Obama Promises Infrastructure Jobs to Stimulate Economy
Presidential contenders, Barack Obama and John McCain have announced plans to stimulate the economy by creating jobs. Among the most pressing issues in which the federal government is being urged to intervene: infrastructure.
Democratic hopeful, Barack Obama, has promised up to two million new jobs annually through national infrastructure investment. On his web site, Obama says he, “believes that it is critically important for the United States to rebuild its national transportation infrastructure – its highways, bridges, roads, ports, air, and train systems – to strengthen user safety, bolster our long-term competitiveness and ensure our economy continues to grow.”
Republican presidential candidate, John McCain has not proposed a blueprint for road, rail and bridge construction, according to Reuters. The report contends that McCain, however, is a “voracious critic of how Congress loads up infrastructure spending bills with pet projects for members and special interests.” He has vowed to seek line-item veto authority on what he calls wasteful spending.
Regardless of who is sitting in the oval office next year, the federal government is likely going to be forced to spend billions to rebuild and improve the nation’s decaying infrastructure. In fact, the American Society of Civil Engineers forecasts that $1.6 trillion needs to be invested in U.S. infrastructure over the next five years. The country needs to wake up to the dire state of its infrastructure, according a report co-published by the Urban Land Institute and Ernst & Young. “The status quo increasingly looks like a precarious option — relying on existing networks and systems will only hamstring future growth and compromise sustainability. This country simply cannot afford to keep treating infrastructure as an afterthought,” the report states.
Decaying Infrastructure
The Federal Transit Administration says $21.8 billion is needed annually over the next 20 years to maintain and improve the operational capacity of transit systems. The Federal Highway Administration says $131.7 billion and $9.4 billion is needed respectively every year over the next 20 years to repair deficient roads and bridges.
The U.S. needs to overhaul its outdated regional infrastructure planning process and create a viable federal framework, or face compromising its ability to compete in a global marketplace, according to the Urban Land Institute and Ernst & Young.
“Unfortunately, the infrastructure debate in this country only moves forward when catastrophic examples occur of the state of our bridges, roads, airports and water systems,” said Mike Lucki, Head of Ernst & Young’s Global Infrastructure Services Group. “If we are going to address this issue and be in a position to challenge rampant economies such as China over the next few decades, we have to take a much more considered and holistic approach and not wait for another structure to collapse. We need to create a mindset to have the will to build,” Lucki adds.
The U.S. has at least a $170 billion annual funding gap in addition to its outmoded land use and infrastructure models, according to the Urban Land Institute and Ernst & Young. Making matters worse, the gap is currently widening and it could balloon over the next few years as local and state governments experience “revenue shrink.” The report warns that America is headed for a crisis in the next 10 years if nothing is done.
Push on Capitol Hill
Senators Chris Dodd and Chuck Hagel, introduced The National Infrastructure Bank Act, back in August 2007. The legislation would establish the National Infrastructure Bank - an independent entity of the government tasked with evaluating and financing capacity-building infrastructure projects.
The bill would effectively create a public-private partnership agency tasked with expanding the role of the federal government in creating massive public works projects. The bank would encourage local public agencies to “partner” with private for-profit entities to develop projects worth at least $75 million each.
Senator Dodd explains that, “It [the bill] targets specifically large capacity-building projects that are not adequately served by current financing mechanisms. The proposed Infrastructure Bank Act also will increase the ability of the private sector to play a central role in infrastructure provision.”
“The legislation we are introducing establishes a new system through which the federal government can finance infrastructure projects by leveraging private and public capital to fund large projects that are vital to our country. This legislation provides a new model for prioritizing the building and maintenance of our national infrastructure,” according to Sen. Hagel.
On the Campaign Trail
Barack Obama is a co-sponsor of The National Infrastructure Bank Act. Included in Obama’s plans for rebuilding the nation’s infrastructure:
- The creation of a National Infrastructure Reinvestment Bank (an expansion of existing federal transportation investments) to invest in America’s most challenging transportation infrastructure needs. According to Obama’s plan, the Bank would receive an infusion of federal money, $60 billion over 10 years, to provide financing to transportation infrastructure projects across the nation. These projects will create up to two million new direct and indirect jobs per year and stimulate approximately $35 billion per year in new economic activity.
- Obama plans to leverage private investment to help fund improvements. Part of this money would go to upgrading grid for powering electric cars, reports Reuters. The U.S. spends about $59 billion annually on transportation infrastructure.
- Obama supports continued subsidies for the Amtrak rail line and wants to expand freight rail capacity and invest in mass transit. The U.S. government estimates $20 billion is needed annually improve transit systems nationwide.
- Obama also proposes to modernize aging air traffic control system.
John McCain is not a co-sponsor of the Hagel/Dodd bill establishing a National Infrastructure Bank. He also opposes federal subsidies for Amtrak. But McCain (a member of the Senate Commerce Committee) backed legislation approved by the Senate to provide long-term capital funding for passenger rail, reports Reuters.
Looking Ahead
The old ways of financing and constructing public facilities through bonds and taxes, simply aren’t equal to the task. Increasingly, investors and politicians alike see privatization as a viable alternative. Amid the trend, executive search firm, A.E. Feldman, says infrastructure finance jobs are opening up for candidates with backgrounds in investment banking as well as experience in analyzing and executing structured financings. A.E. Feldman’s CEO, Carol Schwam, says the most sought after candidates are those with experience in infrastructure transactions and civic engineering. Additionally, legal jobs are opening up for attorneys with expertise in global project development and complex financial transactions.
A.E. Feldman’s infrastructure finance division is constantly researching industry trends and developments. To inquire about existing and future job opportunities in infrastructure and project finance, the lines of communication are open. Contact A.E. Feldman’s President, Mitch Feldman, and the firm’s expert infrastructure recruiting team here.
