal participation over a set dollar threshold would have to be submitted to this bank. (Smaller projects would be left to states, cities, and towns, perhaps with an accompanying federal grant to be used at the discretion of the state or local government.) Rather than receiving grants through pre-set federal formulas or privileged congressional payments, states, cities, or other levels of government would come to the bank with proposals they wished to pursue.” The bank, they say, would have no preconceived, overarching plan for the nation's infrastructure. “Proposals for infrastructure investment would still predominantly come from state and local governments. Our plan would preserve almost entirely the existing balance of power between federal, state, and local government, but would change dramatically the way priorities are set and projects funded. That is because it would proceed project-by-project, and dollar-by-dollar, to find the best use of federal resources.” Doubtless with the recent travails of the mortgage scandals in mind, Rohatyn and Ehrlich emphasize that, “the bank's securities, whatever they may be, should not benefit from a promise of the government's full faith and credit (as has been enjoyed and abused by Fannie Mae and Freddie Mac). Only close scrutiny by investors can provide the kinds of discipline needed to ensure the bank's long-term success. If the bank wishes to support a proposed project—whether by writing a check, insuring a local bond, providing other credit guarantees, or lending its own money—its securities should each be carefully exposed and specifically targeted, allowing participating investors to evaluate the assets they buy.” “Regardless of the government's fiscal position,” they conclude, “ vital investments in transportation, water supply, education, and clean energy are necessary to maintain our future standard of living. Our political system pours money into war and tax breaks while relying on deficit finance. Those in charge then announce that there are no resources left to secure our economic future. The new bank we propose offers one alternative to such a dangerous set of policies.” The proposals may, or may not, be politically practical. At least two bills, one the National Infrastructure Bank Act of 2007, submitted by Senators Chris Dodd (D., Connecticut) and Chuck Hagel (R., Nebraska), both of whom served as members of the CSIS commission, the other offered in the House of Representatives by Banking Committee Chairman Barney Frank (D., Massachusetts) and Representative Keith Ellison (D., Minnesota) outline an approach broadly similar to Rohatyn and Ehrlich. At the very least, however, they usefully sketch out the intersection between homeland security and sustainable development which is likely to be key to public policy going forward.