American Infrastructure Initiative: Policy Papers

Green Trade Balance

Economic Growth — Mon, 22 Jun 2009 06:00:00 -0400

Green investment is a major pillar of the president's economic recovery plan. Yet, America's dependence on foreign countries to produce green technologies may undermine this recovery strategy. Using a list of green goods derived from the Organization of Economic Cooperation and Development (OECD) and the Asia-Pacific Economic Cooperation (APEC), we have determined that the United States ran an overall green trade deficit of -$8.9 billion in 2008, including a deficit of -$6.4 billion in the critical category of renewable energy, one of the main targets of the Obama administration's green agenda. The U.S. economy also suffered a significant deficit in the pollution management category. On the positive side, the United States ran modest surpluses in two categories--energy efficiency and a grouping of other environmental goods related to water purification and sustainable agriculture.

Jobs Solutions for Our Jobless Recovery

Economic Growth — Tue, 19 May 2009 10:40:00 -0400

This speech was delivered at The New School on May 19, 2009.

Views on the U.S. economy

An Economic Recovery Program for the Post-Bubble Economy

adminn — Tue, 29 Jul 2008 20:23:00 -0400

Redressing America's Public Infrastructure Deficit

Economic Growth — Thu, 19 Jun 2008 06:49:00 -0400

Chairman, Oberstar, Representative Mica, and Members of the Committee, thank you for inviting me to testify today on the question of "financing infrastructure investments."

Over the past several decades, we have accumulated a sizeable public infrastructure deficit. As a result, a variety of infrastructure bottlenecks-traffic congested roads, clogged ports, and an antiquated air traffic system, to mention just a few-have begun to undercut our economy's efficiency and undermine our quality of life.

Financing America’s Infrastructure

Ron Tang — Sun, 08 Jun 2008 23:41:00 -0400

America’s basic infrastructure is outdated, worn, and in some cases, failing. Most experts agree that it is inadequate for meeting the demands of the 21st-century global economy. If we are to remain competitive, we must invest in capital assets like roads, ports, bridges, mass transit, water systems, and broadband infrastructure. Many other countries -- both rich and poor -- see investing in infrastructure as imperative for economic survival and success in an increasingly competitive economic environment. But the United States has lagged in infrastructure investment, in both relative and absolute terms. We are spending less than 2 percent of GDP on infrastructure, while China and India are spending 9 percent and 5 percent of GDP, respectively.

If the nation’s infrastructure needs are apparent, so too are the limits on available funds in federal, state, and local government coffers. In this presidential election year, we can see these limits clearly, as the nation’s spending priorities are magnified by electoral politics. Although significant government funding will likely continue to play a key role in the development of public infrastructure, the scale of our funding needs increasingly compels us to look beyond government to close the financing gap. It is for this reason that public support for private sector infrastructure investment is essential.

The good news is that while the federal government struggles to find funds to address its spending needs there is abundant private capital for infrastructure investment. An estimated $400 billion in global funds are available for equity investment in infrastructure, and the funds available to support the debt component amount to several trillion dollars if we include global central bank reserves, global pension funds, and sovereign wealth funds. Rather than focus on these large pools of global capital as a threat, we should view them as an opportunity. So, while we have enormous infrastructure financing needs, there are also enormous pools of capital available for investment. The trick is to bring the two together in a commercial, sustainable, and politically acceptable way.

The U.S. municipal bond markets have functioned well for many years, channeling private capital into financing certain elements of U.S. infrastructure. But current budgetary constraints and other market conditions mean that municipal finance is no longer adequate to meet the challenge of financing the scale of investment needed. And our current financing structures are unable to take advantage of the large pools of capital that are available for infrastructure financing.

We recommend two initiatives to help finance U.S. infrastructure needs beyond direct government grants. First, we suggest the enactment of legislation and the development of regulations to facilitate the origination and issuance of public sector covered bonds in the United States, which will provide a market-based, efficient, and secure mechanism to attract capital for infrastructure investment. Second, along the lines of a proposal by Congresswoman Rosa DeLauro (D-CT) last year, we recommend that the federal government consider the creation of a new, government-owned and -capitalized infrastructure financing entity -- a National Infrastructure Finance Enterprise -- that would pool, package, and sell existing and future public infrastructure securities in the capital markets. The proposed entity would also seek to develop an in-house capability to originate infrastructure loans and would be able to fund itself through the international capital markets. We believe that the entity should be capitalized at a far higher level than proposed in the DeLauro bill. Further, its scope should extend beyond that of the National Infrastructure Bank as currently proposed by Senators Christopher Dodd (D-CT) and Chuck Hagel (R-NE).

Despite the current climate of suspicion and distrust regarding capital markets and financial engineering techniques, we believe that this should not preclude their responsible use in the future to help address infrastructure problems that require the investment and deployment of large amounts of capital.

For the full text of the policy brief, please see the PDF attached below.

Back to Basics: A Pro-Growth Public Investment Strategy

Economic Growth — Thu, 29 Nov 2007 16:32:00 -0500

For more than a decade, rising asset prices have driven the economy, benefiting the wealthy but doing relatively little to improve either the economic status of the majority of Americans or the country’s overall competitiveness. Rising stock and housing prices created staggering short-term increases in wealth for some, but did little to bolster the nation’s preeminence in technology, industry, or agriculture.

In order to retool the economy and generate balanced, robust job growth, the government should focus on rebuilding and enhancing the nation’s energy, transportation, and communications infrastructure. Judicious investment in renewing and creating critical public goods will provide opportunities to all income classes and help ensure that employment keeps pace with population growth. We refer to this approach as “back to basics,” are turn to the sort of sensible public agenda that strengthened the economy and promoted societal well-being in the past.

In contrast, over the past 20 years, while returns to capital and the incomes of those in certain elite occupations grew rapidly, wages for lower-income and middle-class workers stagnated. To be sure, most families spend much less on food than they did in 1960, and the number of people earning over $100,000 a year has risen by over 13 percent since 1979. Yet, it has become increasingly difficult for families with two incomes to maintain a “middle-class lifestyle,” and single-earner households find it hard to keep pace with the rising costs of education, housing, and health insurance.

Almost all of the recent gains in wealth have been achieved by the relatively small number of Americans with incomes more than seven times the poverty level. In the meantime, middle-tier educated and skilled workers have been losing ground. This striking disparity is evident in income and wealth data, which show that the top 1 percent of U.S. house holds now accounts for as much of the nation’s total wealth as it did in 1913, when monopolistic business practices were the order of the day. The net worth of the top 1 percent is now greater than that of the bottom 90 percent of the nation’s households combined.6 Nearly three-quarters of all income gains from 1979 to 2000 were realized by the top 20 percent of taxpayers.

In view of these trends, it is not surprising that Americans are increasingly pessimistic about the prospects for upward mobility. For the first time in our nation’s history, two thirds of all Americans think life will not be better for their children.

A large measure of this national unease is related to our failure to invest in and maintain critical infrastructure. In the past, the belief that it was possible to better one’s economic condition by working hard was reinforced by the public and private investment in transportation systems, scientific research, and technological development that fueled economic advancement. At present, however, Americans see government as being incapable of providing up-to-date transportation systems, reliable water supplies, or even basic education. The Katrina disaster, which led to the near-destruction of New Orleans and was largely caused by local, state, and federal failures to build and repair infrastructure, crystallized these concerns.

For the full report, please see the attached PDF file below.