Infrastructure 2.0 has to be different

Nov. 15 marked two years since President Joe Biden signed the bipartisan infrastructure law — the Infrastructure Investment and Jobs Act. Today we can say confidently that:

■ It was a landmark achievement. At $1.2 trillion, it is, by far, the biggest investment in U.S. infrastructure since President Dwight Eisenhower’s interstate highway system — one of the few programs where execution followed promptly, with ongoing projects across all 50 states, both red and blue. It has helped unemployment reach its lowest level in the past 30 years and benefited low-income communities, with increased access to broadband and safe water. Better health and access to education means greater productivity and higher economic growth.

■ It is not nearly enough. Although $1.2 trillion is a major investment — and the president brought more funding to bear through the Inflation Reduction Act and the CHIPS and Science Act — the American Society of Civil Engineers estimated in 2021 that U.S. infrastructure spending was $2.59 trillion short over a 10-year period. ■ It almost certainly will never be repeated. Worsening political polarization makes it unlikely that the federal government will agree in the near term to anything close to the infrastructure law’s level of funding.

What’s more, the world has changed dramatically since 2021, and not for the better:

The pace of climate change has accelerated well beyond what was expected two years ago. While the Inflation Reduction Act is designed to help in the energy transition, we face massive weather events that require greater investment in climate-resilient infrastructure than anticipated.

Onshoring of semiconductor manufacturing — a response to national security concerns and to the fragility of the global supply chain — has surged. This is a major focus of the CHIPS and Science Act. But national security concerns require significant investments in technology to protect our physical infrastructure from cyberattack.

These factors will require the administration to move into a new phase — Infrastructure 2.0. To make this happen, policy changes are needed, as well as a shift in outlook. It’s necessary to break the ingrained habit — which dates back to Franklin Roosevelt’s New Deal — that infrastructure investment is solely the government’s job. We must consider a number of mechanisms, among them:

■ Widening user fees. The federal gasoline tax has not been increased since 1993. Even congestion pricing — advocated all the way back in 1954 by Nobel economist William Vickrey — still faces obstacles 60 years later, for example, New Jersey’s lawsuit to block New York City’s congestion traffic pricing plan.

■ Creating a U.S. infrastructure bank to bring together both private and public funding and deploy it to public projects. At sufficient scale, with $100 billion in equity capital and a $1 trillion balance sheet, the bank could galvanize private markets, remove infrastructure funding from the vagaries of the political cycle, help investors locate promising projects and provide expertise to state and municipal governments.

■ Facilitating investment by U.S. public pension funds. U.S. pension funds lag in allocating investment to domestic infrastructure. The teachers, health care workers and first responders enrolled in these funds would be proud to invest in U.S. infrastructure, as long as the investment provides reasonable returns. States need to encourage public pension funds to invest in traditional infrastructure through public-private partnerships.

■ Encouraging foreign capital to invest in our infrastructure by removing impediments such as FIRPTA — the Foreign Investment in Real Property Tax Act — which was intended for real estate investment but is a barrier to infrastructure funding. Simplify Committee on Foreign Investment in the United States requirements for infrastructure projects that require critical capital.

None of these steps will be easy to take. But political and economic realities and the urgent need to maintain and enhance U.S. competitiveness argue for a determined effort to move in this direction.

Sadek Wahba is chairman of I Squared Capital. He is the author of the forthcoming book “Build: Investing in America’s Infrastructure” and is a member of the President’s National Infrastructure Advisory Council (NIAC). He wrote this for the Miami Herald.