By Gov. Edward G. Rendell (D-Pa.) - 03/11/10 10:08 PM EST
The economy remains the No. 1 issue in the minds of most Americans and they are searching for something that will revitalize it. But at the same time they are worried about too much government spending and a growing federal deficit.
Of course, there are no easy answers, but I firmly believe that the best response to these challenges is for America to launch an effort to rebuild, revitalize and modernize our infrastructure. The need to do so is readily apparent: Our bridges and roads are crumbling and often present real danger to the public. Our water and wastewater systems are cracking and leaking and present real public health hazards. Locks and levees are old, outdated and literally falling part, and as New Orleans and Cedar Rapids have sadly shown, not fixing them can cause the loss of lives and tremendous economic damage as well. Our electric grid and our broadband networks are woefully inadequate and they are hampering our ability to register the economic gains that can come from new energy and technology services.
Can America afford to do this? I believe we can’t afford not to do it. Every other G-7 nation has undertaken a massive infrastructure revitalization program in the last 15 years and we must also if we are to remain economically competitive. Our country is like every business; if we don’t invest in our assets and acquire new ones when necessary, we simply cannot remain successful.
The good news is that meeting this challenge will revitalize the American economy like nothing else can. Analysts estimate that every billion dollars spent on infrastructure creates between 20,000 and 40,000 jobs on the construction sites. These are good-paying jobs that cannot be outsourced. The same is the case for the jobs at manufacturing plants producing steel, concrete and asphalt, and other materials used in the repair and build-out. So, do the computation. Take the low end of the estimate (20,000 jobs per every billion spent on infrastructure) and a $2 trillion revitalization program would mean 40 million jobs would be produced. If it took five years to complete the work, it would mean roughly 8 million jobs per year, almost the exact number our nation lost in the recession!
Would the American people, troubled by the growing deficit, support such a program? I believe they will because they understand the difference between ineffective government spending and investing in repairing and improving this nation’s assets. A poll conducted by the respected pollster Frank Luntz for Building America’s Future, the organization I co-chair with California Gov. Arnold Schwarzenegger and New York Mayor Michael Bloomberg, found that Americans would be willing to pay more in federal taxes for safer, cleaner and better-maintained infrastructure.
And the best news of all is that the cost for this does not need to be borne solely by the federal budget; therefore, the impact on the deficit can be significantly minimized. I say this because I take into account both the expenditures and the revenues generated by infrastructure investments.
The Congressional Budget Office and the Office of Management and Budget fail to calculate the earnings to the Treasury generated by making these types of federal investments. First, we should focus on the net costs of investing in infrastructure, not simply the expenditures. Those eight million jobs created a year will increase federal income taxes paid to the Treasury. In addition, the corporate earnings of the steel, concrete and other supply companies will also produce additional taxes for the federal coffers. A legitimate and comprehensive analysis of the costs of such investments must clearly include the offsetting revenue expected from the investment. I am confident that this approach to estimating the costs to the federal government will show that such investments may help reduce federal deficit growth.
Second, it is important to realize that in the last several decades, state and local governments covered a substantial portion of infrastructure repair in America (65-75 percent). In today’s economy states cannot continue to contribute at such substantial level. But I am convinced that they would certainly pay a significant portion of the costs if more federal funds were put on the table to be matched with state and local resources.
Third, the private sector stands ready to invest hundreds of billions of dollars in rebuilding our country’s infrastructure. We can and should incentivize this by creating a National Infrastructure Bank (as in the European Union), raising the cap on Private Activity Bonds, increasing funding for the successful TIFIA program and allowing states to toll highways built with federal funds. We should also find a way to expand the TIFIA loan program model to help states and local governments lower the cost of water and other infrastructure projects that have dedicated revenue streams.
Finally, we can mitigate a great deal of the impact on the deficit by further using the federal government’s bonding capacity. Building America Bonds and GARVEE Bonds have been very successful tools in helping states rebuild. Simply allowing states to take advantage of the federal interest rate, with a federal loan guarantee, can also lower project costs to states and local governments. That also seems like an idea worth exploring.
These are just some of the good and innovative ideas to finance such a program and minimize the impact on the deficit. The American people will support this job producing, economic revitalization plan. So let’s not waste any more time. Let’s rebuild America now. America’s future depends on it.
Rendell is co-chairman of Building America’s Future.