Ted S. Warren/AP Photo
Clear skies over downtown Seattle, October 14, 2020
This article is part of the Prospect roundtable on the case for a new large source of public capital.
It has been a tremendous privilege to have the National Investment Authority (NIA) proposal debated as part of the Prospect’s “Big Ideas” series, especially by such a great group of thinkers and policy experts. The roundtable has generated a richly stimulating and multifaceted discussion, and I am deeply grateful to all contributors for their thoughtful and intellectually sharp engagement with the NIA idea.
At the risk of oversimplification, I would divide the roundtable responses to the proposal into two categories: one focused on the NIA’s institutional design, and the other questioning the political payoff of pursuing the idea.
The essays by Palladino and Estevez, Beachy, and Gunn-Wright embrace the need for an NIA-type institution but challenge us to think through difficult design issues, especially with respect to the NIA’s governance and potential distributional impact. I fully share their concerns about striking the right balance between technical expertise and democratic control. In many respects, these two essays lay out the road map for further development of the NIA proposal—an exciting and challenging task.
The essays by Paul and Granoff, Sims, and Tucker approach the NIA idea from a different perspective, as a potential alternative to either a national climate bank or to existing forms of direct public investment. Albeit in different ways, both essays evaluate the NIA idea in terms of its political viability or desirability vis-à-vis these other policy options. It would be a mistake, however, to frame the discussion as a matter of having to choose among these alternatives. The NIA is not a competitor to, or a replacement for, other forms of public investment—it is envisioned as an institutional catalyst for more effective deployment of a wide range of public investment tools.
Thus, a mission-focused national climate bank could be either part of the NIA or its stand-alone partner in the common cause of financing the transition to a clean economy on a national scale. Much like Granoff, Sims, and Tucker, I hope to see the effort to establish such an entity succeed in the near future, so it could potentially grow into a more capacious NIA in the future. The latter, of course, requires that the proponents of the national climate bank do not become unduly limited by decade-old strategic choices and keep their ability to see beyond the four corners of the tried-and-true institutional models.
Even more fundamentally, the NIA is not a substitute for but a complement to direct public investment in green infrastructure. The NIA is simply an institutional mechanism for publicly coordinated and publicly managed investment in public infrastructure. It is designed to operate separately from traditional fiscal-policy channels and to use a broader set of investment tools.
Contrary to Paul’s interpretation, however, creating this dedicated infrastructure-finance channel is not driven by “how to pay for” questions or “the public can’t afford it” assumptions. The federal government can “afford” to invest in infrastructure, but our current legal and institutional arrangements for making investment (and hence spending) decisions make it extremely difficult to invest the needed amounts of federal money quickly, efficiently, and without fear of reversal in the following fiscal year. In this sense, the NIA proposal responds to complex structural dynamics that currently hamstring our fiscal policy; it aims to supplement and relieve current pressures on the Treasury’s and other federal agencies’ infrastructure spending.
That also explains the complexity of the proposal, criticized in Paul’s essay. Despite the popular distrust of financial engineering, the NIA proposal deliberately repurposes sophisticated financing tools to facilitate massive investment in projects that would benefit our most disadvantaged communities. To overcome the dictates of “commercial viability,” we may need to sacrifice our personal preferences for the simple and the familiar. Doing more of the same—by pumping more grants, loans, and guarantees into existing market structures—is not necessarily going to result in better allocative decisions. To direct more money into conventionally unprofitable or unproven infrastructures, the public needs to actively create “market opportunities” by exercising more direct control over the allocation of capital. It’s not just about spending, it’s about managing. And that’s where the NIA offers a novel but much-needed institutional solution.
Of course, the NIA is only one among many proposals aiming to solve today’s complex economic, environmental, and social problems. It is still very much a work in progress, and this roundtable has been an invaluable source of ideas and inspiration for taking it forward.
