During his address to the nation, the president reiterated his ambition “to rebuild and revitalize our nation‘s infrastructure.” He declared, “This is not an option — this is a necessity.”
Unfortunately, the president’s ambition may remain unattainable unless we rethink how we approach infrastructure financing and ownership, and develop a strategy compatible with the president’s vision.
For generations, government has assumed responsibility for constructing and operating the nation’s infrastructure. The federal government is presently broke, and state and local governments are grappling with deficits. Given the magnitude of the endeavor and public opposition to raising taxes, government-sponsored options are either impractical or incompatible with the president’s stated objectives.
The solution lies with the greatest wealth generation machine ever invented — capitalism. Corporations and private investment funds have amassed trillions of dollars over the course of the Trump economy, and they’re looking to invest in low-risk infrastructure that offers a decent return on investment. It isn’t necessary for federal, state or local governments to finance and maintain revenue-producing infrastructure projects when private capital is available.
The concept is known as BOO (build, own and operate), and it does not rely on government funding. There’s no need to persuade a truculently hostile Congress to pass the infrastructure bill and no need for Congress’s consent to facilitate private ownership of new projects — conceptually, there is no difference between private ownership of a hotel, a power plant or a bridge. Privatization of infrastructure would include but not be limited to roads, bridges, tunnels, treatment plants and airports. Tolls and user fees are more than capable of defraying operating costs and retiring debts.
The effect of privatization could be massive. It has the potential to create a long-term economic expansion that will dwarf the scale of the Pacific Railroad and the National Interstate and Defense Highways acts combined.
It’s also a more flexible approach than the one we have traditionally used. New private infrastructure would, in most cases, supplement existing public infrastructure, not replace it. The public would enjoy a dual benefit: reduced congestion on public roads and the availability of private infrastructure. Further, federal and state funds could be directed to the projects that are necessary but that would not offer acceptable returns.
Privatization would open a new page in collaboration between the public and private sectors. The states would provide a right of way, sovereign immunity and the permits as their contribution to the projects scopes while the private sector known for its efficiency and innovation would offer financing and project management.
The system, however, has to overcome the government monopoly that has created nearly insurmountable hurdles to private enterprise entering the field as owners and operators of the facilities. The chief obstacle to privatizing is an ingrained quasi-socialist mentality, making state and local governments the principal owners of the nation’s infrastructure. Beginning of 1980, owners started treating the assets as a revenue stream. Nationwide, tolling has become a familiar feature of the American landscape. The fundamental flaw of this policy is that the government, as law enforcer and protector of consumers from inherent warts and blemishes of the capitalist system, has become part of the system — it owns and operates for-profit enterprises.
In those mutually exclusive capacities, the government is in a position to abuse its power with impunity. It is, therefore, not surprising that owners have embraced monopolistic behavior — manipulating supply and demand to justify constantly raising taxes (property, gasoline and general local taxes), as well as user fees and tolls, ostensibly to build and maintain roads while neglecting maintenance and repair. Privatization would force the government to reassert itself as a law enforcer and protector of public interest.
There are a number of fully-permitted and “shovel-ready” — but stranded, in some cases for years — infrastructure projects. Despite numerous proposals from firms with expertise and financial backing, state governments would rather have the projects remain stranded for another 30 years than yield their ownership to a private entity.
The result, as we have seen, is a complete stagnation of progress when it comes to infrastructure reform. It’s time for the president himself to assume a decisive role in allowing private actors to get more involved in the game — and to usher in a new era of mass prosperity.
Alexander G. Markovsky (@AlexMarkovsky) is a senior fellow at the London Center for Policy Research, a conservative think hosted at King’s College, New York City, which examines national security, energy, risk-analysis and other public policy issues, He is the author of “Anatomy of a Bolshevik” and “Liberal Bolshevism: America Did Not Defeat Communism, She Adopted It.” He is the owner and CEO of Litwin Management Services, LLC.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.