As debates go, this one seems to be moot for now. The President, who pushed for public-private partnerships as his avenue to fixing the nation’s failing infrastructure both during the campaign and for a while after taking office, has since decided to abandon the concept. There were several reasons given by different people in the administration, but an under-discussed reason was likely timing. Once the President learned it would be years before the first shovel hit the ground, he decided to table the concept to focus on more immediate needs like his wall, Obamacare, and tax reform.
It was a smart political move but doesn’t get us any closer to having roads and bridges worthy of use.
Two interesting articles came out arguing for an against PPPs:
Against: Joel Moser
Joel Moser is Founder and CEO of Aquamarine Investment Partners, an Adjunct Professor at Columbia University (International and Public Affairs) and a member of the Council on Foreign Relations.
The problem is not that private investment in infrastructure can’t work. In fact it works quite well. Rather, the issue is not how the capital is raised but how it’s repaid. So while choosing a financing mode for a bridge may be a more impactful decision that picking a paint color, it doesn’t get the bridge built free of cost. The real question is the funding method, whether the money raised will be repaid with taxes or tolls, so by the general public or the using public. Once you have a viable funding plan, you can choose the most efficient financing mechanism.
For: R. Richard Geddes
R. Richard Geddes is a visiting scholar at the American Enterprise Institute. He is also a professor of policy analysis and management and the Director of the Cornell Program in Infrastructure Policy at Cornell University.
New, globally pervasive approaches to infrastructure delivery would help the US address those problems. The main such approach is the public-private partnership, or PPP. PPP typically refers to the bundling of tasks required to deliver a big infrastructure project, such as its design, construction, operation, maintenance and financing, in various combinations via a contract between the public-sector sponsor of the project and a private partner. The PPP contract also transfers many of the enormous risks associated with delivering any major project from taxpayers onto private investors, who are often in a better position to control and manage those risks.
Both have very valid points. Moser’s perspective that we’re simply not ready to embrace the idea is correct, though he doesn’t take into account that the problem could be quickly solved if a small group of activists and politicians truly pushed the plan to the American people. He says that government moves too slowly, but in a world with social media and fickle public opinions, government could be made to move quickly for something important.
Geddes points out that we’re not diving into untested waters. Not only do PPPs work very well in countries such as Canada, they also have been shown to be more efficient and yield better results when handled locally or all the way up to the state level. Could it would at the national level? The answer to that question is one of the reasons why we’re siding with Geddes.
Things couldn’t get worse when it comes to infrastructure repair and maintenance. Currently, it’s abysmal. When given the option of allowing private firms to manage this instead of the government, our confidence level rises dramatically. There are few things more efficient than American companies with their reputation and future on the line. Those who step up to the challenge will be much more likely to succeed than what’s happening in our current situation. Today, government contracts are practically expected to yield poor results. Companies have very little incentive to meet or exceed expectations because they have no real skin in the game. With PPPs, they’re partners in success or failure. I trust them to succeed in that scenario more than I would with the current common scenarios.
Now really might not be the best time with so much turmoil in DC, but this is an idea that should be pushed forward as soon as possible. The President should reconsider this. It’s ironic that one of his best ideas is one that he abandoned too quickly.