The road to America's economic recovery starts in L.A.

Southbound traffic on Interstate 5 near Los Angeles.
Southbound traffic on Interstate 5 near Los Angeles. (Damian Dovarganes/associated Press)
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By Harold Meyerson
Wednesday, March 10, 2010

A life spent stranded in Los Angeles traffic can nonetheless yield its epiphanies. One such moment came in November 2008, when L.A. County's beleaguered commuters voted to increase their sales tax by half a cent over the next 30 years to build an electric rail system that could speed their journeys and clean their air.

Now, Los Angeles is asking Washington for loans -- not grants, mind you -- to be repaid with that sales tax revenue, to accelerate said construction so that it can be done in one decade rather than three. In other words, to help finance a major environmental and stimulus program that won't add to the federal deficit. It's an idea so novel that Washington's initial reaction was befuddlement.

L.A. voters are as tax-averse as anyone, and the initiative that a whopping 68 percent of them supported followed the model for successful Golden State ballot measures: It left little to the discretion of elected officials. It stipulated where the rail lines would begin and end, which bus lines would be added, which roads would be widened. By generating roughly $40 billion over three decades, it would double the L.A. rail system -- a prospect so pleasing to all manner of Angelenos that Measure R was sponsored by the local chambers of commerce as well as unions and environmental groups.

"People will vote for a tax increase if it has a clear purpose they support, and if it's locally controlled," says Mayor Antonio Villaraigosa, the measure's chief sponsor. "But when you spread out the construction over 30 years, voters will begin to wonder, 'What happened to my sales tax money?' "

If the work could be accomplished in 10 years, as the mayor now proposes, it would engender more than 150,000 construction jobs smack in the part of the country that is home to more unemployed construction workers than any other. It would also save nearly $4 billion by avoiding the presumably higher costs of labor and materials in, say, 2030.

What Los Angeles needs are bonds and loans to provide now the funds that it would repay with its sales tax revenue over time. Investment banks are likely to put up some of the money, but the city has found it necessary to seek a guarantee from Washington as well.

The feds, however, are accustomed to spending, not lending, their money. When Los Angeles initially sought not an appropriation but a loan, nobody in Washington knew how to respond. "They laughed," says Villaraigosa. "They said they didn't have a program that could do this."

Some joke. The nation's roads, rails and schools are collapsing; unemployment is projected to remain painfully high for the next decade; last year's stimulus package has not generated jobs on a scale commensurate with the crisis -- and along comes a voter-mandated, job-generating, environmentally beneficial project in the nation's largest county that won't ultimately cost Washington money. And the feds don't know how to respond.

At bottom, the problem is that we don't have much in the way of institutions of public finance. Rep. Rosa DeLauro, a Connecticut Democrat, has been trying to establish a national infrastructure bank since 1994. With $25 billion in public funds, such a bank could leverage far greater amounts in loans for badly needed construction projects. DeLauro's current bill is backed by labor, the U.S. Chamber of Commerce and the bipartisan National Governors Association. But it lacks Republican co-sponsors, and there is no provision for the bank in President Obama's current budget. Thus does the Beltway's political gridlock worsen traffic gridlock elsewhere in the land.

Still, as Angelenos have continued to press their case, some congressional committee chairmen are warming to the cause. Alterations to some federal Build America bond guarantees are under consideration. Some of the Transportation Department's acronym-laden programs may in fact allow for secure loans. However inadequate our funding mechanisms might be, reducing joblessness, improving our infrastructure and cleaning our air, at no net cost to the federal government, does hold a certain appeal.

"We come with money in hand," says Villaraigosa. "And this could be a template for the rest of the nation."

Indeed, if the federal government could do this for Los Angeles, it could do this for other cities and counties whose voters have decided to tax themselves. Without adding to the deficit, town by town, it could rebuild a crumbling nation.

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