Virtual Meeting

Renewing America: Fixing America’s Infrastructure

Wednesday, August 4, 2021
Lucy Nicholson/Reuters
Speakers

Adjunct Senior Fellow, Council on Foreign Relations; Chief Executive Officer, International Capital Strategies

CEO and Cofounder, Cavnue; Former U.S. Undersecretary for Policy (Acting) and Assistant Secretary for Transportation Policy, U.S. Department of Transportation

Commissioner, New Jersey Department of Transportation

Presider
Ali Velshi

Host, Velshi; Business Correspondent, MSNBC and NBC

Panelists discuss major potential reforms to U.S. infrastructure, including new technological advances in transportation, traditional and digital infrastructure, universal broadband, smart cities, and how investment in U.S. infrastructure could catalyze economic growth.

CFR’s Renewing America initiative shines a spotlight on the domestic underpinnings of U.S. competitiveness to find ways to bolster U.S. international strength and influence.

This project is made possible by the generous support of the Bernard and Irene Schwartz Foundation.   

VELSHI: Sam, thank you for this. And thanks to all of you who are joining us for this really interesting and very timely conversation. Welcome to today’s Council on Foreign Relations Renewing America Series meeting. The topic is “Fixing America’s Infrastructure.” My name is Ali Velshi. I am the host of Velshi in MSNBC. And I’m a business correspondent for NBC. And I’ll be presiding over today’s discussion. This meeting is part of CFR’s Renewing America Series, which shines a spotlight on the domestic underpinnings of U.S. competitiveness to find ways to bolster U.S. international strength and influence. We’ve got a number of members registered for this virtual meeting. We’re going to do our best to get to as many questions as possible during the question-and-answer period. And I invite you, please, to participate in that, because our panelists today really know a lot about this topic at hand.

I want to introduce Heidi Crebo-Rediker. She is an adjunct senior fellow at the Council on Foreign Relations and the chief executive officer of International Capital Strategies. Heidi, it’s good to talk to you about this again. Tyler Duvall is the CEO and co-founder of Cavnue. He was a former U.S. undersecretary for policy and assistant secretary for transportation policy at the U.S. Department of Transportation. Tyler, it’s great to have you with us. And Diane Gutierrez-Scaccetti is the commissioner of the New Jersey Department of Transportation, which was also someone I had a chance to talk to last time we had this conversation about infrastructure.

Always an important discussion, but it’s so timely because this week we have something happening that we don’t always see. We got a Senate, by the way, working on the weekends, and they are working on a bipartisan bill—something we don’t hear about all that much—because infrastructure, depending on how you look at it and how broadly you look at it, but even if you look at it fairly narrowly in terms of physical infrastructure—bridges, roads, buildings, tunnels, ports, broadband now that we think about it—these things are a shared priority for Americans.

And, Heidi, I want to start with you because I just saw brand-new polling today that indicated two to one support for spending on infrastructure right now. Now, we can get into, and we should get into, the differences in definition about infrastructure. Right now, Republicans and Democrats are thinking about it as different things. The term itself has evolved in America. But the idea is we are going to spend public money on this, and Americans are two-to-one in favor of spending public money for what they think of as our infrastructure improvements. What are your thoughts on this?

CREBO-REDIKER: So I don’t think it’s—I don’t think it’s news that there are so many Americans that are supportive of investment in infrastructure, particularly smart investment. And, you know, often it would, in the past, take a bridge collapsing or, you know, in most recent, you know, chilling case it’s really, you know, the power grid and transmission lines and sort of the—you know, the challenges that we’re facing from fires, from heat, and from storms in Texas. You know, there are a lot of parts of the infrastructure continuum that really touch everybody’s lives. Particularly during COVID, I think a lot of people thought long and hard about broadband access in ways that they hadn’t before. And so the definition—expanding the definition of even what is considered hard or core infrastructure happened.

But now we’re also seeing beyond the bipartisan infrastructure package, that’s really—you know, it’s moving live as we speak—the extension of that definition to include the care economy, health care. And I think, you know, much of the climate change part of the infrastructure challenge, looking at that later, more partisan bill that is likely to come more towards—more towards the fall.

VELSHI: Diane, let’s talk about that, because you are—you worked, as Tyler did—for Transportation. That is what we generally thought of infrastructure as being for—you know, transporting water as well and electricity. But it’s transportation. It’s roads, it’s bridges, and things like that. You’ve actually been really busy over the last year and a half. You and I talked probably a year ago about this. Obviously, that—transportation as a touchpoint in people’s lives—not just bridges not collapsing, but traffic and being able to get places in an efficient manner—that, as Heidi says, shouldn’t surprise us, that people want better versions of that. But there’s always push and pull, and there’s always partisanship, and there’s always trouble in getting even basic hard infrastructure done. So right now, we’re at this moment where at a federal level it looks very promising. You’re always busy at the state level on this. Across America, there’s always infrastructure at the state level.

GUTIERREZ-SCACCETTI: No, that is absolutely true. But we watch this bill carefully because it will give us an added opportunity to start to—to continue with projects that we might not have been able to fund in a timely fashion. So I think the good thing about the bill we’re looking at now is we define the projects that would be considered eligible for those additional funds as shovel worthy. And I think that’s a very important distinction from shovel ready. A lot of us don’t keep large projects on the shelf. They age. The cost additional money. So for us, this bill—the focus on infrastructure—is critical to continuing to reduce the number of aged bridges that we have.

But I think what you said earlier, Ali, really struck a note with me, when you said it’s the domestic underpinnings of U.S. competitiveness. You know, infrastructure is absolutely that. But it’s also not just U.S. competitiveness. It’s individual competitiveness. It’s our own abilities to access good-paying jobs, to look at how we’ve pivoted in this time from not just being able to work by driving or using public transit, but by being able to hybrid and work maybe from home a few days, and in the office a few days. We’re really at just a pivotal time in how we will do business in this country, I think largely on the private and government side.

And transportation will always play a role, whether it’s surface transportation—roads and bridges—or public transit, which I think is even more key, with continued upgrades to our transit systems, our bus systems, both from a micro level and a macro level. Looking at micro-mobility as something that’s key. And I think the bill that we’re looking at, what’s before the Senate now and hopefully the House will look at, is a bill that really considers all of that. And I think transportation is also well-suited to help with some of what I’ll call the newer pieces of the definition of infrastructure.

VELSHI: Tyler, before we move on to what Diane’s alluding to, the newer pieces of infrastructure—some people call it human infrastructure, some people call it soft infrastructure as opposed to hard—let’s just talk about the basic infrastructure that we all know about. There’s also an evolution in that. Spending properly on infrastructure means maintaining the infrastructure you already have, which we are not fantastic about in the United States. But when we talk about the competitiveness, it’s more than your bridges not falling down. It’s better ways to get places. It’s ways to think about what transportation will look like in 25 and 50 years. It’s what fuels we will use, and how we will move people around. And that’s something that you’re focused on.

DUVALL: Absolutely, yeah. So, Ali, I mean, I think when you think about the competitiveness question, I mean, the United States when I was—spent ten years consulting at McKinsey on global infrastructure challenges. And I think it’s safe to say we have the most disjointed infrastructure approach of any country in the world. We’ve got a lot of infrastructure. I mean, after World War II we built more than anyone’s ever built across every area of infrastructure. And we built it out. And then we said, OK, well, we built it. And then the question was, like, now what, right?

So you look at the highway capacity, if you look at transit capacity, we’re not adding massive amounts of either at this point. We did a lot of physical investments, and now people like Diane have a huge installed base of assets they got to operate, maintain, and modernize. And I think you hit on the key word, which is the challenge that we’ve got now is how do we use technology, frankly, and much better management practices to utilize existing assets more efficiently. Technology on roadways, technology in transit systems, in airports. Technology, obviously, in our broadband networks. I mean, this is a huge wave of activity.

This is the U.S. competitive advantage. We are the tech leader across multiple areas of the world. Now we actually have to bring that tech expertise, I think, into our hard assets to optimize them. We have a climate imperative to do that. If we don’t do that, we’re going to waste a lot of resources. We’re going to see a lot of the effects that Heidi indicated. But we also have huge quality of life issues around safety and mobility, as you said. And, you know, it’s just not fair to our country that we’re not deploying our best assets, our best talent, to this infrastructure problem.

VELSHI: Heidi, what’s the—what’s the motivator right now and what’s the big gain? Because, obviously, people like you, and Tyler, and Diane understand the need to spend public money on things that should have a return. But if you look back to the times that Tyler was talking about, in the ’50s, for instance, we were spending substantially more money on infrastructure. And in theory, every dollar spent on infrastructure should be returned somewhere, right, by either people’s greater productivity or business productivity, you know, and societal happiness and being competitive, to get people to move places and work. How should we be thinking about this in this pivotal moment where this very week we’re going to negotiating and debating the amount of money that the federal government should be spending on our hard infrastructure. What’s the thing you would really like them all on Capitol Hill to be thinking about right now?

CREBO-REDIKER: So I think, you know, again, this is the bipartisan approach right now that we’re talking about in the Senate. And it brings together not only the competitiveness issue and the chance—really a chance to do something really, really big and important at this—at a very pivotal moment. It also brings China and the fact that you have a very bipartisan focus on competitiveness, but competitiveness vis-à-vis China, and the ability to actually get something done in a bipartisan way that is meaningful.

In terms of—you know, beyond the very good points that Diane and Tyler raised, we know that it’s a smart investment. A dollar in results in more than a dollar out in growth. We know, you know, the White House is pointing to about two million jobs per year over the course of the decade with the—with the plan that’s on the table right now. We already touched on resilience. Public safety, whether it’s bridges or drinking water, I mean, this is something that is—you know, public safety is an incredible imperative, right, across the board, across the country.

But I also think, you know, if we can actually get this bipartisan deal done, it is one of the biggest packages, one of the biggest and momentous investments that we could actually make in our infrastructure to achieve all of our goals that we’ve really seen since the 1950s. So, I mean, we really need to be able to get this done, for a whole variety of reasons. Competitiveness, I would think, probably at the top.

VELSHI: My dog just started barking when you said that, so my dog is pro-infrastructure.

Diane, one of the issues is that—you know, the American Society of Civil Engineers, their report card that comes out I think gives us a C or a D, or something like that. It’s all quite bad. I always, as a journalist, wonder whether civil engineers maybe have a dog in this hunt, right? They want you think that everything’s about to break. But there is that reality that stuff’s broken. And in my business, in the news business, we generally get to it once it’s broken, or once it’s about to fall, or once it’s fallen, and bad things have happened, or water’s become tainted.

On the other hand, where infrastructure has developed a bad name is projects that people associated or called pork, or unnecessary spending, or wasteful spending, or things that members of Congress or state representatives did to create things in their own districts that people didn’t understand the larger benefit of. How do we—how should we think about it in this moment? Because there is contingent of people who say infrastructure spending is decoration on a Christmas tree and others who say, look, you got—government’s got to take the hard decisions to maintain and support the kind of infrastructure we need to be competitive, versus other countries that do spend this money in 2021.

GUTIERREZ-SCACCETTI: Well, if they think these are the presents under the Christmas tree, it’s Charlie Brown’s Christmas tree, OK? It’s—the needles have fallen off and we’re in a bad place. I think this round has been different, I think, in that regard, Ali, that there hasn’t been a lot that I’ve seen of wasteful projects being put forward. On the House side early on they did earmark projects. And I think the good part of it, at least in New Jersey, was our congressional delegation worked very closely with the department to ensure that they were projects that could be built, that were necessary, that perhaps would otherwise not be funded because they were in counties and municipalities not covered by the department.

So I think we did a pretty good job here in New Jersey of trying to make sure that it didn’t look like pork, or there weren’t what I’ll call discretionary projects. For some pretty strong bridge projects, some pretty good port projects that we could be using for commuting alternatives into the city. Obviously, people think it’s counterintuitive for a DOT commission to not think surface transportation is the most important thing, but a true DOT commissioner has to look at the whole system. And so for me it’s not just roads and bridges. It’s ports, and trains, and buses. And so I think this round I did not see, from our perspective, a lot of unnecessary asks.

Will there be some? There are always some. You know, there’s always somebody that has—you know, has something they want to do that everyone thinks is less important than the other. But I would have to argue that for the most part there’s not too much in the infrastructure basket right now that would be what I would call discretionary spending. We have waited so long to get to where we are today, to be so close to an infrastructure package that actually will make a difference, that I try to look at the optimistic side, that that money will be put to good use across the country in many regions of the state. And let’s not forget, not just in our urban areas but specifically to our rural areas where transportation has been long neglected. And frankly, has put a tremendous burden on those individuals trying to find jobs, and not having a network that allows them to do that.

VELSHI: Well, that’s the broadband issue, right? For those of us who live in cities—I’m in Philadelphia, where—you know, the home of Comcast. We got about the best broadband known to humanity. We don’t think it’s a problem, until you are in a place that doesn’t actually have broadband, and you had to live through the last eighteen months where you’re working from home or you’re going to school from home, and then you realize, hey, how come I don’t have such good broadband?

Heidi, I want to—I want to ask you, there are some people who—and it’s great to hear Diane, you know, see this as broadly as she does. But some people feel that if we start using the word “infrastructure” for home health care workers, and elder care, and things like that, it takes the priority and focus off of something that hasn’t been focused on enough for the last seventy years in America, or the last sixty years in America. So it’s not that they don’t think that all those things that the Biden administration in the bill—the budget reconciliation bill, the bigger one that is not at the moment bipartisan—it’s not that they don’t think it’s worthwhile. It’s that they worry that should we be calling everything infrastructure if it’s not infrastructure? What’s your view?

CREBO-REDIKER: So, I mean, I think we were talking about this earlier. The definition has definitely, you know, expanded. But, you know, these are all—I don’t think they’re mutually exclusive. And you can see them on a continuum. And if anything, the COVID crisis made it—you know, drove home the point that—you know, that if you don’t have adequate childcare or elder care, if you—you know, if the health care system is not supportive, that you do have—that you do have gaps in the ability of a workforce to be productive, in being able to manage without a care economy that actually serves all populations. I think, you know, you find that you have breaks in the—you get breaks in the system of soft infrastructure. And it’s, I think, about time we start thinking about soft infrastructure as being part of—part of the whole infrastructure conversation.

I do personally hope that we don’t—that it’s not looked at as completely mutually exclusive. I’m very, very eager to see the hard infrastructure part of this go through. But I’m equally hopeful that the soft infrastructure will go through. One thing I wanted to just circle back on, if it’s OK—

VELSHI: Sure. It’s all OK. This is a great conversation.

CREBO-REDIKER: So Tyler—you know, Tyler was talking about ingenuity and unlocking innovation, and all sorts of, you know, parts of the U.S. economy that we’re very, very good at in the technology space. I would actually that on—you know, that we’re talking large numbers for the federal contribution right now, but there is also a huge universe of investors out there that are looking to actually fund the types of new energy investments—for example, whether you’re talking about solar, wind, hydrogen, biogas, you know, what have you. There are—you know, there’s a lot of money, private money, that’s willing to go and make really important investments alongside the R&D that’s included in some of this—some of this legislation that will—that will, you know, reinforce that.

But absent the investment that the federal government can make in transmission lines and grid, to underpin that and allow for new types of cleaner energy to feed into the system, we won’t actually get there. So, you know, the good side and the message, you know, to Congress, is that this is—this is a way to actually catalyze additional investment in infrastructure in a way that will be cleaner, and greener, and more efficient and more effective down the road.

VELSHI: I think everybody’s nodding their head on this one. I think that’s a really important point.

Tyler, when we’re talking about catalyzing—take a look at the stock market today, last week, any week you want. There’s clearly a lot of money out there. There’s a lot of money that wants to be put to work at stuff. But the amount of public money, or the percentage of public money that can go into these things, that can catalyze such a higher proportion of higher money, is remarkable. We haven’t mastered that yet in this country. A lot of countries that are completely cash-strapped have done more in terms of these either public-private partnerships or not even that. As Heidi is saying, just create the necessary underpinnings and that’ll catalyze private investment at a rate that will get us to, you know, better infrastructure than we were otherwise headed toward.

DUVALL: Yeah, absolutely. Look, I mean, everyone talks about how much we’re spending, but I think the mechanisms, the how the capital flows into the system, to Heidi’s point, is really important. And we are—we also are not a world leader in that, as you indicated. You’ve seen tremendous innovation in, you know, Western Europe, a lot in Canada. North of the border they do a phenomenal job of putting private capital to work alongside public dollars. You know, our friends in Australia pioneered a lot of different investment.

The capital pools for these kinds of assets have never been bigger. The availability for them to get into the system has never been harder. And so the role of the government, I think, right now is to catalyze that, and to basically set up structures by which the private sector can invest alongside. Give Diane the tools she needs to put the capital to work when she needs to put it to work. I think the last thing I would say, though, is we’ve got to fix the timeframes around these investment dollars.

The biggest challenge we see across the United States relative to other countries—I did a lot of work in Asia when I was in McKinsey—I mean, they pump money through the system significantly faster because they, frankly, are answering questions around the environmental impacts more efficiently, they’re framing those questions more directly, and the public process for input is, I think, frankly, a lot better than what we see in the U.S. We have a very difficult time putting capital to work. So we—you know, the two things are: How do we tap into that private capital? And then how do we make sure the pipe is flowing quickly so it gets into the projects as quickly as possible? Otherwise, people will move on.

I think when I was in the federal government, we did a poll. One of the things people hated most about infrastructure was how disruptive and long it took to actually do the projects. So I think, you know, coming out of this, you know, iteration of the next federal bill—hopefully we get a good one, as we’ve talked about—we need to pay a lot of attention to the public turning on infrastructure because we’ve actually disrupted their lives more.

VELSHI: That’s amazing. And, Diane, I see you shaking your head vigorously on this. You’re agreeing with all of it.

GUTIERREZ-SCACCETTI: Yeah, Tyler hits a lot of good points, which is the process is just very slow. And whether it’s from the concept piece—you know, we work from concept to concrete or concept to asphalt. The regulatory part can take a very long time. Right of way acquisition can delay a project for years. We need to get better about how we frame and articulate to folks how we’re able to do that as a government better. And it doesn’t mean to the detriment of anyone. The processes just have long windows. And so that’s something I think government really needs to work on. And certainly, we’ll work on it here because we are guilty of some of that ourselves here.

But the idea is, you know, there are a lot of competitive investments. And if the process is slow, people will move on with their money. And it may not be in the U.S. And that’s, I think, the thing that you get concerned about the most, is losing the ability to attract those who want to invest and turning them off by just—by just being bureaucratical, right? And that’s what we do. We’re a bureaucracy at the end of the day. It does not mean, though, that we have to be slow. And so to me, Ali, what that takes is it takes a lot of—and I think we’re at that time. We have a lot of bright young minds that see the world differently than people who are my age and are far more fearless in terms of changing process, which I think is wonderful and I embrace and encourage here.

But you see the very, very strong dichotomy between the group that says: Do it the way we’ve always done it because we know what we’re doing and we can document it. Versus, well, what’s really the bad side if we do it differently and it goes faster? And I think when you talk about being in pivotal moment, it’s in so many different regards coming out of this pandemic that people are anxious to do good work. And we need now to create that meeting of the minds on the human side of what we do. I think once we do that, the hard side of what we do becomes much easier.

VELSHI: Heidi, can I just ask you to talk a bit more about the money that’s available for this? I know the World Bank goes out of its way to offset risk in infrastructure projects in places where people want to invest major funds, pension funds, but they can’t because who knows how politically risky a place is. And the World Bank says we’ll undercut—you know, we’ll underpin some of that risk. America is not a risky place to do business. It should be the place where anybody who wants to be part of an infrastructure bill should be able to do—to participate. So what does that work look like?

CREBO-REDIKER: So, you know, there are—you know, there are lots of different ways to look at risk mitigation, from public—whether you’re looking at public-private partnerships or whether—you know, how—one of the bigger challenges that we still are facing is how to pool assets and create an infrastructure security—like, tradeable, comparable security class out there. And that seems to be one of those conversations that’s just ongoing at the G-20, at the OECD. How do—I mean, what do you do with the private funds that are seeking the investments?

Couple of things. The first is that we seem to have this very beneficial crossover between the ESG investor universe that’s growing rapidly, looking for—looking for much more sustainable investments, and a similar rise in infrastructure funds that are looking for a home. And that is particularly, you know, true in the pension universe. We don’t have an infrastructure bank in the U.S. We have one within the Department of Transportation, that I think Tyler was there at the inception, called TIFIA. One thing that fell out of the bipartisan deal was an infrastructure financing authority that gave the—that would sort of take the TIFIA model and grow it and have it expand to more different modes of—I guess, different types of infrastructure on a national or—for projects of regional significance or national significance.

And I think that is a void that we need to fill that other countries have done. You know, the Europeans have done it very well with the European Investment Bank. Other countries have been able to fill this. Canada has its P3 Canada. Something like that would be helpful, because we can’t just consider infrastructure financing and risk mitigation in a very narrow term of what infrastructure is, when the definition is getting much bigger and the projects are getting more complex and doing something that’s multimodal. Or, what Diane and I were talking about earlier before we jumped on this Zoom call, which is the sort of dig once initiative means that Diane needs to talk to a lot of her different counterparts to lay—to, you know, dig once, lay pipes, cables, transmission lines, whatever is required. And having the ability to have one institution that can help with risk mitigation from the federal side I think would have been helpful.

VELSHI: Tyler, given that you’ve done work on this, should America have something like an infrastructure bank? It comes up every few years. It doesn’t even seem—it seems like something that’s bipartisan. Should we?

DUVALL: Yeah, I mean, a properly structured institution, like Heidi’s describing, could do a lot, right, to drive—you know, attack the problems that we’re talking about. Candidly, I think it just gets hung up in a lot of the national politics. I mean, you know, Heidi was fighting the good fight in her prior career and, you know, many of us have been involved in this discussion for a long time. You know, it’s a little bit—it is what it is.

I think our—the imperative now, frankly, is to unlock the people at the state and local level who are willing to do, you know, really cool, interesting new things. And empowering those people, that’s our secret sauce in the United States. I have a hard time betting on us coming to some great national consensus. The definition of infrastructure is hard for people to align on. The role of government with the private sector, very hard at the national level. So let’s make the bet by basically unlocking the innovators at the state and local level.

I think this convergence of technology and capital—I mean, the company that I’m running now is effectively an integration of long-term pool of capital and one of the largest technology firms in the world. And the idea is, let’s go bet that we can actually add a lot of value to the existing infrastructure because there’s all this innovation happening right next to it. In our case, autonomous vehicles. So I think this is—this is the imperative. So, you know, look, it would be great if we had a national infrastructure bank. It doesn’t appear like it’s going to happen this time. So let’s get the capital flowing and let’s get Diane the help she needs.

VELSHI: (Laughs.) I want to ask Sam to open it up for questions. I’m sure we’ve got some excellent questions from our audience. But before we go to that—first of all, for those of you who have questions, please let Sam know. I want to ask you, Tyler, to just tell us what it is you are doing now, because it does—it’s not only the intersection you just described, but you are thinking a great deal about what travel looks like in the future on roads, as opposed to what it is now.

DUVALL: Yeah, so basically our company was launched under the simple premise that smart roads—smart cars need smart roads, and that basically we have this huge innovation of autonomous vehicles with the Waymos and Auroras and TuSimples of the world that are making massive breakthroughs in the innovation of autonomous travel, and then the large institutional OEMs, including Teslas, but General Motors, Ford—these companies making huge bets on what we call advanced driver assist systems. And that those platforms that are coming to market now, not in fifteen years, do not have the adequate roadway technologies to support that innovation.

And so our goal is to work with owners of roads, owners of right-of-way to deploy an integrated solution. We have the pools of capital that Heidi just mentioned. So we’re coming to government with the offer to basically partner on a long-term basis to deploy the capital up front, and to basically outfit our roadways with an integration of hardware, software, and machine leaning capabilities to solve the problem. We think we’re the first in the world to do this this way. And we think this is an area where the United States can have a huge competitive advantage.

VELSHI: Thank you for that, Tyler.

Sam., do we have questions?

OPERATOR: Excellent. Thank you so much.

(Gives queuing instructions.)

Our first question will be from Whitney Debevoise. And please remember to state your affiliation.

Q: This is Whitney Debevoise of Arnold & Porter, also a former member of the Maryland Port Commission.

I sympathize with what’s been discussed here, but leaving aside the infrastructure bank, what can we do to have better coordination on planning between state and federal? I mean, I remember at the Port Commission we needed to deepen the dredging, and that depended on a dredging bill from the—from the Congress. We needed to do a new tunnel under Baltimore, and that depended on a lot of different things—public and private. And how can we educate people about PPP? I mean, I said the answer to this is we’ll do a PPP. And the chairman put his arm around me and explained that this commission is a creature of the state legislature, and any penny spent here that’s not appropriated by them is a bad penny. So forget PPP. And five years later, in the economic crisis, the PPP went right through the state legislature because they suddenly realized it was the only way to do it.

VELSHI: Those are excellent points. I do feel like we don’t—we don’t—it’s not in the public discourse in America, public-private partnerships, as it is—I’m from Canada. It’s discussed much more there, and then you get to Europe it’s much more common. And when you get into developing countries, everybody knows the word. It’s a normal conversation. But this idea of coordination between different authorities, different levels of government, Diane, it’s something that you were actually talking about, we were all chatting about before this started, but an important matter for you to consider.

GUTIERREZ-SCACCETTI: No, absolutely, Ali. And I think it starts at the state level with good coordination across state departments. And as Heidi was saying, you know, as a Department of Transportation digs up a road, how can it be better coordinated with the DEP and the—and the Board of Public Utilities, and others to make sure, you know, water management systems are all considered in that two, or three, or five miles that we may be turning dirt on? It’s a slow process, but it has to start somewhere.

We have a state planning commission that works with us on some of those items, not a lot but some. And again, I think a lot of things coming out of the pandemic will be redefined, as we saw some of what—I don’t say weakness in a bad way—but some of our soft points, I guess, in how we deliver infrastructure in its original form, as well as its newly defined form. When it comes to the feds, it’s a cumbersome process to coordinate but, you know, on the roadside we have FHWA. On the rail side we have FTA and FRA. And we work closely with those agencies day-to-day. Again, is it—is it the easiest process? No. But it is the process that we have.

And I think with Secretary Pete, he’s looking for ways for us to be better and to be more coordinated. And I hold out great hope. He’s only been there six months; we have to give him a little time. He understands because he comes from local government the importance of creating ease in planning and ease in coordination with our federal partners.

VELSHI: Thank you. Anything you want to add to that, Tyler?

DUVALL: Ali, can I just—yeah, can I just—yeah. Look, I think, you know, one of the problems is the federal government has kind of got it a little backwards, right? It’s all input focused. So, you know, for Diane to do a project she’s got a laundry list of things she’s got to do to comply with federal requirements. But there’s not any outcome orientation. So it’s not like we’re trying to achieve X, Y, or Z. Diane, let’s partner with that to do it. So, obviously, safety, congestion mitigation, environmental outcomes—these basic outcomes that we care about the federal government is not oriented towards. They’re oriented towards making Diane check a lot of boxes before she can deploy the capital.

So one of the things when I was in government we proposed, with no traction—not sure what this says about us—was basically to, you know, do a performance-based pilot and say, you know, we’re going to block grant your funds. And we’re going to—instead of have an input-based relationship with the state of New Jersey, we’re going to say the state of New Jersey, if you want to participate, here are three or four outcomes we’d love to see you achieve. You know, to your milestone kind of type areas. And transform the relationship from one in which, frankly, the federal government is a nag to the state and to one in which it’s a true partner, trying to achieve specific things.

There’s not a pilot like that in the Senate bill. I think there could be something like that, at least try it out, get somebody like New Jersey to raise their hand and say: We’ll participate in it. I know Diane would raise their hand in two minutes. But I think we need test cases like that, Whitney, to really transform the relationship because right now it’s very rigid and very lacking in, you know, call it creative ideas.

GUTIERREZ-SCACCETTI: Just to two-finger to Tyler’s earlier point, so much of this innovation and figuring out how to work with existing infrastructure and knowledge about where to put the funds effectively, it is coming from state and local government. You have enormous creativity and problem solving because they are the ones actually have to deal with people in their communities who are, you know, facing the challenges of a, you know, a power grid, you know, shutdown, or fires caused by them. Or, I mean, there’s just—there’s a lot of—so, all of—I think a lot of the best ideas are coming from state and local governments. So the ability to be able to work together to best channel funds to those who can best use it is that big challenge we have.

VELSHI: All right. Sam, let’s get another question.

OPERATOR: Our next question will be from Tara Hariharan.

Q: Thank you so much. My name is Tara Hariharan. I work for a hedge fund in New York called NWI.

I’d like to return to a discussion about U.S. competitiveness, particularly versus China in the context of the U.S.-China dynamic that is evolving at present. And I would love it if the panelists could actually discuss in a sort of a compare and contrast way how they see the U.S. approach to infrastructure versus the China very state-led, integrated, Made in China 2025 sort of a model. And, frankly, whether the U.S. could stand to learn anything positive from that more integrated, state-led model. Thank you.

VELSHI: All right. That’s a really—I’m glad you came to that, because that’s a highly specific and interesting question to address.

Heidi, I’m going to start with you. I mean, first of all, if you want to get ahead in Chinese politics you’re more likely going to be an engineer than a lawyer.

CREBO-REDIKER: So, I mean, there are multiples ways to come at this. You know, I think one of the big things that President Biden wants to be able to show in this bipartisan—this large bipartisan investment, is that democracy works. And China has been able to employ huge resources. And they don’t have, you know, a good chunk of the constraints that we do, but they go way beyond what’s Tyler’s talking about because, you know, the—you don’t have to deal with communities, or NGOs, or, you know, in the same way that you do in the U.S.

They also have a huge amount of overcapacity—I mean, overinvestment, which I think, you know, we would not want to see. We value scarce resources. And so I think we—you know, I think this is a really good opportunity for us to sort of take on that challenge and say: We can do something really big. We’ve done it before, and we can do it again. And that it works. I’m not looking for the Chinese state model to come here anytime soon.

VELSHI: Diane, let’s ask you about this.

GUTIERREZ-SCACCETTI: I would have to agree with Heidi. I think that short of the fact that we’ve been inconsistent for a long time in funding, I think the way we deliver basic transportation services in this country has worked well. You know, we think back to the creation of the interstate system, which truly is the ribbon that binds the U.S. together as a country. And it’s a phenomenal system. But I think, as Tyler said earlier, we built it and then we said: OK, now what? And that’s where we got stuck. The “now what.” I think we sit on the precipice of doing some really cool things. I’m listening to Tyler and what he’s talking about in terms of delivering a new type of infrastructure which I think, honestly, is the future of this country, in not only a regional sense but in what I’ll call the micro-mobility sense, in the small sense.

And I think we have to—we have to focus on what is our mission, right? And, you know, my mom used to tell me all the time, don’t compare yourself too much to others because you just don’t know what trials they go through that you don’t see. And so there’s probably some truth to that in this case. I think that we know where we need to go. At AASHTO right now we’re working on a project to kind of define what we call the next moonshot. What is the next big transportation focus of DOTs across this country? I think being aware of that is the first big step to understanding that we are pivoting, we are moving.

So I would agree with Heidi. I don’t think we need to be so concerned with doing things the way China or perhaps other countries do. We should learn, but we should—we should continue to engage our public the way we’ve always engaged them. We need to—and coming out of the last eighteen months, and certainly your reporting was phenomenal at the time, understanding the disparity and the inequity in transportation in our cities and in our rural areas, that is particular to this country in a way that we have to stay focused on who we are and who we want to be. And I think this package will go a long way to really helping us get to that point. And I agree, I think the president is really focused on a democratic process—not just the bill, but the fact that, you know, we’ll get two very important outcomes here: A return to democracy and bipartisanship and a really good infrastructure bill.

VELSHI: Well, I’m definitely fascinated and taken by the concept of bipartisanship and the fact that we’re as far as we are on this particular matter. I don’t want to jinx anything, because things are still in process. But, Tyler, I’m curious about your view on that, because one can look—without thinking about all the important points that Heidi and Diane made about how they come to their decisions sometimes in China and how they’re funded—one can look at a train station, you know, on the stops between Shanghai and Beijing and say, you guys kind of do this better than we do.

DUVALL: Yeah, look, I mean, there’s no doubt that their ability today to build transformative infrastructure projects is far better than the United States’ ability right now. There’s many reasons for that. We’ve hit on a bunch of them today. But the goal is not building transformative infrastructure projects. We don’t want Chinese projects. We want productivity, efficiency, and internalizing a lot of external costs. And at the end of the day, we did the—we did the mass investment, we’re adding incremental capacity. And now we are at this moment, you know, there’s a lot of economic research around diminishing marginal returns, to adding capacity when you have a really big installed base.

Now we’re at this pivot moment where we harness the incredible talents—by the way, turning the dysfunction of the U.S. system into our biggest attribute, which is unlocking this—you know, all of these decentralized players that own and operate massive assets of infrastructure in the United States is our—is our comparative advantage, ultimately. We unlock those people, they copy each other, and we grow that way. That’s just going to be the model for the United States. We have to accept it. I agree, you know, I did some work, you know, in China. I’ve been there a number of times. It’s incredible, their ability to deploy capital to a specific project. But that’s not the goal of infrastructure. It’s systemic, not project based.

VELSHI: Hmm, this is—this is an interesting—and I feel like you’ve all been talking about that. And maybe we don’t think about that because we don’t talk about infrastructure enough commonly to understand that it’s systemic, and it’s got to be ongoing, and we’ve got to think about maintenance, and we’ve got to think about moonshots. So thank you for that. Thank you for that question, Tara. It elicited some really interesting stuff that I hadn’t thought about.

Sam.

OPERATOR: Our next question will be from Frank Finelli.

Q: Great. Thank you so much. Ali, great panel. And, Heidi and Tyler, I’d like to follow up on your comments about the infrastructure bank, and also state and local, which does access the private markets for muni financing for a lot of projects. But the federal government really doesn’t access the infrastructure capital markets, for both equity or credit, which are both very deep and competitive. And a lot of this is due to the federal scoring regulations from OMB and CBO, which I think preclude their—them involving private infrastructure capital funds. But there’s a lot of examples, whether it’s Navy drydocks going back to World War II, or utility systems, or, you know, installing advanced telecommunications, where private infrastructure capital is absolutely available, and these projects could progress if there were a path through it from a regulatory perspective. Do you have any comment about how we might be able to get at this opportunity?

VELSHI: Heidi, Tyler, who wants to take it?

TYLER: Heidi, you start with that one. I’ve got my answer, but Heidi’s been working on this as long as anybody.

CREBO-REDIKER: So, I mean, I’m not going to hide it. I’m a huge fan of a properly structured, functional infrastructure bank that does not compete with state and local government financing but is complementary, and is professionally run from a credit perspective, and is able to step in at various levels of the capital structure where private money won’t be able to go. And that’s exactly, you know, the theory of the case with TIFIA within the Department of Transportation right now.

In terms of—in terms of, I guess, what other ways to catalyze private investment and how to—how to integrate that with federal funds, again, it’s—I think at this point it’s going to come at the state and local level. And there’s a huge amount of capital looking for a home in this space, particularly large pension funds that want to have long, steady rates of return. And, you know, same thing with insurance companies. Trillions and trillions of dollars. And this is just something that’s almost a talking point now because there’s so much competition for those specific projects that actually you are able to deliver.

I think the answer really is coming up with some form of risk mitigation for the places that private capital won’t go. But I also think that this huge federal investment right now in places—like, particularly the grid and transmission lines—where we have a lot of private capital going into for, you know, new cleaner technologies. But it won’t work unless we have that massive federal long-term upgrade of our—of our transmission lines. So I guess that’s a long-winded answer. It hits on the same points that I made earlier. (Laughs.) But, Tyler, over to you.

VELSHI: With all due respect, we are talking about infrastructure. This is not a bumper sticker conversation. I mean, you do read a lot of bumper stickers if you’re stuck in traffic, but this is—these questions and answers deserve details.

DUVALL: Right. Well, look, I mean, Frank’s also—just, you know, the other part of it is federally owned assets. And so there are—there’s an OMB circular that’s been the bane of the private sector’s existence for many years around the scoring of private investment into federally owned assets. I mean, if you were in the Biden administration and you said, well, what’s the single fastest way to get a lot of capital unlocked in the United States, it would be to basically have a new interpretation—I have lots of good friends at OMB over the years and they will kill me for even saying this—but, you know, there’s lots of interpretations that could be made to a single circular as well that basically would accelerate, you know, private capital coming into federal assets.

I mean, you know, by the way, for those—I live in the D.C. area. Two of the most important roadways in the D.C. area are owned by the federal government—the BW Parkway and the George Washington Parkway. Federal government owns the Tennessee Valley Authority, the Bonneville Power Authority. There’s massive federal assets. The Department of Defense is the largest owner of capital assets in the world. So there are huge opportunities to unlock capital, to modernize federal infrastructure. And, you know, Frank’s making a good point. I mean, I don’t know what the Biden administration policy on that is. The scoring people get nervous about it, and there are legitimate reasons they’ve got to be concerned. But other countries have figured out how to thread that needle. So a very—this doesn’t even need to be in the infrastructure bill. It’s a very simple way to modernize, you know, a very huge part of the country’s infrastructure through federal assets.

VELSHI: Thank you. And thank you for that great conversation, Frank.

Sam.

OPERATOR: Our next question will be from Fred Hochberg.

VELSHI: Go ahead, Fred.

Q: Hi, how are you, Ali?

VELSHI: Good to hear from you, my friend.

Q: When I chaired the Export-Import Bank, you know, one of the things, as you commented, overseas it’s—PPP is sort of the—is all that you see in much of the rest of the world. In our country, it seems like we have either a distrust—if it’s a PPP, we don’t believe that a company’s going to threat the public fairly. And then when it comes to public governments—local and state and federal government doing the work—we feel their inefficient. So I feel like we’re in this really bad space in our country in terms of the public’s view of infrastructure. And I wonder whether that contributes to the sorry state of our infrastructure today, that the public really doesn’t believe in the government doing it and they don’t really trust the private sector either. And is there a path out of this?

VELSHI: I think that’s a remarkable question that I wonder about myself. What’s the problem with PPP? Is it we don’t want the private sector involved or we don’t want the government involved? Heidi.

CREBO-REDIKER: So how we define what is public and private in infrastructure in the U.S. is different how others—than other countries. So if you look at the U.K. and their—and, you know, ownership of water—water systems or airports, if you look at, you know, a whole—I mean, countries just have a different definition of what should be public and what should be private. I mean, we have freight, and telecommunications, and energy pipelines. And it goes into one bucket. And then we have—you know, we’ve had some real challenges with toll roads and how we figure out how public and private works. The P3 model is not a panacea. And there’s—it needs to be looked at as a risk-sharing mechanism, and for the benefits that I can bring, but not to all projects.

I mean, you obviously—if you’re going to bring the private capital in, it needs to be for a commercially viable project. And not all projects are commercially viable. And they shouldn’t be. And so it’s really—I think other countries are more comfortable with the concept because they have better—I think better mechanisms, longer track records with working with those mechanisms to make sure that state and local governments, who are actually on the front line of negotiating, have the tools to actually cut a good deal and understand what they’re doing when they’re dealing with counterparts on the other side who are looking for a profit, and that’s their motivation. But there are ways to actually do it that work. And we just need to learn how to do it better.

VELSHI: Diane.

GUTIERREZ-SCACCETTI: So I think Heidi hit on a lot of good points. So in a DOT environment, a P3 is a very hard technique to execute because we don’t have a revenue stream back end that we can count on to play that availability payment back to the private sector to give them that return. I also think that when we talk about P3s, if there is a part that is challenging is it’s a lot less about building a transportation infrastructure than it is a financial deal. And they’re very complex agreements that you have to reach. And they take a very long time because there is a risk sharing component that doesn’t exist in the normal design, bid, build, or even design build structure for construction.

So when we talk about P3s—and then you look at sometimes the volatility in funding that we get, or the discussions like we’re having now where there’s an inconsistency in funding, you know, you take a risk that you may not have the funding you anticipate if you do have to make an availability payment and you are a DOT. And that’s on a project basis. If you look at an Indiana model where you’re selling your road, that comes with a whole ‘nother set of issues. So you look at the New Jersey Turnpike, and the number of times they’ve talked about privatizing it. And Tyler’s smiling because he remembers. That brings great fear to our customers, because when you take—when you take that kind of a step what happens to your toll structure? What happens to the price of travel for those individuals?

So from the practical kind of boots on the ground sense, there are some really concerning elements of losing control of a major asset. And when you do a P3, you have to be willing to give up some level of control. And governments aren’t good at that. And local governments probably don’t have projects that are really of the magnitude to make a P3 worth the investment and time to negotiate it. And they are complex negotiations with very, very highly skilled financial folks, that probably would outmatch those on the local side because they don’t do those kinds of deals with any frequency, if at all.

CREBO-REDIKER: Can I do a quick two-finger on that? The municipal bond market provides very cheap financing to state and local government. And so that is always what it’s compared against, when you’re looking at what the—you know, what the value for money is, what the value proposition is bringing to a private holder.

GUTIERREZ-SCACCETTI: And New Jersey does have an infrastructure bank, and it does work very well for the locals, and it’s an aggregated fund of money that pays interest rates that are so low it’s—I don’t know why they would even think of a P3 when they can go to the infrastructure bank to complete any number of projects with very favorable terms.

VELSHI: Fred, I see your hand up. I don’t know how—I don’t know what the rules are around here, but since you’ve got your hand up and there’s a tomato in your picture, go ahead.

OPERATOR: I think that was his last one. So our next question will be from Robert Bestani.

Q: Oh, sorry. I had two hands up. Two hands, Ali, what are you going to do?

VELSHI: All right, let’s—go ahead, Robert. This is crazy. This is crazy. The CFR has come unplugged. (Laughter.) Robert, go ahead.

Q: Well, as someone who spent thirty-five years working in all phases of infrastructure, in both the public and private sector, I’m really much heartened by the progress that we’re making at this point, particularly since I worked so hard to get President Biden elected.

But I’m really disheartened by the fact that the national infrastructure bank seems to be falling off the table. There is a desperate need to coordinate these things. I spent, as part of my career, both running a private sector bank at the Asian Development Bank, where I did numerous financings across all of Asia, including China, but also eight years at the Department of Energy. Let me say that there is—there are a number of infrastructure investment banks in the federal government at this point. But the problem is nobody is talking to each other. I kept reaching out to Department of Transportation and I’d get swatted away. I reached out to FCC and I would get swatted away. Everybody wants to live in their stovepipe.

And I don’t—at a minimum, you’ve got to get these people in the same building working together and coordinating, because that’s the critical aspect of this, is getting people to get the synergies, as the Chinese do. So we can learn a lot from them and we can also learn, you know, from the experience that the—that banks like the ADB have done in PPPs. They work really—

VELSHI: Robert, I got to wrap up in a couple minutes, so why don’t I toss this to the panelists? Because I got a hard out at 4:30.

Q: Exactly. I was going to ask, you know, what the panelists thought about what we could do to put these various humans together and get them to coordinate for once.

VELSHI: Tyler, let’s start with you.

DUVALL: OK. That’s a great question. I mean, look, I think we got to incentivize the coordination through, again, you know, achievement of different performance outcomes. I think that, you know, we’ve got projects that don’t need to be fully integrated. So a lot of times people are trying to coordinate things that don’t need to be coordinated. But then, you know, at a metropolitan area level you’ve got these systems that are extremely interconnected. So, you know, my little company, we depend on fiber or 5G to Diane’s dig once—or, Heidi’s comment about that. Like, we’ve got to have, in order to have a smart road network in the United States, a fully integrated telecom investment approach.

So I think, you know, organizing around specific project opportunities like that. Ultimately coordination, to me, in my experience—I ran a lot of interagency stuff when I was in the federal government. When you’re just doing it in the abstract, people—you know, you see the interest level kind of wane quite quickly. So it’s let’s take projects that are transformational, game-changing, use those projects as the rallying point, as opposed to, hey, everybody, let’s just coordinate. Again, I don’t have a silver bullet, but it does seem to work better.

VELSHI: Heidi, for you?

CREBO-REDIKER: So in terms of coordination, coming up with better methods, since Tyler spent a good chunk of his time at McKinsey doing this exact thing for governments around the world, I think I’ll leave it with his answer.

VELSHI: Very good. All right. Final word to you, Diane.

GUTIERREZ-SCACCETTI: I would—I would agree with Tyler. You always get more traction when you have a project that everyone can focus on and take ownership in to make it move forward. You know, the national infrastructure bank question is an important question. I think, you know, I have to agree with Heidi. I really don’t want to sacrifice the hard part of the—the hard infrastructure in the bill right now and muddy it with too much else, or we’re going to lose it. So I think, you know, we keep working at those things over time. But I do also agree that, you know, lean on the state and local governments to deliver, because that’s really where the boots on the ground are. That’s where the magic is made.

VELSHI: Well, we have leaned on you to deliver today, and what a fantastic group of panelists. And those of you who brought your questions, thank you to all of you. I’m sorry for those of you who we weren’t able to get in. Thank you for joining today’s virtual meeting.

Please note that the audio, transcript—and the transcript of today’s meeting will be posted on the website very soon. We hope you can join the post reception, which is starting momentarily. The link will be posted in the chat box. And with that, I hand it over. I thank my great panelists, and all of our participants and attendees today. And I hand it back to you, Sam.

(END)

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