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Opinion

Main Street, not Wall Street, should fix crumbling U.S. infrastructure

Repairs will cost trillions. Public pension funds can help pave the way.

By Kathleen Sebelius, Andy Stern / May 7, 2008



Topeka, Kan. and Washington

At its best, America's infrastructure has powered our economic prosperity, created well-paying jobs, and served the public interest.

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Today, however, it has fallen into a dangerous state of disrepair. The Minnesota bridge collapse last summer brought home the urgency of repairing and modernizing our nation's system of highways, bridges, tunnels, power plants, transmission lines, and airports.

But doing so will be prohibitively expensive. Current plans seek to exploit the nation's need for private profit. But there's a better source of capital at hand: public pension funds.

The American Society of Civil Engineers estimates that $1.6 trillion is needed in the next five years alone just to maintain the adequacy of existing infrastructure.

But even if every bridge was repaired, it still would not be enough – trillions more will be required to build the new systems necessary to keep our economy competitive. As anyone who commutes every day knows, we need to reduce congestion on our roads and in the air, speed the transportation of people and goods, increase energy efficiency, and do so in ways that are environmentally sustainable.

The thought of coming up with the money necessary for all this, makes people wince – understandably. This is a time when many states face budget shortfalls and our federal deficit is at an all-time high.

Leaders of both the Republican and Democratic parties know the US cannot raise money from traditional public sources of financing, including municipal bonds, user fees, and taxes.

The financiers on Wall Street already have positioned themselves to take advantage of this national crisis for their own gain. Where most Americans see crumbling bridges and traffic congestion, the money managers see a treasure trove of fees, profits, and more record bonuses for CEOs.

It's why some private equity firms and banks on Wall Street are raising massive funds to buy these assets that have typically been owned and managed by the government.

In recent years, new infrastructure funds have been established in North America with capital commitments of $40 to $45 billion. These private funds have sprouted up like weeds, structured for short-term profits and sky-high fees – usually up to a 2 percent management fee plus up to 20 percent of the profits.

It would be a monumental mistake to turn the future of America's infrastructure over to the same crowd that brought us the subprime crisis, an economy loaded down with debt, and recession.

We should know better by now than to create a scenario where bridges and highways are sliced and diced like subprime loans into financially engineered "collateralized infrastructure obligations."

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