In recent years, I have written many times of the tremendous public investment deficit facing this country. Our infrastructure is old, and it isn’t being replaced or maintained–we need a real commitment in order to grow a sustainable and green economy in the twenty-first century.
But resources are now harder than ever to come by, especially with the deficit hawks shrieking every time the Obama administration attempts to invest in an economic recovery.
It should come as no surprise then that poised to cash-in on our national crisis are the same private equity folks whose casino culture brought us our current economic collapse. In our public assets–our bridges, highways, airports, etc.–they see an opportunity to leverage debt all over again, throw in gobs of money, raise user fees, and gain exorbitant short-term returns at the expense of the rest of us.
"There is no way they can get those kinds of returns without hurting consumers," Andrew Stern, President of the Service Employees International Union (SEIU) told me. "What are the new twenty-first century alternative ways to solve American economic needs without continually enriching the same group of people whose only interest is not in our country but is in their company?"
Fortunately, there is at least one very smart alternative. Public pension funds.
"We’re at a moment where the country is both desperately in need of funds for infrastructure in the long run, and for jobs in the short and the mid-run, until the economy does hopefully produce jobs and not just a jobless recovery," said Stern. "We’re also at a crossroads as to whether the funding for infrastructure is going to put our public resources into private hands, or keep it in public hands. The good news is that these public pension funds are beginning to think about the fact that they actually are one of the places in America that really does have capital…. Here are people investing billions of dollars a year, and the only issue is where are they going to invest this money?"
In contrast to private equity firms, who usually charge a 2 percent management fee and take 20 percent of the profits, public pension funds are looking for a return of 7 or 8 percent annually over the long-term. That would make it much easier to manage a public asset in the public interest, rather than in the interest of Wall Street investors.
"All the worst instincts that got us into the financial crisis, we do not want those wrecking infrastructure," said Stephen Abrecht, Executive Director of Benefit Funds, SEIU Master Trust. "They wrecked the mortgage industry, we don’t want them wrecking the infrastructure industry with the same short-term, risk-taking kinds of strategies."