To remain a land of opportunity, all citizens—and many businesses—must have access to state-of-the-art affordable infrastructure. This does not just mean transportation. It also includes water, communications, schools, public hospitals, community colleges, and public universities. Today, most of us simply do not have this access. Moreover, we cannot attract and retain global businesses with the resources we have.
We are in this situation in part due to dysfunctional politics. The Beltway cannot agree on the basics: how to pay for the needed infrastructure, how to prioritize our needs, and the most efficient way to design and build projects.
However, more significantly, we find ourselves in such sorry shape because for decades we have suffered from a mindset that refuses to recognize that a rising tied, in this case investment in Infrastructure, raises all boats. At times the wealthy do not want to pay for the infrastructure of the poor, metropolitan areas the rural, the coasts for the Rust Belt, and so on. It is not that we leave our fellow citizens behind so much that we underachieve as a nation as a result of underinvesting in many of our communities.
President-elect Donald Trump is coming to office with a mandate to fix all this. He promises to rebuild America as the central plank of his nationalism. Even if Mr. Trump's brand of nationalism does not rule Washington, he should not get much pushback with his party controlling Congress and a sizable number of votes in favor from the opposition party despite attacks by Senator Bernie Sanders.
Many think that Donald Trump found his way to the importance of infrastructure as a politician. It has been part of his real estate strategy on several occasions. Trump's first great success was turning a run-down Commodore Hotel near Grand Central into a Grand Hyatt. He recounts the story in his best-selling book, The Art of the Deal. This investment was really one in Grand Central Terminal which was not in great shape at the time. He bet in the future of the Grand Central neighborhood. As Grand Central has grown and thrived, so has his Grand Hyatt.
So, what is Trump’s plan? Can he capitalize on this opportunity? Is the president-elect pragmatic? Does it work for those who hold starkly contrasting political positions?
The elements of the plan are clear. However, how it all fits together is not self-evident.
Before getting into even the elements though, let’s get the sticker shock out of the way. The plan aims to bring $1 trillion of public and private dollars to the table into infrastructure over the next decade.
Most commentators are sharply critical of the public-private dollar ratio. Experts think that the plan should rely mainly on public money. My view is that they are mis-reading the plan and, at times, not keyed into how major infrastructure initiatives have historically been financed in this country.
Trump has committed himself to choosing the most innovative and effective ways of financing and delivering infrastructure regardless of political pedigree. His elements read like a who’s-who of the most innovative ideas in Washington.
They include public-private partnerships, a special bond program, the repatriation of corporate profits sitting overseas, the streamlining of environmental and regulatory review processes, among others.
All of these elements enjoy at least a modicum of bipartisan support, usually much more. The bond proposal is based upon the Build America Bonds which were, according to Alan Kruger, the former Chief Economist of President Barack Obama's U.S. Treasury Department, the “unsung hero of the recovery”. In fact, Steven Mnuchin, the president-elect's choice for U.S. Treasury Secretary, even mentioned recently that the incoming administration was looking at a National Infrastructure Bank, the holy grail of bipartisan politics.
Thus far, president-elect Trump has promised to find the right ideas for America committing himself to prudent innovation.
Public-private partnerships are the cornerstone of his plan. Rather than use public outlay of money to pay the entire cost of infrastructure build-out, these partnerships use public money as honey to attract global investor money from pensions, insurers, sovereigns, endowments, and other sources. Additional partnerships are formed with global design, engineering, and construction firms with astounding capabilities to build the projects themselves.
One version of a public-private partnership is the Internet which was a public-private endeavor too, although a little more public than what Mr. Trump has in mind. Every President since George H. W. Bush has promoted partnerships, but none has yet to bring them to scale.
The real question is one of alchemy: What does it mean to combine all these elements together? What will be the likely impact?
My view is that Mr. Trump’s plan, boiled down, is about three things: moving money to market very quickly; raising money from investors who do not expect to be repaid in the near term; and designing and building projects with engineering prowess.
The plan is innovative, not stuck in partisan quibbles, merit-based, and, in an important way not straightjacketed by false dichotomies like public and private.
However, to succeed, a sizable obstacle must be faced. It is politics. Not national, but instead, state, local and non-governmental. When it comes to infrastructure, often most politics is local. The federal government cannot, for instance, settle labor disputes which inevitably arise. A politician who champions a project may lose an election and his successor not view it as a priority. A civic organization may see private money as demanding too high toll charges as a means of repayment.
The plan is a good one, including the spirit of prudent innovation behind it. The question will be whether Mr. Trump can inspire us to pull together as a single community one project at a time.