In 2008, Illinois Senator and Democratic Presidential nominee Barack Obama visited the Janesville Assembly Plant, an automobile factory owned by General Motors Company (GM) and located in Janesville, Wisconsin. There, Obama – in the midst of a White House run that captivated the US, as well as much of the globe – made a speech that put the crux of his platform front and centre.
Leveraging his claim as the lone candidate to oppose the Iraq War, Obama went on to frame himself as the harbinger of sweeping economic reform. His premise was simple: the capital America was spending on the war effort was better spent domestically, invested in affordable education, child care, job training, and rebuilding transportation infrastructure. The soon-to-be 44th US president then revealed one of his trump cards – America needed a national infrastructure bank.
“We have stood by while our national infrastructure has crumbled and decayed,” said Obama. “For our economy, our safety…we have to rebuild America. I am proposing a national infrastructure reinvestment bank”.
Come 2013, the Janesville plant, established in 1919 and the longest operating GM site, is closed. Insurgent violence in Iraq has risen, while Obama, now in his second term as President, has continued to champion a national infrastructure bank. In a 2011 address before a joint session of Congress, Obama reiterated his call for a $10 billion infrastructure bank. His most recent appeal to invest in “crumbled and decayed” infrastructure came in his Tuesday, February 13th ‘State of the Union’ address.
As far as the asset class is concerned, he made his most significant mention of infrastructure to date. For the first time in his crusade to establish infrastructure as part of the national discussion, Obama referenced “private sector participation”.
“I am proposing a Partnership to Rebuild America,” Obama announced, marking his first overt, active championing of private capital as the catalyst to develop and repair infrastructure in the US. It was a departure for the President, who has repeatedly posited that financing infrastructure is largely the domain of the taxpayer.
The ‘Partnership to Rebuild America,’ he said, would modernise seaports as well as pipeline infrastructure. He added the ‘Fix-It-First’ component of his proposal, a programme the White House said is geared to repair surface transportation infrastructure. On Wednesday, February 20th, the president urged Congress to approve $50 billion to fund his infrastructure agenda – $10 billion of which he asked to be earmarked to create a national infrastructure bank.
The White House has gone on to describe ‘Fix-It-First” as essentially a public-private partnership (PPP; P3) mechanism, leveraging initial federal spending with private capital to repair transportation infrastructure in the manner of TIFIA (the Transportation Infrastructure Finance and Innovation Act).
Little that President Obama has suggested to address the US infrastructure crisis so far has come to bear. The national infrastructure bank proposal floated in 2008 has not materialised. There is a chance the ‘Partnership to Rebuild America’ will suffer a similar fate. Congress has resisted Obama whenever ‘investment,’ i.e., ‘government spending’ is mentioned. If political will is lacking, public support is generally non-existent.
Similarly, the medium – the P3 – can be hard to reconcile with the message. Yes, a private operator can run an infrastructure asset more effectively while turning a profit. Yes, the asset class has no shortage of capital to invest in public infrastructure. But the idea of the P3 ‘serving the public good’ remains, despite this, a tough sell.