TOPICS > Politics

America’s Infrastructure Needs Crucial Repairs

April 4, 2006 at 12:00 AM EDT


RAY SUAREZ: The U.S. has spent hundreds of billions of dollars on building the nation’s roads, bridges, water systems, and other infrastructure. Yet for all of that spending, much of the nation’s infrastructure is either deteriorating or inadequate to meet the demands of a growing population.

That’s the conclusion of a special bipartisan commission that issued its own blueprint for fixing the problem. The commission was created by the Center for Strategic and International Studies.

Among other things, it calls for changing funding priorities for the transportation system so that safety and congestion problems are reduced on the road, in the skies, and at harbors; investing more money in the creation and replacement of public school buildings; and creating a national federal corporation that would oversee the dollars, cut waste, and limit political interference.

Felix Rohatyn is an investment banker and co-chairs the commission with former Senator Warren Rudman. He’s the former U.S. ambassador to France, and is perhaps best known for his role in helping New York City emerge from bankruptcy in the 1970s. And he joins us now.

Ambassador Rohatyn, what are the kinds of things you want to fix?

FELIX ROHATYN, Center for Strategic and International Studies: Well, first of all, I think one has to recognize that the federal government used to be a full partner with the states and local governments, with respect to spending on infrastructure.

And the federal government has cut way back, and therefore now, even though the states are trying to keep up with the needs, the absence of the federal government in a serious way is sufficiently large so that it’s very, very difficult to do. In any way, what you do you have to do more efficiently, if you’re going to begin to make up for that big differential.

Most importantly, what I would like to see happen is for the political system to recognize and for the American people to recognize that investment isn’t the same as simply expenditures, that infrastructure requires investment which, over the years, will provide a return, but it isn’t the same as spending money for bullets or for just day-to-day expenditures.

And therefore, that you ought to consider what you spend on infrastructure, as long as it’s intelligently done, and as long as it has all of the controls as a long-term investment, and it should be financed with long-term bonds, which gives the economy time to grow underneath and earn back the investment that’s being made.

Every other country in the world does that. And as a matter of fact, every great United States’ president has looked at this thing in this way, beginning with Jefferson and the Louisiana Purchase.

RAY SUAREZ: The momentum in Washington in the last 20 years has been to push these things down the ladder of government, block grant them away to states, to counties, to cities. Why try to set up a new federal architecture for such a vast national challenge?

FELIX ROHATYN: You can look at the investment corporation, what we’re trying to create, as a catalyst for investments by the federal government and the states and the private sector together.

I mean, imagine this bank as fulfilling somewhat the role of the World Bank on the one hand and the role of Goldman Sachs on the other, i.e., making long-term loans on important development projects that take a very long time, and planning for these investments, and at the same time dealing with the private sector and bringing private capital into this mix.

But it can’t be done simply at the local level. And more and more you’re dealing also with regional problems, where regional financing mechanisms should be issued, come into play.

RAY SUAREZ: In certain kinds of infrastructure, tunnels, bridges, railways, there are fees, there are taxes, there are revenues that come in, and ways of counting whether or not you’ve been successful.

FELIX ROHATYN: That’s right.

RAY SUAREZ: But one of the things that you’ve identified as a critical need is school rebuilding. And a child that’s learned well is a little harder to count the return on over time.

FELIX ROHATYN: That’s right. Well, we have specifically singled out school construction because we think it’s a vital — it’s part of the process of education. You can’t have a program that’s called Leave No Child Behind and then put the child in buildings where the roofs are leaking, and where the windows are broken, and where you can’t really study.

And in that case, then the corporation would have the right to actually make a grant to a school system that is in dire need for money for a school, provided that the school district takes proper action, in terms of the educational standards and the way they run their system. We would just make grants for new schools.

RAY SUAREZ: We’ve watched repeated accidents on the nation’s rail system which is in — you know, is crumbling in many places, too heavily used in some places and not used at all in others. We’ve watched a very slow federal response before and after Hurricane Katrina to flood alleviation in the Gulf Coast.

Can people really believe that a federal response is what’s needed now, when the federal government has been found to be lacking in its ability to handle some challenges?

FELIX ROHATYN: Well, just because an agency of the federal government has been found incompetent to deal with the problem doesn’t mean that the problem can’t be dealt with by competent people. I mean, you know, that is — I hate to say this, but it’s a fact.

You have to be able to deal with these, and you have to be able to deal with these things in combination by the federal government, and the state, and the city, and the local government.

I mean, when New York was going bankrupt in the ’70s, the first thing we did was to put around the same table the governor, a representative of the federal government, the mayor, the heads of the unions and the heads of the banks, because it’s the only way you can deal with large problems is, a, on a bipartisan basis and, b, on a business-labor basis. You just can’t have one agency try to do it all by itself.

RAY SUAREZ: $1.6 trillion dollars, is that the contemplated price tag?

FELIX ROHATYN: No, no, no, no, no. What the association of civil engineers has done — and they do this every two or three years — is they do some kind of a balance sheet of the nation’s public assets. And they give it a grade, about A, B, C, D, on the level of being adequate.

And they’ve come up — their latest figure is that it would take a $1.6 trillion dollars to bring the infrastructure of this country up to an acceptable level of decency. We’re falling another $300 billion every two or three years behind because we don’t provide adequate support to this problem.

Now, I can also tell you that it’s very difficult to do this if you religiously think that you can’t raise taxes, and that you can’t raise revenues, and that fees are a problem, and, certainly, taxes are a problem.

RAY SUAREZ: But the fact that it’s going to cost more money next year and more money still the year after that, doesn’t that put some urgency on this, in your view?

FELIX ROHATYN: Of course. Every 10 minutes, it costs more money, absolutely. But, you know, I used to have a boss of mine when I started working at my firm who used to say, “You know, you can explain things to people, but you can’t understand for them.”

RAY SUAREZ: Ambassador Felix Rohatyn, thanks a lot.