By Guest Columnist KEITH MASON, an advisor and investor in economic development and infrastructure projects
Since the recent election, President-elect Trump and his team have been touting his goal of investing $550 billion to $1 trillion over the next decade in new infrastructure.
Voters across America expressed support for greater infrastructure investment by approving over 70 percent of related ballot initiatives in states and local communities. We saw it here in Georgia with the passage of a number special purpose local sales tax and bond initiatives, most notably the expansion of the MARTA tax to help pay for the Atlanta BeltLine and other transit projects.
Before the election, I met with Jason Grumet, President of the Bipartisan Policy Center to discuss opportunities on how to build greater results around what was already an issue supported by both Hillary Clinton and Donald Trump. Although I had thought then that I would be writing on this subject now from the standpoint of someone who had served on the Hillary Clinton Infrastructure Policy team, I am pleased that “infrastructure” has become “the happiest word in American politics”, as noted recently by Grumet in The Washington Post.
Today, the U.S. is consistently ranked behind many of its global competitors for infrastructure investment and spends roughly half of what it did 35 years ago, less than 2 percent of our Gross Domestic Product. As of last year, the average age of our fixed infrastructure assets, both public and private, was 22.8 years, the oldest since 1925 when such data was first kept.
Trump has the opportunity to start addressing this gap by building a bipartisan bridge throughout our country with sustained and vigorous infrastructure development. Numerous studies have proven that building new infrastructure and repairing existing assets creates immediate jobs in construction and manufacturing and, in turn, improves overall efficiency, competitiveness and quality of life.
As my longtime colleague and friend, Marcia Hale, president of Building America’s Future, a group representing a variety of former public officials pushing infrastructure investment said recently in The Washington Post, “The President elect is a builder at heart. A developer. … This is the one thing he knows. This is a passion for him and he’s very comfortable in this space.”
Georgia happens to be home to the nation’s busiest airport and fourth busiest and fastest growing container port. As chairman of the board for the Georgia Ports Authority (2001-2003), during its most rapid-growth period, I have witnessed how such investments can result in the creation of thousands of jobs and billions in income.
In my professional work with public and private industry leaders, identifying and connecting new infrastructure opportunities with private capital and management resources, I have found a desire to not just repair and build our nation’s physical assets, but a willingness to embrace new and untraditional approaches in financing, development, design and operation.
Many of those solutions are found in public/private partnerships(P3) that provide the financing necessary to rebuild our infrastructure by identifying new sources of capital that can incentivize and accelerate investment. Together, elected officials and American businesses can usher in a new era of prosperity and connectivity by sharing financial responsibility and risk with private investors instead of relying exclusively on public taxpayers.
There are a number of proposals that have been suggested at the federal level capable of unlocking the door to more sources of private capital for projects at all levels of government. Trump’s advisors Wilbur Ross and Peter Navarro developed a 10-page plan centered around the use of federal tax credits for private investors. Last year, President Obama sent Congress a plan for business tax reform using a one-time 14 percent tax on $2 trillion in corporate overseas profits as a way to help pay for infrastructure. There are other proposals in Congress that would expand the use of private activity bonds (PAB) for more asset classes beyond transportation, such as public buildings and water systems even when there is private equity and management in the projects. (See Performance Based Building Coalition for more background on these.)
I have spent my entire 30-plus-year career working with both the public and private sector on economic development and infrastructure projects across the U.S. as a participant from multiple vantage points, which include being a professional advisor, an investor, and public official. One of the most important lessons I have learned from these experiences is that the best way to grow our economy for ALL Americans is to strengthen our investments in infrastructure here at home, which, in turn, create good, middle class jobs for American workers. These are the kinds of jobs that cannot be shipped overseas and they make us a stronger nation.
Last week, I attended a Bloomberg-sponsored conference in Washington on “New Directions for U.S. Infrastructure,” which featured leaders from across industry, labor and governments who echoed a common theme: it is time to heal the labor-business divide, Republican-Democratic divide, and our urban-rural divides. I agree.
Now, let’s get to work and get it done.
Note to readers: In addition to his role with economic development and infrastructure projects, Mason has served as a senior Bill Clinton White House official, chief of staff to former Georgia Gov. Zell Miller, and chair of Georgia Ports Authority.
I am quite sure that turning public infrastructure monopolies over to private operators is not the best path to take to solve our nation's infrastructure problems. We are acting as if there is some limitation on the Federal government's ability to to finance its own infrastructure requirements, which is absurd. There is nothing stopping the Federal government from spending $1 trillion on infrastructure immediately without any reliance on private sector capital. And it would be much more efficient. Private capital will require a 15% return on investment. Public dollars require 0%. Therefore you get 15% more infrastructure on every dollar spent.
We need to dispel the notion that our Federal government is broke and can't spend money. We spent $1 trillion on TARP and never missed a beat. Just spend the money!
We wasted $1 trillion on TARP.
We know what we have tried does not work. Explain in detail what you propose.
I am not offering an opinion on TARP one way or anther. I am simply pointing out that the Federal government is not operationally revenue constrained in any way. Bernanke has tried to explain this but no one seems to get it (go to the 8 minute mark of this video where he explains it: https://www.youtube.com/watch?v=uRM9qV4lkEg).
What I am suggesting is that the Federal government is fully capable of spending $1 trillion (or any other amount) on infrastructure without raising taxes, issuing debt or cutting spending on other activities. Economists call this "overt money finance". The only limiting factor is the impact that spending has on inflation. Given our historically low inflation and significant excess capacity, inflation is not a real threat (but it would of course have to be watched).
In the absence of this approach, what we are more likely to see is a private capital concessions approach as advocated here by Mr. Mason. Under that approach, the public loses control of its public infrastructure while at the same time paying more for it. Great deal, huh?
I appreciate the links to Trump's 10 page plan for infrastructure and the Performance Based Coalition Building website.