- Development & Aid
- Economy & Trade
- Human Rights
- Global Governance
- Civil Society
Wednesday, March 21, 2018
WASHINGTON, Mar 29 2013 (IPS) - President Barack Obama doubled down on a new push for infrastructure investment in a major speech Friday, highlighting roads, ports and bridges that many say have suffered from decades of insufficient upkeep.
“When the American Society of [Civil] Engineers put out their 2013 report card on our national infrastructure, they gave it the best overall grade in 12 years … the bad news is we went from a D to a D+,” President Obama said, speaking at a port in Miami.
“We still have all kinds of deferred maintenance. We still have too many ports that aren’t equipped for today’s world commerce. We’ve still got too many rail lines that are too slow and clogged up. We’ve still got too many roads that are in disrepair, too many bridges that aren’t safe.”
The American Society of Civil Engineers (ASCE) annual report the president referenced was released earlier this month and has spurred a debate over infrastructure and spending in Washington and beyond.
“We know that investing in infrastructure is essential to support healthy, vibrant communities. Infrastructure is also critical for long-term economic growth, increasing GDP, employment, household income, and exports. The reverse is also true – without prioritizing our nation’s infrastructure needs, deteriorating conditions can become a drag on the economy,” the report states.
On Friday, President Obama outlined a new plan that, he said, would seek to attract private investment for public infrastructure, while also creating new bonds and offering more loans for similar projects.
1.3 trillion dollars needed
A think-tank in Washington has one idea for leveraging private investment toward infrastructure: encourage the investment of labour union pension funds in infrastructure projects.
“Couple [our poor state of infrastructure] with pension funds, which are long-term, patient investors, with stable, risk-adjusted returns, and this fits well with our fiduciary duty,” Dan Pedrotty, managing director of benefits and pensions at the American Federation of Teachers, said Thursday at the release of a report on the topic at the Center for American Progress (CAP).
Pension funds present a viable alternative to traditional public financing because their large-scale assets and long-term nature give them the ability to put up a large amount of capital and see projects through to their payoff—obstacles typically thought to be too large for any investor except the federal government.
The report also suggests the time is ripe, both economically and politically, for this kind of change.
“We will need an extra 1.3 trillion dollars in infrastructure investments over the next 10 years,” Donna Cooper, co-author of the report and a senior fellow at the Center for American Progress, said Thursday. She was referring in part to the recent American Society of Civil Engineers report.
“There is [also] an unemployment rate of 14 percent in construction … and a reduction in construction investment.”
The report focused on the business interests of investors, but also the unique benefits the plan can generate for the labour unions themselves.
For example, a paper from the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) that outlines its infrastructure investment standards says it encourages pension funds to “invest in infrastructure projects that utilize union construction labor and protect the jobs, collective bargaining rights and working conditions of current employees.”
And as with any policy discussion in Washington right now, the overall mood of fiscal constraint lends the plan particular appeal.
“Putting existing money to use is certainly much more politically popular than spending new money,” Baruch Feigenbaum at the Reason Foundation, a free-market-oriented think tank, told IPS.
Supplementing government money with private investment from pension funds could also free up scarce government grants, the new report states, to go to projects “where user fees or other dedicated revenues are not likely to be sufficient to repay investors”.
Charting a way forward
Going forward, the report highlights structural changes that should be made to facilitate greater union pension fund investment in infrastructure.
Those proposals included the establishment of a national infrastructure bank with experts “who have the background and expertise to build working relationships with pension funds” and bringing back taxable bonds like Build America Bonds, which provided more of a federal subsidy to state and local governments than traditional bonds.
Obama’s speech on Friday went on to propose such an infrastructure bank and introduced America Fast Forward Bonds modeled on the success of the earlier Build America Bonds.
Much of the discussion on Thursday also focused on models that the U.S. could use in designing such a shift.
In 2012, for instance, as part of a strategy to strengthen the UK’s Manchester Airports Group (MAG), a Melbourne-based pension fund manager, Industry Funds Management (IFM), bought a 35-percent stake in the group. The additional capital allowed MAG to buy another airport and plan a large-scale renewal project to balance out the airport market share that Heathrow Airport Holdings had come to gobble up over the years.
The deal resulted in a 10-percent increase in employment and a 26-percent increase in underlying operating profit.
But smaller-scale models also exist in some U.S. cities already, like Chicago, which established the Chicago Infrastructure Trust in 2013 that functions much like the infrastructure bank suggested by the report and proposed by President Obama Friday.
The trust’s six board members are tasked with reaching out to private investors and developing financing strategies for different public works projects.
“Hopefully those local projects can spur on the federal government,” Pedrotty said Thursday.
IPS is an international communication institution with a global news agency at its core, raising the voices of the South
and civil society on issues of development, globalisation, human rights and the environment
Copyright © 2018 IPS-Inter Press Service. All rights reserved. - Terms & Conditions
You have the Power to Make a Difference
Would you consider a $20.00 contribution today that will help to keep the IPS news wire active? Your contribution will make a huge difference.