LEX It is embarrassing that the country that brought us the information superhighway relies on crumbling regular highways. Besides red faces, America’s fraying public infrastructure imposes costs on businesses, individuals and the environment.
The numbers involved are huge: the American Society of Civil Engineers reckons $1,600bn is needed just to bring the country’s existing infrastructure up to scratch. But is it possible to secure political support and funding to address the issue in a country wedded to low taxes and sceptical of big government?
It just might be. A bipartisan bill aimed at establishing a federal infrastructure bank is working its way through the Senate.
This entity would be similar to the European Bank for Reconstruction and Development, offering subsidies and loan guarantees for critical projects.
Several political trends are working in the bill’s favour. The disasters of Hurricane Katrina and last August’s collapse of a bridge in Minneapolis have raised public consciousness. Fears of being “overtaken” by China – which spends three times as much on infrastructure as a share of gross domestic product – add further impetus.
The bill’s explicit aim is to attract private money. Infrastructure funds, pension pools and sovereign wealth funds, with their long investment horizons, are natural sources of capital. One obstacle to the attraction of private money into US public infrastructure has been the alternative provided by a deep municipal bond market. Recent problems there might help remove that blockage.
Perhaps the most powerful argument, however, is the state of the economy. The current stimulus package has been rightly dismissed as a short-term measure merely prolonging, at best, America’s love affair with shopping.
Done properly, however, investments in public infrastructure hold out the prospect of productivity gains, as well as achieving related environmental goals. Best of all, as recession creeps up, rebuilding America creates the sort of jobs that cannot be exported.
