Ideally, a federal infrastructure loan program should be more than a zero-sum transfer payment of some part of a loan’s cost from federal taxpayers to the borrower. If that’s the goal, it would be better (and more honestly) done as a grant. Instead, if the loan includes specific features that the federal government is more economically efficient at providing than the private debt market, then there’s a chance that overall efficiency is increased. In real world terms: fewer financial resources are used to achieve the same outcome (e.g. new infrastructure) and the cost to federal taxpayers is less than the national benefit. Maybe not much — but the right direction.

Of course, there aren’t many things where the federal government is actually more efficient at providing than the ultra-efficient private debt markets – assessing complex credit risk is definitely not one of them. But here are two that I think qualify:

• Interest rate management – due to gigantic economies of scale the US Treasury can access in managing the national debt. The marginal cost of sharing a little bit of this management expertise in connection with a rate lock on an infrastructure loan during construction is probably very small – certainly much less than the cost of the usual transaction-specific bespoke arrangement.

• Very long-term loans – notwithstanding current political fireworks, the US as a borrower (and as presumed repayor) is a forever thing. Or forever enough – even the Roman Empire took four centuries to fall. So the federal government can also be near-forever lender.

The reality of both of these features is much more nuanced, but it’s accurate to say that interest rate management and very long-term lending are strengths of the federal government. A loan program that can package and deliver these features efficiently to qualified borrowers (i.e. creditworthy and willing/able to go through the policy hoops) will, exactly like a private sector business with lower production costs, help move the invisible hand of an efficient economy in the right direction. And where are these features especially valuable? Financing infrastructure projects with long construction periods and long useful lives. As in basic water infrastructure. Which brings us to today’s poster program.