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New move to woo private capital for public works
Construction on the I-580 freeway in Emeryville, Calif.
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Kai Ryssdal: I know out here on the West Coast there's been a lot of attention paid the past couple of days to disaster preparedness, how we might manage in an earthquake like Japan's. Substitute a different natural disaster, and the same question applies to most of the rest of the country: How infrastructure would hold up.
The White House says improving roads, pipelines and even broadband networks is a priority. That'll mean money and lots of it, which is why Washington, in this case, is going to have to make nice with Wall Street. Our New York bureau chief Heidi Moore reports.
Heidi Moore: This week, Marketplace has learned Massachusetts Senator John Kerry is likely to introduce a bill to create a national infrastructure bank. The bank would be seeded with government money. But -- and this is unusual -- its primary purpose would be to get Wall Street to pick up part of the bill for future construction projects.
That's a good move, according to Michael Likosky. He wrote a book called "Obama's Bank: Financing a Durable New Deal."
Michael Likosky: What an infrastructure bank at its core is about, it's about building new things and bringing private capital in to build new things.
Here's how it might work: The government would put in as much as $50 billion. Wall Street would add to that and it would have a say in investment decisions. The profits would be split proportionally. Bernard Schwartz, a long-time executive, says that $50 billion could quadruple once professional investors add their own funds.
America needs $2 trillion just to fix its old roads and water systems. Previous plans to boost public works spending have called on the government to pay for everything -- which it can't afford.
Schwartz, like other supporters of this idea, sees the infrastructure push as a solution to the nation's unemployment problem.
Schwartz: For every billion dollars of transportation infrastructure that's invested, it's estimated that about 46,000 people are put back to work.
Schwartz believes that several million Americans could get off the unemployment line if Washington and Wall Street can work together on the new bank.
In New York, I'm Heidi Moore for Marketplace.
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To Sam Mandke: You need to read your pre-1950 history a bit better. Many early transit systems were in fact privately owned in the US prior to WWII. Compare transit access now to transit access then; it's no comparison. Acess decreased steadily after WWII and is only recently seeing a revival, often with public-private partnerships playing a role.
Beyond transit, water systems, telegraph lines and many early inter-city roads were also privately built or built as public-private partnerships. PPP and private involvement in infrastructure development ARE our nation's history.
Private involvement is not a panacea, but neither (certainly) is 100% government funding, construction and management. PPP is a way forward. Clinging to the failing model of the late 20th century won't work, nor will completely relying on the private sector. A national infrastructure bank could be a major step in facilitating successful PPP in tyhe US.
How do the private investors make their money back? I understand that the roads are better, more business gets done, but it's hard to see what your ROI is that way. Are they suggesting that the private companies own the roads they paid for (which make sense) and then they could charge tolls to get their investment back? Or is the idea that this is just another loan and the government will be paying the private interests back?
The idea of private investment in public works seems short-sighted and contrary to the history of infrastructure utility in this country. The National Highway System, which spurred economic growth for the latter half of the last century was not a private enterprise, and we would be remiss if it was. History has demonstrated that private ownership of infrastructure leads to less access and increased costs to the public. Look at the railroad barons of yesteryear.
Commend John Kerry...are you kidding me...these guys stay awake at night figuring out new ways to spend "our money"...share profits....what profits...this is the same guy who threw medals (not his) over the White House gates to make a point...of course this was before he was a senator.
@Ross Spalding, the U.S. Government does NOT tax all citizens. Therein lies one of the problems. We have many folks who choose to take all that America has to offer in terms of opportunity but when America asks for these folks to help contribute (pay taxes) to maintaining the system that provided for their successes they would rather avoid it and freeload.
We also have many folks who are illegal immigrants, who for the most part would probably like to become legal citizens but cannot because of our failed immigration policies, that are living and working in the U.S. and using our public services (road, schools and hospitals) but not paying into the tax systems that funds these services.
In a nutshell, we have a lot of people living under our roof that are not helping to pay the rent and keep the lights on. Some are freeloading with some false sense that they are entitled to benefit without having to contribute and others are forced into hiding in the shadow economy where there is no mechanism to allow them to contribute.
Before we talk about budget deficit problems and what we can cut or how government can find new ways to help pay for public services, it would be logical to first consider how many folks the government is supporting vs. how many people are supporting government.
I hate paying taxes but I see it as a necessary and patriotic thing to do. I love this country and have nothing but appreciation for the standard of living it has allowed me to have.
@Nick Knight, highways were hever supposed (and are probably not) money making endeavors. They are public goods that only government can provide. Trains are not, most are privately owned and managed.
America has refused to invest in its infrastructure for decades, blinded by the promise of an overinflated stock market and political moral hazard. If it continues, America will enter a painful period of economic and social turmoil, far worse than we saw in 2008. True, America is far over leveraged and needs to find a solution to its debt problems, but if America's infrastructure fails first, it's debt and dollar will be worthless and the global economic implications would be futile. This is a good idea, and I commend John Kerry for such taking such a necessary political risk.
I do not understand how the U. S. Government (which taxes all citizens )can afford to put $50 billion up to create an infrastructure bank to push expensive alternative energy onto all citizens.Then requiring other private firms to come up with even more billions. We are broke, but the far left wackos really do not care!
Heidi Moore says
"America needs $2 trillion just to fix its old roads and water systems. Previous plans to boost public works spending have called on the government to pay for everything -- which it can't afford."
Nonsense.
The social costs of the government paying for this infrastructure is far lower then the social costs of the Bankers owning america's infrastructure.
Japan is about to spend 3 trillion rebuilding Japan post quake. There is no question that they can afford this.
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