Western Front You didn't build that, Act II

Again, US President Barack Obama evoked infrastructure in a nationally televised speech.

Again, his well-intentioned call to recognise transportation infrastructure as critical for the economic well-being of America came agonizingly close to making the asset class relevant for a mass audience.

Again, he unfortunately missed a shot to plead his case compellingly and may actually have done more harm than good – at least as far as helping to posit private investment in public infrastructure as a viable solution in the US is concerned.

Like his last effort to make infrastructure part of the national discussion – his appeal for a national infrastructure bank, made in his 2011 address to a joint session of Congress – his latest ‘we need to invest in our infrastructure’ argument started off promisingly.

It was Martin Luther King Day when the president celebrated his inauguration, having won his second four-year term in the White House. When Obama cited climate change, referencing the “overwhelming judgment of science”, he made an appropriate nod to the aftermath of Hurricane Sandy. The Halloween ‘super-storm’ debilitated the US East Coast, highlighting the need to create and finance energy and transportation infrastructure that can withstand hitherto unprecedented extreme weather.

But his misjudgment came when he talked about road-building. When Obama alluded to federal spending, he announced that “no single person” could “build” the transportation system. “We,” according to Obama, have to subsidise economic growth, as well as infrastructure building.

Here, the “You didn’t build that” put-down Obama hurled in his campaign against private equity maven and erstwhile Republican Presidential rival Mitt Romney with regard to bridge and road building is especially apt. As far as progressive pragmatist Obama is concerned, the private sector isn’t a job-creator, Washington is. Moreover, the private sector doesn’t fund and build infrastructure – that’s down to the taxpayer.

SPENDING ON INFRASTRUCTURE

In the past, whether in his State of the Union address or through his job plan, President Obama has put forward a budget request asking for increased government spending on infrastructure.

Borrowing capital to build infrastructure is an unpopular notion with the US public, evidenced in how Sarah Palin struck a popular chord with her “I told Congress ‘thanks but no thanks’ for that bridge to nowhere” statement in regard to backing a federally funded bridge in Alaska when she was governor. At the same time, infrastructure has proved to be a blunt tool in its ability to stave off unemployment in the badly suffering construction sector.

Obama tried to gain support for a national infrastructure bank using his rationale that building (and rebuilding) infrastructure was a job-creator, rather than a necessary buttress for economic survival – a flawed approach that cost infrastructure investment after his stimulus failed to address joblessness. Compounding the problem is the fact that Capitol Hill is the owner of a traditionally lacklustre track record in picking what kind of ‘infrastructure’ to spend on – ‘green’ energy and high-speed rail have been prioritised.

The outlook for the asset class in the US in 2013 and into the near-term is good, but a vote of confidence from a re-elected President would have gone a long way. To bring up infrastructure – and road construction in particular – without mention of private investment is especially galling. The US highway system, built by the World War II generation and suffering from generation upon generation of neglect and under-investment ever since, was responsible for transforming the US economy and America itself. ‘We the people’ know that, and we need all the help we can get in restoring and expanding it.