It was hard not to think of recent comments by Bruce Flatt, Brookfield Asset Management’s chief executive, when US President Joe Biden announced his much-vaunted $2.3 trillion infrastructure plan last week.
When it comes to private sector infrastructure investment, Flatt said, the “less drama” the better. “Because when there are big plans, often nothing happens. And therefore just the slow and steady monetisation of infrastructure is the best way countries can get it done,” he argued.
Well, so much for that. President Biden’s “once-in-a-generation” infrastructure plan is big – though not as big as some would like – bold, divisive and, thanks to Biden’s insistence on paying for it through tax increases, guaranteed to generate plenty of political “drama” in the months to come.
While infrastructure is often touted as a bipartisan issue, Politico is not wrong to say that “infrastructure has become the ultimate partisan battleground” – or at least has the potential to. Even before the plan was announced, Republican Senate minority leader Mitch McConnell warned it “may actually be a Trojan horse for massive tax hikes”. Its focus on clean energy and sustainable infrastructure is equally divisive along partisan lines.
To the disappointment of many of our readers, perhaps, the plan is also not overtly welcoming to the private sector. There’s no talk of catalysing public-private partnerships and no push to privatise, much less a federally-structured asset-recycling scheme. If anything, there’s even a hint of hostility when Biden stresses the plan is not “a vision… seen through the eyes of Wall Street”.
But while not exactly welcoming, the plan doesn’t stand in the private sector’s way either. In fact, there are plenty of opportunities to co-operate, taking in everything from renewables, to high-speed broadband, to EV charging infrastructure. That’s in addition to more traditional transportation opportunities, even if there is a healthy debate around what the plan considers ‘infrastructure’.
Equally importantly, “Biden is using fuzzy math to say the plan is paid for”, the Washington Post explains. That is, his intended tax increases would take 15 years to pay for a $2.3 trillion spend that will take place over a period of eight. Or put differently, the president’s proposed tax increases will raise about $1.5 trillion over a decade, leaving $1 trillion to be added to the country’s debt… or raised in some other fashion.
Of course, as a publication focused on private infrastructure investment, we would’ve preferred a more comprehensive plan – something less focused on public money and more along the lines of what I Squared Capital chairman Sadek Whaba proposed recently.
But, harkening back to Flatt’s comments, we wonder if, in not getting what it wants, the industry is actually getting what it needs.
Given all the “drama” that’s likely to envelop the plan in the coming months, the private sector’s potential role in it can certainly do without the harsh glare of the spotlight. Assuming it survives the coming scrape – intact or otherwise – we have a feeling there will be plenty of opportunities for private capital to participate.