Toward a New Federal Role in Infrastructure Investment: Using U.S. Sovereign Wealth to Rebuild America

Abstract

As the United States emerges from the economic collapse of 2008, the question of how to address years of chronic underinvestment in infrastructure remains a pressing issue. Taken together, annual investment in public and quasi-public infrastructure systems of 4% to 6% of GDP ($500-$700 billion) will probably be necessary for the foreseeable future, but in an era of trillion-dollar deficits, no funding source is projected to have the capacity to generate funds sufficient for infrastructure investment at these levels. At the same time, there is a clear and immediate need for public and institutional pension funds to invest in instruments that can generate stable, long-term, and low-risk returns on equity. This article attempts to weave together the concurrent needs for infrastructure investment and improved returns to U.S. pension plans and begin a dialogue on a conceptual approach that could have the capacity to supply significant additional capital for infrastructure while at the same time addressing the needs of U.S. retirement systems to obtain higher returns with minimal risk. The core idea of the proposal is to use a combination of public and institutional pension funds, individual retirement accounts, and other private investment capital, together with Social Security Trust Funds to capitalize a National Infrastructure Bank that would provide senior debt to fund projects and programs supported by user fees or other reliable and sustainable revenue streams. This proposal is viewed as a new and novel way of raising the massive amounts of capital that will be necessary to recapitalize America’s infrastructure.