US President Barack Obama’s stimulus package looks set to pass the Senate this week, with the Republicans and the Democrats having reached a preliminary agreement on it on 6 February. But one important feature failed to result from all the legislative wrangling, despite its being backed by top economic adviser Larry Summers: provisions to encourage large-scale private investment in infrastructure. That deserves to be shoehorned into the final Bill before Obama signs it.
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There may be as much as $180 billion (Rs8.75 trillion) of capital for infrastructure projects sitting on the sidelines, according to Barclays Capital, Carlyle Infrastructure Partners, Chadbourne and Parke Llp., Credit Suisse and others released on 28 January. Even if that is an exaggeration, any and all ways to reduce the burden on taxpayers should be explored.
Indeed, Summers, director of the National Economic Council, told lawmakers in a letter on 12 January that Obama would seek to maximize the role of private investment in the stimulus package. The new president also backs a national infrastructure bank that could help finance private sector investments.
Even leveraged conservatively, the $180 billion could fund a lot of infrastructure projects. Of course, those can be uneconomical when gross domestic product is trending down—making it more difficult to get projects such as toll roads to pay off. But there are still ways to prime the private investment pump. The government could offer subsidized loans, insurance or co-investments, for example. These approaches could be cheaper than simply plunking taxpayer funds directly into projects.
Sure, there are political concerns about private sector involvement in crucial public goods. But concessions can be structured to overcome these worries by, for example, leaving the actual ownership of the infrastructure with the government. In any case, when devising a stimulus package that will cause the ballooning government budget deficit to swell even more, some trade-offs are worth making.