Where Might A Needed Economic Stimulus Come From? A Private Infrastructure Initiative
One of the save-the-economy notions floating around Washington these days is something called the American Infrastructure Financing Authority It’s a public-private approach to refurbishing and modernizing our roads, bridges, public transit, schools, and other infrastructure.
In its current proposal form, it would have the government front $10 billion in start up capital for infrastructure projects that would pay for themselves over time (e.g. through tolls), with private parties providing the bulk of the capital needed to fully fund these projects. The incentive for these private parties is government guarantees to protect their investments.
Not a bad idea. It’s pathetically small in terms of the badly aging infrastructure it hopes to improve and the jobs it seeks to create. But in the context of present-day Washington, surprisingly commonsensical.
Only there’s a better way. One that could generate far, far more capital toward infrastructure improvement and create far, far more jobs. It’s a private sector-only approach to these challenges.
Here’s the idea:
Corporate America has an estimated $1.5 trillion in house it isn’t using to expand because demand (at least in this country) doesn’t warrant investing this vast sum in expansion. This money is now also being seen by CFOs as necessary reserves in case the economy tanks still further. This $1.5 trillion is therefore not likely to go into a private infrastructure initiative.
Large corporations, however, have one other major asset that might be applied to this purpose. Their ability to borrow at the exceptionally low rates being held down by the Fed. While small businesses can’t tap this cheap money because banks and investors shy away from lending to them, large corporations with good looking balance sheets and the implied backing of the Fed, can tap this well easily. Thus a great deal of cheap borrowed money could potentially go into a large corporations-only private infrastructure initiative.
What would it cost an individual company to be part of such an initiative? Not much on a yearly basis. Borrowing rates (from banks or via bonds) for highly rated corporations are piddling today. A $10 million or $20 million project to improve schools, roads, public transit, bridge repair, or other infrastructure could be funded for a few hundred thousand in interest payments annually — and the principal easily rolled over years down the road.
Multiply that one private company-funded project by thousands of projects, you get big bucks flowing into infrastructure improvement and big number job creation. The source of funding here is banks or the market, with no government participation. The cost guarantor is not one government but many large corporate entities.
Now, one might ask, why should companies do this? One answer comes from not viewing large corporations as inherently evil entities and their top management as mindless parasites. These people know the consequences of deficient infrastructure better than most Americans, and the consequences of excessive long-term unemployment for company bottom lines. They’re also, by in large, decent people who don’t wish to watch their country’s economy going down the drain and their fellow Americans suffering.
In purely business terms, a company leveraging annual outlays of a few hundred thousand dollars in interest payments to put hundreds of people to work on worthwhile infrastructure projects is great public relations, and could almost certainly be written off as such or otherwise handled in a tax-friendly way via a corporate-related foundation.
Infrastructure that benefits everyone might also be especially beneficial to companies funding it. Roads on which companies trucks run, public transit and highways bringing company employees to work, clean water needed in huge qualities by many companies for their own operations, might be a special focus of any given company’s own initiative. And if this spending relieves a local government from a project’s cost, would that government object? A silly question. That government would simply have more money to spend on other infrastructure needs.
It’s obvious to anyone who knows how large corporations actually operate that the basic idea here is anything but new. Some computer companies have long supplied schools with their products to promote computer literacy and product identification that will help their sales in the future. Some financial service giants have long promoted financial education in schools because they want to gain creds with tomorrow’s investors. Big companies have been gifting public infrastructure in all sorts of ways over the years.
What’s new here is the scope of the proposal, its systematic and far more expansive nature. And most important, the funding mechanism — tapping the huge pool of capital in banks and in the market that is currently not going to where it should be going — infrastructure improvement and jobs creation — at a time when a Washington train wrecked government can’t (for fiscal reasons) or won’t (for political reasons) provide the capital to do what has to be done in this realm.
So Corporate America has to step up and do the job. Corporate America, which for sound business reasons won’t tap its $1.5 trillion in stockpiled wealth to reanimate the economy, must use its good credit borrowing status to unlock the unused (or misused) capital in banks and markets to repair America and put it back to work.
There are many vital things at stake here. One of them is the salvation of the kind of capitalism this country has long known and whose fruits we’ve long enjoyed.
More from (and about) this writer at http://cootavengers.com/
17 Responses to “Where Might A Needed Economic Stimulus Come From? A Private Infrastructure Initiative”
I agree, and how about a quick infusion by allowing repatriated corporate bucks and Swiss amnesty dollars from overseas? Taxed on a sliding scale dependent on the % contribution participation in the Get Some F—– Jobs Going Already, Fund.
Yeah they are hanging onto the money they gleaned from all of us. I’m for instituting profit margin laws against this crap. There is no reason what-so-ever why any business should be allowed more than a 7% profit margin. Keep a large portion of wealth in the hands of the people and it will keep the economy working like it is supposed to. Stop trying to take it ALL!
A “public-private partnership” is not a private initiative, obviously.
Doing infrastructure projects, as some (if not many) of us not only anticipated but expected as part of the 2009-2010 stimulus? Well, better late than never in conceiving of such a thing. [scowl]
Note that we don’t have the money to spend that we had in 2009, far from it. (Is that why inviting the private sector, no doubt with visions of all that money business is currently sitting on out of concerns and of uncertainty, on some minds? And it’s not a tax if it’s voluntary!) Is it possible to have governments contract for some kinds of these projects now, with federal funds given to them (state and local governments, which should be doing these things and making the contracts)?
As far as borrowing, do we want more debt now, even if (finally?) for something that is logical to borrow to do? And anybody who lives or has lived in the Bay Area with its large water crossings (and infrastructure projects) knows better than to believe that the tolls to pay off the bonds would go away once the debt is retired.
An infrastructure initiative, finally? Yes, maybe, but bear in mind it raises more questions than answers given what we have observed.
This plan requires a leap of faith that corporations are ethical. I have a hard time making that leap of faith.
I also take issue with the idea that corporations have helped through donating computers to schools and educating kids on finances. Corporations have also stocked schools with junk food adding to the obesity epidemic and taken advantage of college students through shady lending practices, expensive textbooks, and dishonest credit card advertising.
Are we all tired of leaps of faith? Will that mean Obama’s second Hopey/Changey 2012 campaign might not do so well. I say this infrastructure/whatever idea is better than temporary cash for clunkers and payroll tax reduction ploy. Keep the faith baby and pass that joint.
DLS-
What do you mean we don’t have the money to spend that we had in 2009?
We went into the RED INK under Bush and the majority republican congress in 2002.
If we didn’t have it then, why did YOU REPUBLICANS keep spending it on frivolous crap and tax breaks for the greedy rich? Why, pray tell, didn’t YOU REPUBLICANS balance the checkbook?
What’s good for the goose is good for the gander, we will now spend to help OUR people, and, it will come out of the, way over bloated, defense budget, and, the pockets of the rich trough taxation.
[sigh] If you ever read and understood things well, Allen, you’d know that I’m not a Republican, and I’ve been tough on Republicans when they’ve earned it (just as I’ve studied pet liberal causes and learned more, apparently, than so many liberals, it often seems).
The leap of faith would be what Dems and libs would hope for the public (the mainstream and everyone right of it, anyway). We’ve given the Dems a chance, despite knowing better, in 2009-2010 and we’ve seen what they did — they failed (and did much that repelled the mainstream and everyone right of it). It takes a real leap of faith to expect confidence this time in trying (while in fact for those of us in the know it is revisiting) what should have been tried and done in the first place. Why would anyone intelligent trust them again?
(And it’s only made more ludicrous if we see more things like Rachel Maddow drooling over gigantic infrastructure projects from the 1930s — an attitude beyond adoring FDR, but also the fascist tyrants in Europe in the 1930s — the same things that the Left ordinarily decries and excoriates, notably things like dams.)
Hitler built roads.
Rachel Maddow wants to build more roads.
Just sayin’!
How is this any different than the Kemp FEZ from then 1980′s? Kemp’s “Compassionate Conservative” stance didn’t work 20 years ago, how will it work in today’s Teabagger anti-government environment?
The problem with that idea is that infrastructure is rarely profitable, it cost a small fortune to build and if you’re lucky you will get your money back in 30 to 40 years.
Here is the standard case of private infrastructure:
Bear Mountain Bridge
Build it and the newly minted believers will come and cross it, ride on it, go to school in it, and see how clean it all is.
There’s still a very legitimate fear that we are inevitably heading for a depression. No sane private company is going to risk their assets when it might be their only protection.
Prof, for a tax break and good will, and the country (Play National Anthem).
I don’t know ask them and I’m sure some would step up like Microsoft, Berkshire, GE.
That’s why they have the Business Round Table and Jeff Imelt.
Absalon (Axel): Rachel Maddow also drools over 1930s monstrous mega-federal-infrastructure-objects as well as projects, such as Hoover Dam.
Of course, it’s in a way honest, given that in the USA fascism has been the preferred way for our Left. The megalomania, though, is diseased, and is especially diseased given we’re not able as in the 1930s to throw huge amounts of money into controversial (not only constitutionally) projects, especially after the culprits were given their chance despite history and wisdom, and they fucked it up badly.
Does anyone real or serious believe it will be different the second time, when we don’t have the money to spend (waste) we did before, and it has been proven (again we can’t trust Them)?
Anyone who says “Yes” is dishonest or (substantially) diseased.
Prof. Elwood wrote:
So it is with individuals and households, too: Despite the differences, Japan once more shows us more than many want to see.