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Bonds to specifically fund revenue generating infrastructure

Here is a link to paper written by Richard G. Little (University of Southern California - School of Policy Planning and Development) on the idea of using infrastructure projects that generate revenue to encourage investment in rebuilding the country's infrastructure.

 

Because the funds are invested only in projects that generate revenue, the money spent is recovered plus interest.

 

The focus of the paper is on rebuilding infrastructure but it has the side effect of creating jobs and generating a revenue stream for the government.

 

If the revenue generating infrastructure projects are focused on domestic power generation (wind, solar, nuclear, etc.), it also has the added effect of creating jobs that cannot be outsourced, and energy independence.

 

Taken far enough, it would reduce the cost of using the U.S. military to defend access to foreign sources of energy which could be reinvested in further energy independence.

 

The government could create bonds (or some other interest bearing investment) that are only invested in revenue generating infrastructure, specifically power generation.

 

With Richard G. Little's proposal, pension funds, individuals, institutions, the government etc. could then invest in building revenue generating infrastructure.

 

Building infrastructure and the economic stimulus changes from an expense to an investment generating revenue and an ongoing revenue stream for the government.

 

The new revenue streams could then fund building infrastructure that generated lower amounts of revenue directly but still benefit the economy (e.g. shorter highway and high-speed rail routes between major population centers to save fuel, fiber for broadband Internet).

 

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1534771

 

Towards a New Federal Role in Infrastructure Investment: Using U.S. Sovereign Wealth to Rebuild America

 

Richard G. Little

University of Southern California - School of Policy Planning and Development (SPPD)

 

Public Works, Management and Policy, Forthcoming

USC Bedrosian Center on Governance & the Public Enterprise Working Paper No. December 2009-1

 

Abstract:

As the United States emerges from the economic collapse of 2008, the question of how to address years of chronic underinvestment in infrastructure remains a pressing issue. Taken together, annual investment in public and quasi-public infrastructure systems of 4 to 6 per cent of GDP ($500-$700 Billion) will probably be necessary for the foreseeable future but in an era of trillion dollar deficits, no funding source is projected to have the capacity to generate funds sufficient for infrastructure investment at these levels. At the same time, there is a clear and immediate need for public and institutional pension funds to invest in instruments that can generate stable, long-term and low-risk returns on equity. This paper attempts to weave together the concurrent needs for infrastructure investment and improved returns to U.S. pension plans and begin a dialogue on a conceptual approach that could have the capacity to supply significant additional capital for infrastructure while at the same time addressing the needs of U.S. retirement systems to obtain higher returns with minimal risk. The core idea of the proposal is to utilize a combination of public and institutional pension funds, individual retirement accounts, and other private investment capital, together with Social Security Trust Funds to capitalize a National Infrastructure Bank (NIB) that would provide senior debt to fund projects and programs supported by user fees or other reliable and sustainable revenue streams. This proposal is viewed as a new and novel way of raising the massive amounts of capital that will be necessary to recapitalize America’s infrastructure.

 

Keywords: infrastructure, infrastructure investment, National Infrastructure Bank

 

Accepted Paper Series

Date posted: January 12, 2010 ; Last revised: January 12, 2010

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