A national investment fund to save America

A national investment fund to save America
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Make no mistake: The potentially fatal flaw in President Biden’s American Jobs Act is not the tax increases for corporations from 21 percent to 28 percent and for households making more than $400,000 a year, or in programs that do not fall under traditional definitions of infrastructure, such as electric cars, charging stations, home care services and job work forces. Indeed, as the Wall Street Journal points out, raising corporate taxes will not help economic growth, could raise costs for consumers and might constrain 401K and other retirement plans.

The fatal flaw is hidden in plain sight and, so far, has not been raised by proponents or opponents of the plan. The fatal flaw is the absence of a strategy to administer, execute and oversee the effective, efficient and legal dispersal of funds. Without such a strategy, no ambitious plan can succeed.   

Compounding the lack of an execution and oversight strategy are two other negative factors. The Biden team is filled with senior officials with experience in government and policy. But none has a strong business and management background in the private sector. One reason that the Troubled Asset Relief Program (TARP) of the second Bush administration succeeded was the role of Treasury Secretary Henry Paulson, former chairman of banking giant Goldman Sachs. By forcing banks to accept federal loans and to a degree to go “public,” the government made money by taking convertible debt holdings that became very profitable as stock prices increased.


Second, by a large margin, the public distrusts the federal government to manage much of anything. During the Obama years, “shovel-ready” programs was a slogan not a reality, and technology disasters such as investments in Solyndra’s solar panels confirmed this cynicism as some half-a-billion dollars in loans evaporated when the company imploded.

The Trump administration promised that tax cuts would pay down the national debt. But it soared as revenues could not keep pace with increased spending. And despite tariffs on Chinese goods, the trade imbalance grew. 

Given that the Biden infrastructure plan faces powerful opposition, what might be an alternative that can address these criticisms related to taxes, debt and oversight? It is painfully obvious that obsolete American infrastructure – from the power grid to highways, bridges, air and sea ports, education and the internet – must be repaired and modernized for the 21st century. Sadly, the national track record in fixing its infrastructure has been consistent: complain and take no real action.

The answer is through a public-private partnership investment fund seeded with about $1 trillion in federal money (and hence needing fewer tax increases) and at least an equal amount raised from the private sector through the issuance of 30-year bonds incentivized with 2-3 percent interest rates above prime guaranteed by the government. The fund would be off-budget and repaid by user fees, tolls and returns on investment. TARP demonstrates that smartly done, government can indeed make money on its loans.

The fund could be used to cover the whole Biden plan. Indeed, the $400 billion directed towards housing and care could be used to collect modest rent and even be the means for residents to buy back and own their homes. But what is critical is to create a mechanism to administer, execute and oversee the investments. None so far has been described in the current program. Here, the major threat is politicization of any organization to exercise and oversee the proper use of these funds that would destroy any chance of success.


One solution is to put in place a national oversight board for the whole plan. Committees would reinforce the board, with one functioning as the equivalent of a board of directors for venture investments, with government taking a convertible debt position in these companies that can return a profit as the technology develops. These boards should be filled with experts from the private sector who must be free of any potential conflict of interest. And each board might benefit from the presence of a Cabinet secretary or deputy and even a representative from Congress.

The name could be taken from the greatest economic boom in American history following the 1918-1920 Spanish Flu and called the 1923 National Investment Fund. But without a strategy for execution and oversight, Biden’s American Jobs Act is at profound risk.

Harlan Ullman, Ph.D., is United Press International’s Arnaud de Borchgrave Distinguished Columnist. His latest book due out this year is “The Fifth Horseman and the New MAD: The Tragic History of How Massive Attacks of Disruption Endangered, Infected, Engulfed and Disunited a 51% Nation and the Rest of the World.”