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Your guide to what the 2024 US election means for Washington and the world
The writer is the author of ‘Build: Investing in America’s Infrastructure’, a member of the president’s National Infrastructure Advisory Council and chair of I Squared Capital
When Donald Trump began his first term as US president, one of his primary objectives was to invest in American infrastructure. However, his administration’s attempts to develop a major infrastructure programme were stymied by internal challenges and later by the pandemic.
In 2021, the Biden administration passed the bipartisan $1.2tn Infrastructure Investment and Jobs Act. In the years since, capital has been allocated across various sectors in both red and blue states successfully upgrading roads, removing lead from water systems and improving bridges — although progress has been slower than anticipated.
The IIJA was a once-in-a-generation investment. However, the federal debt now exceeds 120 per cent of GDP and the deficit is over 6 per cent of GDP, making continued traditional infrastructure spending unsustainable.
Historically, the private sector has played a pivotal role in filling infrastructure investment gaps. For the first 140 years of the American republic, essential infrastructure such as roads, water systems and railways were largely built and managed by private entities with government support. It was only during the Depression and second world war that roles were reversed. The government assumed control of public works with the private sector playing a secondary role — a model that is still with us today.
A second Trump administration has a unique opportunity to build on the IIJA and fundamentally alter the way US infrastructure is managed. The private sector should be encouraged to manage and operate infrastructure assets, with the government focusing on regulation of natural monopolies, like water systems and roads. By providing a stable, well-developed regulatory framework, the government can attract long-term capital to these assets, encouraging investment from US pension funds, domestic capital and foreign investors.
Consider the water sector. More than 90 per cent of US water systems are owned by local or regional governments. Managing these systems is a colossal challenge for federal and state governments, as well as agencies such as the Environmental Protection Agency. A regulatory framework at the federal and state levels that incentivises private aggregation of water utilities could create economies of scale and deliver significant benefits to consumers, driving economic growth and job creation. The National Infrastructure Advisory Council that advises the president has suggested exactly this in its latest report on the US water sector.
Airports offer another compelling example. In America, most airports are state- or locally owned and managed, unlike in Europe, where over 40 per cent have at least some private shareholders. By adopting a public-private partnership model for airports, the federal government would allow local governments to gain access to new capital, tax revenue from airport commerce and foster economic growth in airport-adjacent communities. For instance, San Juan’s Luis Muñoz Marín International Airport, the only major airport that undertook a PPP in 2013, is projected to generate an estimated $2.6bn in economic benefits for the city over the life of the arrangement. The same model could be applied to the air traffic control system.
A truly visionary infrastructure plan must embrace the transformative potential of PPPs, using recent advances in the way such arrangements are structured to address reservations that state and municipal policymakers may have. This is an issue that transcends ideological divides. At its core there should be a pragmatic discussion about what mechanisms deliver the best outcomes. In some instances, government-driven initiatives will prevail, while in others the private sector will prove more effective. As John Maynard Keynes once observed: “The line of demarcation between [public and private enterprise] is constantly changing in accordance with the practical needs of the day. As to where precisely this line should be drawn, no great question of principle is involved.”
The Trump administration and Congress have a historic opportunity to build on the infrastructure milestones of the past four years and inaugurate a new era of innovation. By harnessing cutting-edge technology and unlocking the power of private capital, they can revolutionise the delivery of infrastructure and set the stage for transformative progress.
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