Source: The Boston Globe
BUSINESS GROUPS and labor have at least one thing in common right now: a frustration that our politics are producing more hot rhetoric than good jobs, even as crucial national needs go unaddressed. But if private industry and labor unions pool their money and their political influence, they can lead the way toward modernizing an aging national infrastructure that dulls America’s competitive edge. In doing so, they would also start building the kind of longer-term economic compact necessary to sustain the high-quality jobs that the nation desperately needs.
The United States needs some kind of national infrastructure bank – an entity that would provide the financing for long-overdue repairs and improvements to our roads, bridges, and other public works. There is a $2.2 trillion backlog of such projects. Amid rising concerns about federal spending, infrastructure investments are more efficient economic drivers than tax cuts or other stimulus spending in achieving these goals.
Moody’s Economy.com estimates every $1 spent on infrastructure generates a $1.59 increase in GDP. University of Massachusetts Professor Robert Pollin has shown these projects generate between 20 to 30 percent more jobs than equivalent tax cuts.
For such reasons, President Obama is likely to call for greater infrastructure spending in his upcoming jobs talk. But some in Congress have already called it “dead in the water,’’ in large part because it looks to them like another big government program.
This is why business and labor need to lead this effort. By showing they are willing to work together to fund and manage a private-public bank, they can help convince Congress to do its part – essentially, to authorize issuance of special low-interest bonds. And, by working together, business and labor can show Congress and the American people they are trying to help end the polarization that is killing the economic recovery and ruining our democracy.
As governments around the world face growing fiscal pressures, the use of some outside money for public infrastructure has become more common, and these investments have paid off well for investors, workers, and customers. In Britain, 15 percent of infrastructure projects are now private-public partnerships. These projects are chosen purely on their economic merits, not for political patronage, and have achieved high on-time and on-budget performance outcomes, 80 percent customer satisfaction ratings, and higher employment standards than conventionally financed and managed projects.
Meanwhile, the Housing Investment Trust, funded by the US building trades, has financed over 100,000 housing units since its inception and has consistently met its benchmark rate of return. Indeed, there is growing interest in this market. Goldman Sachs, Citigroup, and Morgan Stanley have created their own global infrastructure investment funds. It’s time the nation as a whole catches up with this new market opportunity.
The AFL-CIO has stated it is ready to commit up to $10 billion from union pension funds over the next five years to help fund a national infrastructure bank. Now business leaders, who say they are reluctant to invest because of uncertainty about where the economy is headed, need to get off the sidelines and use some of their large piles of cash to join in creating a long-term strategy for making investments in American jobs pay off.
Wall Street should be able to more than match what labor is contributing – and then put its financial engineering talents to work to help assemble investment vehicles to build up the bank’s capacity.
There is a broader issue here. In an era of narrow partisanship, the United States needs a long-term compact – not just between business and labor, but also involving government and educational institutions – to create conditions that promote innovation, sustainable economic growth, and high-skilled employment. On Labor Day and beyond, America’s workers should convert their anger over the lack of jobs into a call for such a compact.
An infrastructure bank is just the first step. But by working together to get such a plan back on the agenda, business and labor would not only be advancing their own interests, but those of the nation.
Thomas A. Kochan, a professor at the MIT Sloan School of Management, is the co-founder of the Employment Policy Research Network.