Infrastructure key to long-run U.S. growth--panel

By Pedro Nicolaci da Costa

NEW YORK, May 22 (Reuters) - Washington's efforts to prop up a flagging economy with tax breaks for consumers may provide a short-term boost, but job-creating infrastructure investment is central to growth in the long run, a panel of experts said on Thursday.

Speaking at the New School University, the group of economists and investors agreed that while these longer horizon projects are less palatable politically, capital injections into things like public transport, bridges and schools must be part and parcel of a sustainable growth strategy because they create employment.

Their comments come in a month when the Treasury has distributed more than $150 billion in tax rebates to millions of Americans, in the hopes that they will continue spending and help prevent a deeper economic slowdown.

"The recovery plan may be wrong in very basic ways," said Teresa Ghilarducci, professor of economic policy analysis at the New School.

That's because the odd $600 check in the mail is unlikely to create very many jobs, which economists say is a foundation for stable consumption.

"Economists think way too much about GDP and way too little about people," said Lawrence Mishel, president of the Economic Policy Institute in Washington.

The panel proposed the creation of a U.S. version of the European Bank for Reconstruction and Development, a government entity that could oversee infrastructure investment and lead partnerships between the private and public sectors.

The economy has been reeling from the worst housing downturn since the Great Depression, which has been accompanied by a crippling financial crisis that has dried up bank lending.

Participants at the New School meeting were supportive of efforts to take quick steps to prevent further pain, but argued that these must be accompanied by an overarching plan to make growth less prone to boom-bust cycles.

"Infrastructure spending could prove a major source of growth for the U.S. economy," said Heidi Crebo-Rediker, co-director of the Global Strategic Finance Initiative.

She envisioned a big role for sovereign wealth funds, large pools of government capital from places like Middle East and China that have emerged as major players in international financial markets during the last few years.

Crebo-Rediker added that the market for covered bonds, used widely in Europe but largely absent in the United States, could provide a good source of funding for infrastructure projects. (Editing by Leslie Adler)