Obama Launches Private-Public Partnership to Address Infrastructure Construction

July 30, 2014

President Obama intends to address infrastructure construction with a new "public-private partnership" called the Build America Investment Initiative, explains Diana Furchtgott-Roth, director of Economics21.

What is a private-public partnership? The concept is a partnership between the government and private parties. In the case of the Build America Investment Initiative, the federal government would work with states and cities to grant them federal loans and encourage them to enter into private sector partnerships.

Furchtgott-Roth cautions against the very notion of a public-private partnership, writing that partnerships are supposed to consist of equal partners that share in risks and rewards. Businesses and governments, she writes, cannot be equal, as one party taxes the other. 

The initiative would include a Transportation Investment Center within the Department of Transportation, which would serve as a public-private infrastructure bank. When President Obama proposed a similar bank in 2011, cost projections were $5 billion for 2010 and $30 billion over the following six years. Congress did not authorize funding for the project. Instead, President Obama is using his executive power to create something similar.

The Build America Investment Initiative would also include:

  • A navigator service, which would explain to states and local governments how to access federal credit programs and design public-private partnerships.
  • Programs to encourage the use of credit programs with the Department of Transportation that are designed to spur private sector investment.
  • Technical assistance to ensure that the public and private sector can work together on these projects.

Furchtgott-Roth warns that government and the private sector are not good partners, and the flow of money between the two can create the appearance of impropriety. She also questions whether the government would use its leverage to require the payment of above-market wages or the use of environmental impact statements.

Source: Diana Furchtgott-Roth, "Obama Dances Around Serious Transportation Fixes," Economics21, July 22, 2014

 

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