The Wall Street Journal
COMMENTARY
A Trust Fund for America
By FELIX ROHATYN
June 16, 2005; Page A16
Thomas Jefferson committed the U.S. to acquire the Louisiana Territory from France for $15 million. In so doing he doubled the size of the U.S., guaranteed navigation on the Mississippi, and opened the American West. But Jefferson, Madison, and Congress were understandably worried about the size of the commitment. After all, total revenues from import duties then were only $12,280,000. Nevertheless, Congress approved the purchase and the greatest investment in American history was completed when a British bank and a Dutch one underwrote the bonds required to pay Napoleon on schedule. In doing so, they were confirming America's creditworthiness and recognizing the huge present and future value of the assets acquired by America.
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Public investment has, by tradition, meant infrastructure: Roads, trains and bridges, public transportation, schools, etc., have provided the private sector with the complementary investments that improve business productivity and improve our standard of living. Largely the product of a federal-state-local partnership, it has been badly neglected over the years. A biannual "balance sheet" provided by the American Society of Civil Engineers, grading the categories of infrastructure from schools to sewers, indicates a need for $1.6 trillion over 5 years to bring national infrastructure up to reasonable standards; that need increases by $300 billion every two years. In addition to traditional physical capital, an even more important component of our infrastructure is our intellectual infrastructure... We cannot compete with China by making cheaper T-shirts or forcing them to revalue the yuan by 10%. We can only do so by fighting tooth and nail for supremacy in education, intellectual capital and R&D, and both the federal government and the States must play a role in that fight.
In 1865, when Lincoln created a system of land grant colleges (which ultimately totaled 213), he initially provided America with 75% of its engineers; when FDR proposed the GI Bill, he allowed millions of young Americans who would not have had a college degree to become the source of our technical and industrial power. Through the years, the Bill has provided $70 billion in aid to veterans. Can anyone doubt that the investment has been returned manyfold? Eisenhower continued the tradition of federal involvement in infrastructure with the Federal Aid Highway Act, which generated millions of jobs and created a suburban economy now basic to the U.S., with enormous incremental value.
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To help deal with our shortage of public capital investment, the Congress should authorize a trust fund of up to $100 billion, to be financed over a five-year period by special 50-year Treasury bonds created for that specific purpose. The fund should be used to co-finance high priority state and local investment programs, including physical infrastructure and projects to create intellectual property. Tight outside controls will be applied to the operations of the fund, and it should also be subject to the federal debt limit.
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Jefferson, Lincoln, FDR and Eisenhower proved that public investment could generate vast returns. The federal budget should be a tool to encourage national investment instead of writing it off. Let us adopt a different perspective of our national wealth and how to increase it.
Mr. Rohatyn is chairman of the CSIS Commission on Public Infrastructure.
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