MONETARY POLICIES
article titled “Trump’s Plan a Recipe for Failure, Former Infrastructure Advisor Says,” he added, “If we don’t get our act together very soon, we should all be brushing up on our Mandarin.”
On Monday, February 12th, Pr e s i d en t Trump’s own infra s t ructure initiative was finally unveiled. Perhaps trump
to China’s
$1 trillion mega- project, the Administration has now upped the
projects, since they lack the sort of ongoing funding stream such as a toll or fee that would attract private investors. Public-private partnerships
profit guarantees.
The White House says its initiative is not a take-it-or-leave-it proposal but is the start of a negotiation, and that the president is “open to new sources of funding.” But no one in Congress seems to have a viable proposal. Perhaps it is time to
look more
closely at how China does it...
ante from
$1 trillion to $1.5 trillion, or at least so the initiative is billed. But as Donald Cohen observes in The American Prospect, it’s really only $200 billion, the sole sum that
is to come from federal
funding; and it’s not even that after factoring in the billions in tax cuts in infrastructure-related projects. The rest of the $1.5 trillion is to come from cities, states, and private investors; and since city and state coffers are depleted, that chiefly means private investors. The focus of the Administration’s plan is on public-private partnerships, which as Slane notes are not suitable for many of the most critical infrastructure
In any case, as Yves Smith observes, private equity firms are not much interested in public assets; and to the extent that they are, they are more interested in privatizing existing infrastructure than in funding the new development that is at the heart of the president’s plan. Moreover, local officials and local businessmen are now leery of privatization deals. They know the price of quick cash is to be bled dry with user charges and
People’s Bank of China issues money for infrastructure through an innovative form of quantitative easing
also drive up costs compared to financing with municipal bonds.
C h in a ’ s S e c r e t F u n din g Source: The Deep Pocket of Its State- owned Banks
While American p o l it icia n s
argue endlessly about where to find the money, China has been forging full steam ahead with its mega-projects. A case in point is its 12,000 miles of high-speed rail, built in a mere decade while American politicians were still trying to fund much more modest rail projects. The money largely came from loans from China’s state-owned banks. The country’s five largest banks are majority- owned by the central government, and they lend principally to large, state-owned enterprises.
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