Upgrading our crumbling infrastructure could recession-proof the nation | Opinion

As economic indicators point toward a slowdown in global growth and a potential recession, the time has come for a national infrastructure stimulus that can prevent a recession and, at last, launch a new era in infrastructure investment.

With improved infrastructure, Florida and the nation can guard against any economic slowdown by embarking on large investment programs that address climate change, mass transit challenges and aging water and wastewater systems. These investments will generate jobs, increase productivity and invest for the future.

The Federal Reserve is less equipped to fight a recession than at any other time, with interest rates heading toward unprecedented negative territory. Traditional fiscal stimulus alone will not be enough, with national debt reaching 106 percent of GDP and budget deficits reaching nearly $1 trillion in 2019, the highest in seven years. The alternative would be to go back to 1943 when the budget deficit reached 26.83 percent of GDP, which — unless we are at war — no one wants. Former Treasury Secretary Lawrence Summers likens this double bind to “pushing a string.”

But the price tag is hefty. By 2035, the world will require $69.4 trillion in infrastructure investment, and the United States alone $20 trillion, according to a recent study by McKinsey & Co.

Where will the funds come from?

It is time to involve the private sector. Public Private Partnerships (PPP) can be effective in bringing private money to invest in our infrastructure. The challenge has been a lack of resources at the local levels. While many states, including Florida, have passed legislation that encourages PPPs, the problem is in the execution. State officials need resources to design these PPPs, select the right partner, then monitor the performance during the life of the investment with the power to penalize the private partner for failure to perform. To date, few states or municipal authorities have readily available resources, and procurement processes make it cumbersome to manage these complex multi-billion projects, let alone monitor them over several years.

My proposal is to create a not-for-profit InfraTrust, with the support of organizations such as the U.S. Conference of Mayors, that would be owned by those that elect to participate. InfraTrust will act as the trusted adviser responsible for developing, managing and executing the PPP process. It will also work on capacity-building at the state levels to provide officials with the ability to monitor investments. Funding InfraTrust will come from the PPP projects directly. I estimate that for every million dollars invested, the cost of operating InfraTrust will be less than $200 for every participant.

The sector most keen to invest in these long-term projects is none other than our state and private pension funds that manage the retirement plans for our teachers, firefighters and nurses, among others.

Foreign pension funds that also represent their own workers in countries such as the United Kingdom and Denmark are eager to invest in the United States and have done so in their own countries for decades with great rates of success. Many sovereign funds are from strategic partners such as Singapore, Korea and Kuwait. They should be encouraged to invest in the United States. We should unleash these U.S. and global funds worth more than $40 trillion for our benefit and that of our future generations.

Infrastructure is more than dams, roads and bridges. It provides bones, muscle and neural pathways that allow a society to operate at peak efficiency. It includes smart, scalable electric, water, and transportation grids powered by 5G technologies. Stewardship of the Earth must be woven into every business plan. In meeting infrastructure’s demands, the future will belong to the nimble. It is past time to seize the moment, break gridlock and spur into action to give the region and the nation the infrastructure so essential for a healthy society.

Sadek Wahba is chairman and managing partner of I Squared Capital, a Miami-based private equity firm.