New money for old…road
The 19th century American writer and humorist Mark Twain once declared "The lack of money is the root of all evil." How true today, especially in Washington, DC.
Money is at the root of the disagreement preventing the United States from making much-needed investment in its roads, highways, bridges, hi-speed rail, and many other capital-intensive engineering projects to facilitate the movement of people, trade, and data.
US President Joe Biden has put forward his $2 trillion-plus infrastructure investment package, but Senate Minority Leader Mitch McConnell opposes both the high price and the increased corporate taxes the president wants to finance it. And so, the waiting game continues.
By comparison, the China-proposed Belt and Road Initiative is already speedily underway. With such momentum, as China's 6th century BC warrior and philosopher Sun Tzu knew so well, "Opportunities multiply as they are seized."
The US can employ a new method to pay for the greatest infrastructure revitalization program since World War II. It involves the around $3 trillion of profits US multinational corporations admit to having "trapped" abroad for the past few decades. The solution seems obvious. To paraphrase 14th century English poet Geoffrey Chaucer, it's time to "Bring home the bacon."
Through this ironic "foreign" direct investment America will acquire the financial wherewithal to begin upgrading its decrepit infrastructure, while maintaining fiscal discipline (meaning, not increasing the national debt or corporate taxes). Unfortunately, this method will mean bankers and fund managers across Europe, the UK, Asia, and beyond will hear a giant sucking sound as they lose deposits. Yet, this approach will also trigger a renaissance for Chinese, Indian, and European steel plants as well as shipping fleets (sectors from which the US began retreating decades ago).
With leadership from Senator McConnell, lawmakers could mint lasting political capital by legislating a zero federal tax rate on the repatriation of profits corporate America has stockpiled overseas. That would "free" those sums for redeployment into the US where needed most. This is all about US corporations investing to modernize their home country's dismal road systems, ports, railroads, broadband networks, and drinking water systems so as to generate competitive advantage plus long-term value. Best of all, such projects will create decades-worth of much needed jobs.
There is only one caveat: US companies that elect this tax-absent patriotism must use their repatriated offshore profits to buy qualified infrastructure long bonds directly from states, municipalities, and Tribal lands.
Crisp national standards can be established to facilitate those jurisdictions' bond structuring, origination, and ratings. Also, project management best-practices can hew to US Army Corps of Engineers standards and procedures so as to infuse selected projects with rigorous planning, design, engineering, procurement / contracting, construction, and maintenance.
The long bonds can be serviced via alternative public-private techniques such as tax-increment financing (income streams derived from taxing new construction activities and related services). In other words, familiar territory to state and local governments.
Governors, mayors, and Tribal leaders should prepare for their anticipated windfalls by immediately identifying, assessing, and prioritizing infrastructure projects in their respective backyards.
Some regressive jurisdictions' elected officials may rail against such manna from heaven. Partisan ideology and well-oiled political rhetoric have plagued the US for generations. Over the past half century that duality has enabled thinly masked special interests to reap short-term private advantages and profits for client entities at the perennial public liability and expense of those respective ecosystems' citizens. However, today's winds of change, if not recognized early and harnessed smartly by said officials, could leave in their wakes irredeemable modern Dust Bowls.
On the sunny side of the dilapidated tracks, progressive governors and mayors (who, fundamentally, operate in the "Reality & Accountability" business) will instantly grasp this elegant solution's potential and establish infrastructure boards. Most states brim with retired professional talent. Jurisdictions found deficient should begin recruiting now. Results-oriented officials can appoint to their boards a range of retired and ever-vigorous generals, private-sector project managers, engineers, CFOs, CFAs, CPAs, and lawyers, all itching for new challenges.
Appointees will provide oversight for their respective state's rebuilding priorities while performing two other crucial functions: 1) Managing reverse auctions to ensure transparent, frothy, and cost-effective markets for finance entities' services; 2) Maintaining an unblinking 24/7 weather eye on the institutional funds, private equity groups, and other service providers to which those boards have awarded short-term mandates.
In this manner US corporate leviathans can tax-efficiently deploy their mountains of cash and enable America to "Build Back Better".
If Senator McConnell remains slow in seizing this once-in-a-lifetime opportunity, President Biden can activate it tomorrow by Executive Order.
Just like the Chinese today, Mark Twain in 1889 understood the need for speed: "All good things arise unto them that wait -- and don't die in the meantime."
Jim Egan is the Founder and President of the exploration company Ferrumar.
The opinions expressed here are those of the writer and do not represent the views of China Daily and China Daily website.
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