Filling meaningful new jobs is a high priority for the US. In July there were 1,137,000 unemployed construction workers and probably one-third more who have given up. No layer of government seems to have money for infrastructure projects our nation needs, and there is neither a shortage of dwellings, nor an awaiting throng of move-up home buyers. Viable construction projects are scant.
But by joining two developments we could repair this gloomy state of affairs.
First, private finance initiative: “The public sector decides what type of project it wants. The private sector then designs, finances, builds and operates it – usually on a contract of 25-30 years that includes full maintenance. At the end of the contract, the public sector is handed back the project in full working order. If it is delivered late or over budget, or fails to perform once up and running, in theory the private sector pays.” In Britain, Canada, and Australia, PFI addresses many public infrastructure needs (roads, airports, bridges, schools, hospitals…) that government entities might take on if only they had the money. PFI has enthusiasts and detractors. Most bitter feelings arise when government circumstances take an unanticipated downturn while the private funders have the gall to continue earning contractually specified profits. But, most projects come in on time and budget and are run well – governments get what they ask for.
Second, a $1.84 Trillion stash of cash: US corporations generate earnings from foreign operations and face a 35% US tax if they bring the income back for state-side uses. They are reluctant to pay more than the minimum tax when they repatriate the funds. It takes heroic efforts by lawyers and accountants to drag money back to the US. Merger and acquisition gambits are often used but there appear to be few accusations of actual fraud.
So, suppose offshore cash could be repatriated tax free if used as the capital for public infrastructure projects. With sensible conditions on project selection (e.g. must be construction of infrastructure; no vote-purchasing giveaways, no operating funds for government departments, no union-only handicap), and reasonable conditions on the PFI bidder (e.g. project net income is taxed at normal rates, heavy penalties for contract non-compliance, equity saleable only after 5 years). Some extremists loathe private sector involvement in traditional monopolies of government; other extremists who mistrust government to specify a list of needed infrastructures. But a chunk of almost $2 Trillion could set off a construction tsunami that brings jobs to millions of unemployed Americans. We hope that remains the focus as leaders discuss this idea.
Alan Daley is a retired businessman living in Florida. He follows public policy issues from the consumer’s perspective.