By Henry Teitelbaum, Editor, P3 Planet
Over the past six years, Republicans have become very adept at blocking US President Barack Obama from achieving anything in Washington, often through tactics that could have done lasting damage to the nation’s credit standing in the world.
Now that the Republicans have control over both houses of Congress, it’s time for them to grow up. The 114th Congress brings with it just about enough time before the 2016 Presidential election campaign for the Republicans to craft a meaningful federal agenda that will prove it is more than just the party that says “no”.
While there is already talk of working together on a tax reform or immigration agenda over the next six months, it’s hard to imagine a breakthrough on issues of such long-standing disagreement between the two parties.
Finding Common Ground Yet?
There is, however, common political ground to be found in seeking to fix America’s critical infrastructure. This is because senior leaders of both parties recognize that progress in this area depends largely on successfully enabling private investors to finance, deliver and maintain these essential public works.
America’s neglected bridges, roads, water and sewage systems have become a very visible example of how Republicans can pretty much block any program for which the other party might conceivably claim credit. As a result, investment in infrastructure is now at a 20-year low, even though companies have mountains of cash to put to work, interest rates for new borrowing are at rock bottom levels, and pension funds are running out of suitable domestic investments with a reasonable yield to match their long-term liabilities.
With the Republicans at the helm, one would hope they’d have enough sense to do something about this for the sake of their own constituencies, among them big business. But they are a fractious lot, and now include among their ranks some true believers in the notion that the federal government should have no other responsibility than to pay for the nation’s defense.
Reining in the Radicals
Indeed, the toughest opposition that the Republican leadership will encounter is likely to be among the same zealots who saw nothing wrong with trying to force the US to default on its debts this time last year. Getting these people to accede to the logic supporting any new federal spending, no matter how necessary or immediately beneficial to the economy, will be interesting to watch.
One thing they won’t be able to do, though, is blame the Democrats for inaction on an infrastructure investment agenda. For all the criticism levied against Obama’s handling of the economy, the president’s first term saw the American Recovery and Reinvestment Act of 2009 will have made some $831 billion federal dollars available for promoting economic recovery, including some $111 billion for shovel-ready infrastructure projects.
Of course, the amount spent on infrastructure was only a small fraction of what is needed to upgrade America’s highway and bridge infrastructure. But ARRA supported the economy through a period of low private sector demand and allowed America to avoid the kind of prolonged, austerity-led downturn that Europe has been experiencing.
The federal government could go much further to support private sector investment in infrastructure. President Obama’s blueprint for an infrastructure bank would help to catalyze private investment in projects through government backed project finance bonds, credits to states on individual projects or through private investors that successfully bid for projects through the Public Private Partnership (P3) model.
Thought Leadership Up for Grabs
Indeed, at the state level, both parties have shown a laudable openness to trying new ways to procure and pay for critical infrastructure improvements. Current and former Republican governors have been at the forefront of enabling P3 programs, and can point to successes in states such as Indiana and California, where private investors finance, design, build redevelop and operate roadways and other transportation projects in their state.
These experiences have also shown that an infrastructure-led investment agenda can boost economic activity while delivering long-term value for money. Infrastructure investment quickly puts money in the pockets of those hired to do the work, triggering a multiplier effect through higher consumption, higher tax revenue, and increased re-investment.
Infrastructure investment brings longer term benefits as well. Among these is improved economic competitiveness through better transportation links, more efficient energy distribution, and better quality water services. It also helps make America a more attractive destination for foreign investment.
Finally, this type of investment is anchored in the domestic economy, which means it delivers benefits to the same voters who threw the Democrats out of office precisely because of the slow pace of economic recovery.
So what’s it going to be? More pandering to the far-right fringe? Or will we see a constructive Congressional agenda that does what’s best for the country?