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completed on time than traditional government projects.34 Another advantage is the greater efficiency
of operations. Private firms have incentives to reduce excessive operational costs, as illustra ted by
the labor cost savings from the leasing of the Chicago Skyway.35 Finally, private operators of
infrastructure such as toll roads are more likely to charge efficient market rates to users, as illustrated
by the leasing of the Indiana Toll Road.36
The Brookings' paper raises some important concerns with PPP, which I share. One is that state
officials may lease assets such as toll roads simply to paper over short-term budget deficits. Another
concern is that policymakers write poor contracts that assign profits to private parties but risks and
possible losses to taxpayers. The Brookings' authors propose approaches to structuring contracts
and competitive bidding to ensure efficiency.
For new infrastructure investments, well-structured PPP or full privatization appears to be a winning
approach for taxpayers, governments, and the broader economy. Taxpayers win because subsidies
to infrastructure users are minimized. Governments win because they get new facilities built. And the
economy wins because private investment is more likely to be cost-efficient and well-targeted than
traditional government investments.
In its report on the state of U.S. infrastructure, the American Society of Civil Engineers gives America
a grade of "D."37 However, the ASCE report mainly focuses on infrastructure provided by
governments, so if you believe that this low grade is correct, then it is mainly due to government
failures. The ASCE lobbies for more federal spending, but OECD data shows that public -sector
spending on infrastructure is about the same in this country as in other high -income nations.
Some of the infrastructure shortcomings in the United States stem from mismanagement and
misallocation by the federal government, rather than a lack of taxpayer support. So part of the
solution is to decentralize infrastructure financing, management, and ownership as much as possible.
State and local governments and the private sector are more likely to make sound investment
decisions without the federal subsidies and regulations that distort their decisionmaking.
This committee's description of today's hearing noted: "Transportation infrastructure is especially
important to the manufacturing sector, which relies on various modes of transportation to obtain raw
materials and to transport end products to the marketplace." That is certainly true, and I think
transportation privatization is part of the answer to improve America's competitiveness in global
markets. For example, nearly all airports and seaports in this country are owned by governments, but
many airports and seaports abroad have been partly or fully privatized. The World Economic Forum
rates America's seaports only 23rd in the world, but the first- and third-best seaports in the world,
according to the WEF...
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This document was uploaded on 02/06/2014.
- Spring '14