Here’s How to Improve American Infrastructure – More Efficiently and More Effectively

Republican presidential nominee Donald Trump says he’ll spend “at least double” Democrat standard-bearer Hillary Clinton’s proposed $250 billion on infrastructure if he’s elected to the White House.

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These are big sums, and the truth is, America needs improved infrastructure. Many of our highways, airports, seaports, railway lines, water pipes, and even broadband networks are dilapidated. A shoddy infrastructure is restricting the nation’s economic potential. And in our highly competitive global economy, the opportunity costs of inadequate infrastructure are simply too high. This must change.

But with such huge sums involved, we must spend wisely. As Opportunity Lives recently explained, America is on the brink of bankruptcy. And with Clinton and Trump refusing to discuss entitlement reform — the core driver of the national debt crisis — the importance of scrutinizing spending has never been more urgent. In that regard, we should openly reject Trump’s $500 billion proposal as far too expensive. But we should also oppose Clinton’s plan for a national infrastructure bank.

First, a national infrastructure bank would inherently politicize the allocation of infrastructure funding. While Clinton’s proposals assume the bank’s board of directors would be impartial, politicians would appoint them. And dealing with vast sums and vested interests, temptations of corruption or patronage would be significant.

Second, a national infrastructure bank would be inefficient in achieving strong returns-on-investment. A sustaining truth of private investment versus government investment is that private investment is more efficient and accountable. Remember Solyndra?

Third, reflecting its highly public role, a national infrastructure bank would be inclined to pick projects that attracted short-term public appeal at local levels. That might sound good, but infrastructure spending is best allocated to high-return projects rather than a wide array of disparate projects.

IN OUR HIGHLY COMPETITIVE GLOBAL ECONOMY, THE OPPORTUNITY COSTS OF INADEQUATE INFRASTRUCTURE ARE SIMPLY TOO HIGH
Reflecting these realities, we should pursue an alternative infrastructure reform approach: Private-public sector partnerships (PPPs). Involving collaboration between government and the private sector, PPPs offer clear benefits to America’s infrastructure future. First, they mitigate taxpayer liability for resources at the point of investment. Under PPPs, the private sector provides major investment in return for the prospect of future earnings gain. Considering the billions of dollars involved in major projects, that’s a big deal. Second, always focused on ensuring investor resources are well spent, the private sector is far more inclined towards accountability and efficiency in delivering its projects. Third, PPPs are more sustainable over the long term. Consider a theoretical PPP highway construction scheme. To recover their investment, the private entity employs a toll system.

That system offers two further advantages. First, those using the infrastructure program are those who ultimately pay for it. That pay-to-use system offers a fairer approach than simply throwing government revenues at the problem. A taxpayer in Florida should not be forced to pay for a bridge in New York. But it also ensures that local populations will more carefully scrutinize the merits or costs of a prospective project before it begins because they know it will affect them specifically. Second, private revenue generation means greater sustainability for a project. A major problem facing many U.S. infrastructure programs is the fact that investment has not kept up with the times. But a toll-system, for example, allows the private sector to ensure its highway is maintained over the long term.

Still, PPPs are not a silver bullet. For a start, some infrastructure programs are ill inclined to PPPs. That is especially true with smaller scale or more rural projects that may offer only very long term economic gains. Potential economic gain must always be apparent to the private investor or he/she will not invest. Additionally, across the nation, excessive regulations and convoluted laws continue to deter private investors from helping to get infrastructure projects up and running.

Finally, many liberals remain deeply skeptical of using private organizations to provide infrastructure. That reality is best reflected in the Democratic Party’s current opposition to energy infrastructure. As Opportunity Lives has noted, America’s energy sector is under attack from politicians who preference special interests above an infrastructure investment in jobs and opportunity.

Yet we must also think more broadly about what infrastructure reform actually means. After all, consider the ludicrous restrictions we impose on foreign companies that could bring lower costs and improved services to our airline and shipping industries. We must remind ourselves that better infrastructure isn’t just about capacity; it’s about efficient access to that capacity.

Put simply, if we can make our journeys cheaper, more reliable, and shorter, we’ll have more time to spend making money and spurring economic growth. At present, we lose too many hours to our infrastructure maze. Regardless, our ultimate understanding on infrastructure reform should be clear: infrastructure improvements are necessary, but projects must be accountable and the costs involved must be sustainable for the taxpayer.