Infrastructure funding – past and present

“Bold Endeavors: How our government built America and why it must rebuild now” by Felix Rohatyn A review of “Bold Endeavors: How our government built America and why it must rebuild now” by Felix Rohatyn

By Dave Henderson

In “Bold Endeavors” Felix Rohatyn provides an overview of ten significant historical investments that have been undertaken by the U.S. government and outlines a plan to fund the repair and expansion of vital national assets.

Rohatyn is no stranger to government policy and diplomacy as he served as U.S. ambassador to France from 1997 to 2000 and is a member of the Council of Foreign Relations and the American Academy of Arts and Sciences. As a professional, Rohatyn was an investment banker and served as the managing director of Lazard Frères. So, it is with the perspective of a banker, and the storytelling skill of a diplomat that Rohatyn summarizes these landmark investments and their impact on the development of the U.S.

Rohatyn’s focus on infrastructure is apparent as half of the chapters focus on major projects ranging from the construction of the Transcontinental Railroad, the Erie and Panama Canals, the Rural Electrification Administration, to the final chapter that focuses on the interstate highway system. Rohatyn’s analysis of these government projects includes not only a historic perspective on how the course of action was chosen, but also his unique and interesting perspective on the benefit that these investments gave a developing nation, from the proud perspective of an immigrant.

From the perspective of a member of the Asphalt Institute, it is the final chapter on the interstate highway system that really makes this book a worthwhile read. In this chapter, Rohatyn tells the story of young Lieutenant Dwight D. Eisenhower and a U.S. military convoy slogging through the mud in 1919 for what was to be a 62-day journey from Washington, D.C. to San Francisco. The convoy was cheered on by 3.5 million people along the route who celebrated the procession with fireworks, speeches, picnics and parades.

All this is memorialized in Eisenhower’s memoirs where he noted with frustration that the long and arduous journey demonstrated a missing but necessary piece of infrastructure for the U.S. vision of becoming a world power.

“The road system of the United States may have been less usable for transcontinental travel than it had been 50 or 60 years earlier? according to Eisenhower. He also urged that this nation must be ?interested in producing better roads.”

The book also points out that a rail network without a solid highway system did not adequately address the issue as 254,000 miles of track had been laid across America between the end of the Civil War and the time of Eisenhower’s cross-country journey. The story continues as Eisenhower becomes a four-star general and eventually President and how the lessons he learned as Supreme Allied Commander and then leader of the free world shape his perspective on the strategic economic and defense requirements for a transcontinental means of vehicle transportation which ultimately led to his support for an interstate highway bill. The story details the legislative wrangling and behind the scenes political infighting that went on to get a bill prepared for Eisenhower to sign, which he ultimately did on June 29, 1956 while recovering from surgery at Walter Reed Hospital.

The epilogue of the book clarifies the author’s concern and offers an idea on how to address our current infrastructure issues. Throughout the book, Rohatyn makes a case for the strategic economic value that America?s government funded infrastructure projects provide. Additionally, he details our current deteriorating situation by summarizing an ASCE (American Society of Civil Engineers) report from 2005 that details the need to spend $1.6 trillion over the next five years to bring America’s infrastructure to reasonably safe standards.

Rohatyn’s proposed solution is the formation of the National Infrastructure Bank (NIB). The NIB would be funded with an initial investment of $60 billion and empowered to insure the bonds of state and local governments, provide targeted and precise subsidies, and would issue its own 30-50 year bonds. Rohatyn believes such an institution could easily provide $250 billion of new capital over the next 5 years and create millions of new jobs during a recession. If successful, the institution could be further capitalized to cover the entire shortfall reported by the ASCE.

While many question government?s ability to truly create wealth for our society, most agree that the nation does serve as the primary caretaker for certain shared services of its citizens such as transportation and defense. Additionally, most recognize the economic benefit that American infrastructure provides.

It certainly seems that private industry could play a role in the funding and oversight of the NIB to the extent that both the liberal and conservative branches of government could find a way to agree on a clear and measurable strategy to increase long term prosperity and short-term economic recovery, through strategic investment America’s infrastructure.

Dave Henderson is the Vice President of Sales at Road Science, LLC in Colorado.

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