On Friday, President Obama outlined a new plan that, he said, would seek to attract private investment for public infrastructure, while also creating new bonds and offering more loans for similar projects.
1.3 trillion dollars needed
A think-tank in Washington has one idea for leveraging private investment toward infrastructure: encourage the investment of labour union pension funds in infrastructure projects.
“Couple [our poor state of infrastructure] with pension funds, which are long-term, patient investors, with stable, risk-adjusted returns, and this fits well with our fiduciary duty,” Dan Pedrotty, managing director of benefits and pensions at the American Federation of Teachers, said Thursday at the release of a report on the topic at the Center for American Progress (CAP).
Pension funds present a viable alternative to traditional public financing because their large-scale assets and long-term nature give them the ability to put up a large amount of capital and see projects through to their payoff—obstacles typically thought to be too large for any investor except the federal government.
The report also suggests the time is ripe, both economically and politically, for this kind of change.Inter Press Service
U.S. Eyes Pension Funds to Renew Crumbling Infrastructure
Katelyn Fossett
This is incoherent from the point of view of monetary economics given the existing monetary system. However, there is actually a rationale to it that works. In providing infrastructure bonds, the federal government is providing safe asset and an interest subsidy for future pensioners, similar to the Social Security trust fund.
While neither taxation nor borrowing are necessary operationally, they are apparently necessary politically in order to elicit the bipartisan support required to pass legislation. The difference is that the Social Security trust fund is "funded" by taxes, while the infrastructure improvements would be "funded by borrowing."
Whatever it takes, I guess, given the prevailing level of asininity in policy making. But it would be simpler to just cut to the chase and use the available policy space to deploy the available resources that are not being requisitioned by the private sector.
