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Finding balance: new governance structure in America

Balancing stonesThe pendulum of public policy in the US has swung, and, to many, it has swung in a way that is unsettling different, and confusing. Historically, we could imagine with some reasonableness what a new Administration would yield for the American people. But the 2016 political process has propelled us toward a future that’s extremely hard to predict. What we can predict with a high degree of certainty is that for the next four years, America is going to try on something very different on many levels that will require extra vigilance by the citizenry to help steady the ship.

Public Sector Experience Gap

Our incoming president is a businessman with no experience in governing a national economy. Some may see this as a good thing, others not so much. No matter your political view, the reality is clear: a steep learning curve will be in order. Running a corporation is not the same as running a national society of citizens from all different walks of life, religion, and economic means. Whereas the duty of a CEO is to increase profits, the duty of the President is to protect US citizens and create an environment where all can prosper. Balancing the budget of a national economy versus a corporation will be much more complex and involve an analysis of diverse spending needs from defense, veterans’ benefits, and infrastructure to public education and public health.

This political twist-of-fate in the highest office of the land has also yielded some highly unusual Cabinet picks in comparison to American history. To date, five of the Cabinet picks are billionaires, many are millionaires and, like Trump, some have no government experience so the learning curve will be steep for them as well. For example, Dr. Ben Carson, who was picked to head Housing and Urban Development, publicly admitted that “his background [as a neurosurgeon] didn’t prepare him to run a federal agency.” Linda McMahon, who is Trump’s pick to lead the Small Business Administration, comes from being a long-time CEO of World Wrestling Entertainment. Her connection to Trump dates back many years, not only as a campaign contributor, but as a business partner in Trump ventures.

Public Sector Experience Contradiction

Other cabinet picks, while experienced in government, have been particularly adversarial against the very mission of the agencies they’ve been selected to lead. Scott Pruitt, for example, was chosen to run the Environmental Protection Agency, whose very mission is “to protect human health and the environment—air, water, and land.” Yet Mr. Pruitt, as former Attorney General for the state of Oklahoma, sued the agency last year, asserting that it exceeded its authority with the Clean Power Plan because it coerced states into “shuttering fossil-fuel generated electricity.” Rick Perry, who is Trump’s pick for Department of Energy, vowed to shut the department down entirely during a Presidential debate in 2011, and now he’ll be heading it up.

Private Sector Advisories

One thing that was consistent with previous presidential transitions was Trump’s pre-inauguration outreach to the business community. On December 2nd, Trump created a Business Advisory Council made up of major US corporations (GE, GM, Disney, Boeing, IBM, Global Infrastructures, among others), adding Tesla and other clean tech companies as well. Last week, he met with leading technology companies to discuss their concerns, which ranged from HB1 visas to education/training and climate change. Elon Musk, a champion on the issue of climate change and the “poster child” known for seizing climate change with bold, visionary moves to transform the economy attended as well.

Musk isn’t the only environmental champion, of course; wind and solar industries are flourishing as green energy jobs exceed 3.8 million. The big question on many people’s minds is how these issues will fare given Trump’s campaign rhetoric and his pre-election Contract with the American Voter. On the one hand, he asserts that he will “create at least 25 million new jobs through massive tax reduction and simplifications,” but on the other hand, he “will leverage public-private partnerships, and private investments through tax incentives, to spur $1 trillion in infrastructure investment over ten years.” How will that contradiction work: tax incentives with tax reductions? The answer remains to be seen.

Policy Direction—To Be Determined

When government lowers taxes, it has less revenue to spend. That’s important because public-private partnerships (P3s) aren’t just about private financing sources. While P3s could fill the infrastructure gap, make no mistake, it’s not an easy fix, nor is it cheaper. Private equity and finance costs are higher than government-sourced financing (e.g., municipal bonds). To make the numbers work, there is still a need for public sector funds and tax incentives to attract private investment. More importantly, public capacity to manage the planning, design, and upfront financial modeling of large complex infrastructure projects is crucial. Without it, taxpayers could be left holding the bag on a long-term 30+ year payment that has little value to the taxpayer base.

If the Administration’s approach to infrastructure is overly simplistic (i.e., focusing only on enabling private sector financing of public infrastructure) and neglects to invest in a policy framework that supports governments at the state and local level in a way that will help them to identify, prioritize, vet, plan, and negotiate deals, the problem is only going to get worse. A few unsuccessful P3 projects out of the gate may quash it as a viable, long-term tool for government. No one wins in this scenario—not government, not taxpayers, and not investors.

“The thing about democracy, beloveds, is that it is not neat, orderly, or quiet. It requires a certain relish for confusion,” Molly Ivins, former newspaper columnist, once said, and it’s truer now than ever. Conflict, it seems, is at an all-time high because our democracy—warts and all—allows for it. The key, however, is that we take this opportunity of conflict and really try to listen and understand what underlies each side’s position. Stay tuned as we continue to help turn down the political noise that surrounds us and begin the hard work of focusing on policy developments as they arise and how they may impact the design and construction industry.

About Yvonne Castillo, Vice President of Risk Management

https://www.linkedin.com/in/yvonnercastillo

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