As explained in my first post this year, Federal Earthquake, I’m on a steep learning curve when it comes to political science and practical applications thereof. But the effort to better understand this is necessary to provide real-world political context for the main topic here, federal infrastructure loan program policy. In normal times, the political context for policies concerning such an apparently technical and neutral area would be relatively straightforward and essentially unchanging — I could remain focused on analytical details and refinements. But these are not normal times.

In an essay a few days ago, Taking Sides, I sketched out the two, opposing, paths which I think serious people may be developing underneath the daily chaos. The first, which I label ‘Post-Neoliberalism’, is a reformist approach that seeks a true break from the neoliberal past. The second, which I label ‘Neo-Narrative Neoliberalism’, seeks to roughly preserve the neoliberal status quo with a new, and perhaps more powerful, narrative. (Btw, I do takes sides on this — you can read the last few sentences of the essay for my personal opinion).

In this post, I’ll try to put those opposed approaches into a more practical political context. As you can see from the diagram above, I don’t think the approaches neatly correspond to standard political party classification — at all. Political experts who know about this stuff are constantly writing about the factions within both parties. Although it’s a little more evident with the Democrats (because they lost), the Republicans are also divided on many things. But I’m guessing the various divisive issues probably can be roughly divided into two categories — real change or status quo, with neoliberalism (again, roughly) being the reference point.

That doesn’t shed much light on possible agreement on specific issues, because how to change, or how not to change, something specific is still open to a lot of debate (e.g., MAGA Republicans and New Left Democrats might agree that the economy should be fairer, but won’t agree, to put it mildly, on how that should be achieved). But my aim here is different and much less ambitious — to look at what might be the opposing forces involved as the change vs. status quo battle starts to play out.

Institutional Power is the traditional force that comes from big, established organizations like the Democrat and Republican parties. To some extent, agreement can be imposed within the party, and I’m sure that that extent was greater in the past. But now that force is diluted by the essentially irreconcilable difference between Neo-Narrative Neoliberalism (status quo) and Post-Neoliberalism (change). I think this is pretty typical in history — when a pressing need for change surfaces, existing alliances are fractured. But they keep working for a while.

Neo-Narrative Power is a relatively new force made possible by digital media. I believe that we saw this in action 2008-2024 as the post-WFC defense (or more precisely, camouflage) of otherwise obviously failed neoliberal policies. We also saw this camouflage incinerated in the 2024 election, but a new and ‘improved’ version of the narrative will return. How else can neoliberalism be maintained? Note that this power crosses party lines, and the details will be adjusted to audience taste, but that does not dilute Neo-Narrative Power — because they know at some level it’s all bullshit anyway. Hence, Traditional Republicans and Establishment Democrats can privately agree on a lot about policies which preserve the status quo.

Ideological Power is the force of a belief that change is necessary. This doesn’t imply that the believers are idealistic fanatics — far from it. Many will see opportunities in change for their own careers or power bases. But it can’t be bullshit in the way a neo-narrative story can because it must be founded on a lived reality about which there is widespread agreement (that the status quo is intolerable and must change) and for which a plausible vision for improvement can be persuasively articulated to a skeptical audience (that’s the ideological part). Not easy — but it gets harder in the current political context. MAGA Republicans and New Left Democrats could easily agree about the need for change, but the ideological vision for solutions is another matter. In effect, Ideological Power is diluted when crossing party lines, when it’s possible at all.

When things are relatively stable in a society, Institutional Power predominates. When things are intolerable and unsustainable, Ideological Power can have a dramatic effect and lead to massive change, though not always in the originally intended direction. Narrative power failed spectacularly in 2024, but new and improved Neo-Narrative Power? More serious, as the stakes are higher, and powered by rapidly advancing AI technology? I don’t know.

The dynamics certainly make it worse. Proposals for change will be opposed by a combination of Institutional Power and Neo-Narrative Power. Ideological Power, in contrast, is likely to be reduced by Institutional Power, as things currently stand anyway. At some point, change will happen because it must, so in one sense Ideological Power will prevail. But what point is that? Torches and pitchforks? Civil war?

Reforming Federal Infrastructure Finance?

All these forces will swirl and gyre in complex and unpredictable ways over the next few years, at least. People with expertise in political science and practical US politics will understand it all far better than I ever can. I hope they write the stories and analyses because it’s interesting to watch.

But my main purpose in thinking about any of this goes back, of course, to the topic of this site: federal infrastructure finance. To finish off this essay, I’ll explain briefly how an examination of current political forces is relevant to my narrow focus.

My goal is to see federal infrastructure finance, especially the loan programs, substantially reformed and expanded. If Institutional Power predominated, the path to that goal might be largely technical and analytical — as I saw it to be pre-2024.

But in a political context where forces of change and the status quo are battling it out, not only will federal infrastructure finance reform look like a low priority, but the technical and analytical approach, however valid, won’t cut much ice. Bigger and more fundamental questions are being raised about the objectives (or lack thereof) of federal policies.

Not an optimistic outlook, I have to admit. But I do see a path forward to the goal. Federal infrastructure finance reform in itself is very unlikely to attract Ideological Power, for obvious reasons. Without that, however, reform is not possible — the neoliberals will keep the programs pretty much as they are, unless infrastructure P3s become a thing again, in which case federal finance will be distorted and degraded to deliver stupid money for rent-seeking projects. Otherwise, the status quo will be maintained — federal infrastructure finance as small and relatively meaningless, and as such, unthreatening to tax shelters sustained by the municipal bond market.

Public infrastructure, however, as a focal point of many important issues could attract Ideological Power — and maybe a lot of it. There’s the obvious stuff we’ve all heard about for years, e.g., crumbling, inefficient, not ready for a changing climate and so on. But I’m now thinking that infrastructure renewal will touch on much deeper issues — the role of localized labor and local communities in a new economic world of AI and robotics, the importance of place and continuity, and (most importantly) the moral right to preserve these things. There may be true, even ideological, bipartisan agreement on these issues. Much more on this topic in future essays.

Here, then, is the possible path: To the extent that a very substantial improvement of US public infrastructure is supported by Ideological Power, that power will be extended to the means by which that improvement can be accomplished — and reformed federal infrastructure finance is that means.

PDF Download

Yes, I know — ChatGPT cheerfully goes anywhere your questions lead (e.g., “Excellent framing — you’re getting to the core distortions caused by rent-seeking in the municipal bond market”). But maybe I’m just asking hard questions?

I’m not the only one. Here’s a quote from an article today in Governing magazine, Volatile Times in Muni Bond Land:

For the main reason that muni bonds will likely remain tax-exempt, look to the
mega-rich investors who contribute to political campaigns. Those are the people
who benefit most from tax-exempt bonds, and they are the ones in charge now. So
don’t kid yourself that it matters one whit to this regime whether New York or
Texas issuers might pay interest of 5 percent tax-free versus 5.7 percent taxable for
long-term muni bonds to build schools, housing and infrastructure. That’s not the
point anymore. Today, it’s ultimately about providing lucrative tax shelters for the
uber-rich. Politically, the local public purpose is now secondary.

For ChatGPT’s own trashing of the muni market this morning, you can judge for yourself — questions below. FWIW, I think the answers are mostly substantive. Maybe a muni bond proponent could upload the PDF and ask ChatGPT to rebut every point? Might try that myself, actually.

Bigger picture point: AI will have an impact on policy depth. The time and cost to quietly and discretely ask hard questions has been significantly reduced. But will the answers have an impact on policy direction? Who knows.

1. The muni bond tax exemption costs the federal government about $25 billion a year. How much of this cost can be attributed to muni bonds that are financing infrastructure projects? (page 1)
2. Yes, for water infrastructure [breakdown] — drinking water, wastewater, water management (e.g., flood control) (page 2)
3. If that $3.9 billion was provided to the WIFIA loan program as funding for credit subsidy, how much infrastructure could be built using WIFIA loans instead of tax-exempt bonds? (page 3)
4. In light of this result, and the fact of federal deficits, why is an expansion of WIFIA not being considered by Congress? (page 4)
5. Would not opposition from the municipal bond market lobby be a reason? This reason would operate ‘behind the scenes’ and not attract publicity. But the incentives are there. (page 6)
6. Is the muni bond market effectively a monopoly (or near-monopoly) provider of federally subsidized infrastructure finance in the US? (page 8)
7. If this near monopoly is being maintained by the power of the municipal bond market lobby, isn’t it an example of rent-seeking? (page 9)
8. How does such rent-seeking damage both federal taxpayers and the state & local governments financing infrastructure projects? For example, for the former, the windfall profits that go to high-income taxpayers instead of issuers. For the latter, the terms of muni bond financing reflecting retail investor preferences as opposed to optimizing the needs of state & local issuers. (page 11)
9. Yes [summarize a policy framework] (page 13)
10. Yes [draft ‘Policy Brief: Reforming Federal Infrastructure Finance to Maximize Public Value’] (page 16)

‘Narrative’ politics, as it has evolved over the last two decades, is a uniquely insidious force.

It appears able to displace consideration of reality even amongst a political leadership who are entrusted to know better. Yes, of course, there’s always been propaganda, spin, press plants, etc. But the ‘narrative force’ is different. Its power seems to originate from something completely new — advanced digital media. The printing press, mass-circulation newspapers, radio, television, even the early-stage internet — all mere precursors. Digital media puts it all together in terms of political impact.

Unchecked, the ‘narrative’ goes to absurd extremes. So absurd that a superior force — actual reality — eventually intervenes. I think this is what happened in 2024, which was, when you think about it, a veritable bonfire of unsustainable political and cultural narratives.

But so what? Fundamental economic and social questions are still not being addressed. Much of the pre-2024 narrative was not necessarily substantive. It may be better explained, especially in its distracting absurdity, as post-WFC camouflage for the continuation of business-as-usual. That business being various kinds of rent-seeking, extractive financialization, relentless wealth concentration, etc. In effect, the period 2008-2024 can be seen as an era of ‘narrative neoliberalism’.

Yes, Trump and his crew incinerated the camouflage, and it was fun to watch the well-deserved wrecking. But was the purpose to expose our hard reality and thereby start dealing with it? Or simply as an exercise in gaining political power, because a ‘counter-narrative’ can be as powerful a force as a reigning narrative?

Perhaps those are questions for future historians. But ‘what happens next?’ is far from academic. This is because, unlike any point in the US since 1945, fundamental issues need to be addressed. Kicking the can further down the road will have serious and inexorable consequences.

On the surface, the landscape looks chaotic. How could it be otherwise? The revolutionary regime is new and still consolidating its power, defenestrating long-entrenched opponents, performatively demolishing various iconic symbols of the ancien regime, and announcing (and often retreating from) radical decrees. Those on the losing side howl in outrage, to increasingly lesser effect, while they search for a way back in. The whole political circus is energized by a polarizing figure of unique genius for this purpose, Trump.

But underneath I am sure there are (there always are) serious people developing plans. They know the US faces fundamental issues that will drive fundamental change. Managing that change, and to what end, will be the critical challenges, and the fact of upheaval in itself frames the risks and opportunities. Note that agency within the frame is not limited to the revolutionaries who launched the upheaval, even after they’ve apparently consolidated their power. Far from it. You know the story — Robespierre to Napoleon, Kerensky to Lenin, to name just two. It’s entirely possible that follow-on revolutionaries or counterrevolutionaries, if they emerge, will make the current crew look tame.

Who knows what form these plans are taking? But I’m guessing that they’ll be roughly divisible into two opposing groups, if only because that seems to be a historical pattern. On the one side, there will be those with aspirations for deep reformation of government (and society, too, to the extent it can be influenced by government), as the way not only to comprehensively address near-term critical issues but to restore the nation to a better path. Of course, their idealistic visions will be tempered in due course, but a deep reformation will involve as a first step the dismantling of the existing order. Things will evolve from there. In my own narrow focus on loan programs, I already see some hints of a stern, reforming mindset, bent on dismantlement. Call this ‘post-neoliberalism’.

On the other side will be those for whom the current neoliberal arrangements have worked rather well. On a personal level, they can easily navigate any travails that unaddressed national issues might cause, and maybe even profit from the exercise. But it’d be a shame for such a lucrative enterprise to blow up completely, and so their plan will be focused on the various band-aids, emergency moves, quick patches and short-term repairs that will plausibly work, more or less, to keep the status quo going. The overall inadequacy of such ‘solutions’ for the nation will become apparent, but slowly at first. Much narrative force will be needed, once again, to camouflage the reality. But more robustly this time, and with less absurdity, because the impending reality will be, as it were, no joke. I assume they’ll steal and modify various parts of the post-neoliberal plan, especially the uplifting and aspirational bits — that’ll help keep people confused. Already, the ‘Abundance‘ narrative has that smell. Call this plan ‘neo-narrative neoliberalism’.

All interesting to observe, no? But at this point, I take sides, unequivocally. I have no doubt that post-neoliberal (or post-liberal, if they go that far) policies will be a hard and uncertain road to possible renewal of some kind. I don’t expect much, except a lot of work, and nobody else should either. Maybe there’ll be some virtue in this path, sometimes. It’s honest and real, or ‘reality adjacent’ anyway, and that seems important.

But neo-narrative neoliberalism is just a degenerate path to national suicide. It’s dishonest and corrupt, and even the prospect of seeing the ‘neo-narrative’ emerge in scale sickens me — what blatant and disgusting lies will they spin this time? What insults to our intelligence, what grotesque perversions of reality? An ever louder and more distracting carnival show of AI-fueled illusions to hide the depth of accelerating decay until rational thought becomes impossible? This is what they want?

I try to stay as neutral and realistic as possible in all political matters because it keeps things more analytically interesting. This one, this neo-narrative neoliberalism, however — I just hate.

So, taking sides is easy. No matter how little a post-neoliberal plan achieves, at least it opposes the other one. That’s sufficient for now, I think.

This was written before the 2026 Budget Summary was out but now even more relevant.

5/11/2025 Addendum: A Process of Clarification

After publication, a hearing expert witness contacted me with a clarification.  The reference to “small” WIFIA applications in the testimony was intended to mean applications from “small communities with big capital projects”.  Since WIFIA generally lends to bigger projects, while SRFs generally deal with smaller projects, the point was that regardless of borrower size, WIFIA should be enabled to support big projects with a small community funding base by offering a loan feature (sub-UST rates) that will help address their fundamental problem.

I don’t think that the clarification changes the main point I was making in the article: that WIFIA isn’t administratively set up to deal efficiently with such applications.  A big project with a small funding base is intrinsically risky, and SRFs are better positioned and experienced to deal with local project and credit risk.  If sometimes SRFs lack the loan capacity to do big projects, then WIFIA’s relatively efficient role here is to help add that capacity so that SRFs can utilize their strengths to finance these situations (which are apparently relatively widespread).

Maybe that’s a sufficient answer as far as the article goes.  But the clarification discussion made me think further.  Administrative capacity is a somewhat subjective metric, as well as being amenable to alteration (e.g., just add the right personnel and adjust the procedures).  Shouldn’t there be a more policy-oriented reason that sub-UST rates to smaller borrowers (with small or big projects) are outside WIFIA’s policy purpose?  After all, the larger point of the article is that the ‘new policy world’ makes it necessary to dig deeper and explain why the federal government should or should not be doing something, not only about how it might be done more efficiently or can’t be funded just now, as applicable.

Well, and to be fair to the expert witness, currently it is not clear why WIFIA should or should not be doing anything in particular (other than being generally helpful to the water infrastructure sector) because it and the other infrastructure loan programs have no explicit, precisely defined policy purpose.  So sure – sub-UST rates for small borrowers with big projects, why not?  Just add some admin capacity and the Program will be ready to go.  Who’s to say that’s mission creep when the mission is only defined by what Congress will fund? Why not ask, which is literally what the expert witness was doing in the hearing? Fair questions.

The need to address policy questions was implicitly surfacing at the hearing, but it became more evident, I think, in the 2026 WH Budget Summary.  In addition to proposing slashing cuts, that Summary makes some strong policy statements about the federal role in water infrastructure, like that “the States should be responsible for funding their own water infrastructure projects.”  Well, that certainly defines a mission, or more accurately, a non-mission, for federal policy. Doesn’t such a statement require an answer in kind?

I wrote a post about this after the WFM article was written but before that article was published: 2026 Budget Request: Policy Hints Amidst the Chaos. The Budget Summary’s radical cuts and associated policy rationales made me think that federal infrastructure loan programs might end up on somebody’s list. From that post:

“But here we are – if relevant policy directions and/or confusion [about federal support for water infrastructure finance] are emerging from the apparent chaos, they need to be addressed in the context of clear policy objectives. So, what are they? What should they be?

Here is where TIFIA, WIFIA and CWIFP have a serious problem. After you strip away all the special interest narratives, what exactly is the national purpose of federal infrastructure loan programs lending to investment-grade borrowers financing low-risk projects while debt markets are functioning normally? It could be reasonably said that there is none. In pre-2025 times, such an observation wouldn’t have mattered. Now, it might invite the DOGE chainsaw. So, a real-world, narrative-free objective, suited to the emerging political context and actual federal fiscal constraints, must be made explicit. For now, I’ll simply state what I think it should be:

The primary goal of federal infrastructure loan programs is to facilitate local funding for local infrastructure solely by utilizing intrinsic and unique federal financing strengths (relative to debt market alternatives) through loan feature design and efficient transaction implementation.“

With an explicit policy statement, the use of sub-UST rates at WIFIA can be clarified in a policy context:

• As noted in the article, a sub-UST loan has a grant (that is, funding) component.  Sub-UST loans for small borrowers with big projects would therefore be directly funding local projects.  Maybe the federal government should be doing that elsewhere, but it’s not WIFIA’s mission.

• Sub-UST loans to SRFs of course also have a grant component.  But the grant is not made to a local infrastructure project, but intended to improve a nationwide system of local lenders (by encouraging leverage) who will in turn have added capacity to facilitate local funding.  WIFIA, or more precisely SWIFIA, is — arguably — adhering to its mission in this case.

• While we’re at it, the federal government does not have any “intrinsic and unique” strengths in lending to small borrowers regardless of project size.  A national government can be made to do it, but it’s not good at it, relative to local lenders.  So WIFIA should stick to large, low-risk borrowers – a category which does include SRFs.

To be clear, you can agree or disagree with that policy statement, or you can propose something else. The point in the article and in the post, and one I’ll be making again, is that that’s the debate required for these times of federal upheaval.

PDF download