Everyone agrees that we need to maintain and upgrade our infrastructure—crumbling roads, bridges, tunnels, city streets, airports, etc. Progressives are all for spending the enormous amount of money, and either letting taxpayers or future generations (of taxpayers) pay for it. While Conservatives would like to improve the infrastructure too, they are loathe to pay for it now, or to saddle our grandchildren with it.
The Republican Congress and Administration has just signed into law a new tax bill. Among other things, it provides a way for U.S. –based multinational corporations to bring back literally trillions of dollars of overseas profits. They have been left overseas until now as a way of legally avoiding a second layer of taxation by the U.S. governments, without an excessive tax burden. Although many Democrats agreed with at least these concepts in the bill, they did not vote for the overall tax bill.
Why not combine this recent event with the obvious need?
Suppose the government were to pass a bill which allowed a corporation who repatriated profits from abroad to use up to 30% of the funds to purchase a special new issue of government bonds which would pay them tax-free interest, and also provide an equal amount of tax credits for five years. Many corporations would snap up such an offering, which could provide some or all the financing necessary to rebuild our infrastructure. It would keep the government out of the capital markets, not causing distortions in them for massive new borrowing.
Next, someone will eventually have to repay the borrowings—that’s the way borrowing works. It either has to be repaid by taxpayers, or by the infrastructure users, without intervention of the tooth fairy. If the newly built facility were to come with toll collections for its use, the bonds could be issued as revenue bonds, where the tolls collected would go first to paying interest and principal on the debt. Use of new, automated toll collection, like EZ Pass, would prevent bottlenecks and the need for toll stations. Commercial truckers could pay a new tax based on facility usage—and yes, they would raise their prices, but again, the users would be paying, not general taxpayers.
How do we know that the states would use the money wisely, and not just rush to get money for construction projects? Some discipline could be maintained by making the states that got the money be the guarantors of the bonds, should the revenues generated from tolls prove insufficient for debt service. That would also get the borrowing off the Federal government books, thus not increasing the deficit, and transferring it to the states who would have incentive to only request funds for broadly used facilities.
Of course we would see squabbling and infighting over who got the funds for what project. That’s what Congress does. But with the various using states absorbing the guarantee for repayment, some sense would be injected into the process and requests. This appears to be a project and solution that most in America would back, and is a Centrist solution to a problem, taking advantage of current opportunities to marry them to current problems.
THE AMERICAN CENTRIST 
Clase. But won’t work because gov’t is simply terrible at managing construction projects (eg…laws requiring only union labor etc etc…and how many years did NYV try to repair the Wollman Skating Rink and failed until Trump did it ahead of schedule and budget…or same thing w Ferry Poing Golf Course). Do what has worked already in lots of locals and have private firms responsible for managing the project and construction…and even let them make a profit (sorry for using a curse word on this blog!!).
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Hi, Paul, thanks for the thoughts. The plan I put forth only uses Federal Government to raise the private financing, not to do the projects. Let the Congress wrangle over how to divvy up the funds to the several states, and let the states fund and manage the projects. There is no reason they can’t hire private contractors to actually design and manage the projects themselves. By making the funding come from revenue bonds, guaranteed by the state in which they reside, the usage should liquidate the loans.
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fist won should be “Close…”
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tough day…first word should be “Close…” Think I finally got it
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Aha! I knew there was a tooth fairy.
The only problem with this is that the two sides would have to agree to do the right thing.
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Matt–thanks. Tooth Fairy aside, we are not talking two sides here, rather the three sides. The point of a Centrist Party is to gather in moderate Democrats and moderate Republicans to compromise on programs like this.
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forget about the two sides and go direct to the top. maybe have this sent special delivery, registered mail to the top and have it signed for by the chief secretary (or should i say top administrative assistant to the president). this should be right up his alley by using private independent businesses to bid for the opportunity to show the lobbyist owned congress and senate how to do these infrastructure opportunities (GOD I HATE THAT WORD) with an eye on operational cost, also to create jobs, and bring something in under budget as our president has done often as an independent business man and not controlled by special interests in the congress and senate. send me the bill for the mailing!!
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Thanks, Wayne, for your enthusiastic agreement. I agree, this is a project and financing that should be agreeable to our President. But if you want Congress to agree and pass a bill authorizing it, you have to let them gain credit for “bringing home the bacon” to their respective states. The states themselves can certainly hire private contractors to run the various projects.
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Good ideas and a good start. Two potential problems with your approach.
1. You are being too rational and too altruistic, two characteristics that elude Congress.
2. By the time the bill passes, if it does, 60% of the money raised by the bonds sale will be committed to a pet hospital in Senator X’s home town, a research center to study the sex lives of snakes in House member Y’s home town, a newly established department at the university of senator z’s city, to study whether the sun comes up every morning, etc, etc.
I don’t wish to sound negative and wish I could be more hopeful, but I believe in history repeating itself.
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Thanks, Mike. In general, I share your cynicism about Congress. However, since development and construction are the strong point in the understanding of this President, I believe he could strongarm Congressmen into only supporting physical infrastructure building and deferred maintenance.
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Some thoughts:
1.The monetization of the public infrastructure benefits the wealthier, penalizes the poorer and continues to drive us further apart. I disagree with the characterization you draw. We built the Interstate system and yes, it mortgaged the future. But, as Henry Clay pointed out, that’s what government’s do.
And, to reward those firms that parked money overseas to avoid paying U.S. taxes strikes me as just inappropriate. Firms need to decide if they are “American” or “international”. If they are the former, then pay taxes; if the latter, then avoid the taxes. But, don’t ask me to help them “repatriate” their money and then help them use it for further profit. No matter the good deed.
2. You want an infrastructure bill – reduce the amount of funding that goes to the Defense Department. I’m a retired Navy member and I have been appalled by the increasing largesse devoted to war. Well over half of our budget, Social Security and Medicare excepted, goes to the Defense and Veterans Departments. Cut that by 10% and you will put half a trillion dollars or more into infrastructure over the next decade.
3. Regarding Congress’ penchant for building pet hospitals and the rest, one could conceive of a “Reverse BRAC”, i.e., the bill would have to identify the types of eligible projects and provide a scoring system for evaluation.
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Rene–thanks for the comments, although (actually, or especially) since I disagree with several. I don’t see how repairing a bridge or a city street only benefits the wealthy. When we built the interstate highway system, our debt-to-GDP ratio was much lower, and we were not running large annual deficits before the construction. On the matter of International companies, they earned profits in their German (or other) subsidiary, and paid German taxes on them. Only the US then taxed its multi-national corporations a second time, on those same profits, if they repatriated the cash. Why was that fair, sensible, or competitive in the international scene?
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Infrastructure of the type you support disadvantages the poor … just get stuck on the 5/405 merge coming from LA because you can’t afford to pay the toll on the 73. These are common goods, they need to be paid from the common pool.
As for our debt ratio, that’s a direct function of Republican politics since we decided to fight several wars and not raise taxes. And, the latest tax bill will drive another 1.5 trillion dollar hole in the debt.
Taxes need to rise. Or we can continue to find ever more ways to monetize the public sphere. Either that, or cut the Defense budget. Close to 2/3 or our discretionary budget goes to war making.
As for the international companies, unless I am mistaken, U.S. Tax code allows them to deduct that amount of taxes they have paid overseas. Correct me if I am wrong. Else, it’s not double taxation. What really happens though, is that these “American” companies shop for lowest possible tax rates, take U.S. profits as recognized overseas, etc., etc. Q.v., the Double Dutch.
Rene
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