Search Form
Now choose a category »

Public Statements

Rebuild America Jobs Act

Floor Speech

By:
Date:
Location: Washington, DC

BREAK IN TRANSCRIPT

Mr. KERRY. Thank you, Mr. President.

Mr. President, I believe we are currently debating the motion to proceed to go to the energy, water, et cetera, package. Included in that is the proposal of the President that he has sent up asking the Senate to vote on the question of an infrastructure bank.

I believe there was a prior vote in the Senate on that in the context of the Jobs Act, which we all know failed at that time. There are some signs that this may wind up being a partisan effort here, but I hope colleagues will stop and think very carefully about the infrastructure bank proposal and what it represents to our country.

Whether we can get it over the hurdle at this moment, I do not know. But it is an idea whose time has come, and I am confident in the next weeks or months, hopefully, the Senate will embrace this concept. The reason for doing so is very simple. Colleagues on both sides of the aisle are increasingly reminded when they go home, as well as familiar here just in the general dialog about where we are going in our country, of the enormous deficit reduction--the deficit; it is on my mind--of the infrastructure deficit we face in this country as a whole.

So I want colleagues to stop and think hard about a simple question: How are we going to build America? How are we going to build America going forward so that we can do what our parents and our grandparents did for us, providing us with the basic infrastructure of a nation that has been able to allow people to move easily from home to work to places of commerce across the country, an interstate highway system, all of our airports, our train stations, all of the assets that provided for the strength of our Nation and for the kind of communities we live in? None of it appeared out of nowhere. It was built because people had a vision, people had an idea about how you make communities strong, and also how economies work. The fact is that some of the greatest projects in our country, whether it is some of the great bridges we look at today--Golden Gate Bridge, Triborough Bridge, George Washington, countless bridges across the Potomac and elsewhere--the tunnels, the roads, our water treatment facilities, our airports, and the airline system we have, all of those things contribute to the strength of our country.

But everyone here knows we are not currently pursuing a set of projects calculated to make America more competitive and to continue that rich history and tradition of building for the future. We are busy living off the assets that were created by the generations that preceded us. So the question has to be asked by every colleague here: Are we going to appropriate the money for grants? And the answer is no, partly because the deficit and the debt are telling us in loud terms we do not have those kinds of funds right now, but also because everybody here sees the difficulty we are having trying to get the highway bill reauthorized or the FAA bill reauthorized in order to do the things we need to do.

The proposal for an infrastructure bank is a proposal that recognizes this fiscal reality. We simply do not have and will not allocate the types of funds necessary to do the job every American knows has to be done. That does not mean the job cannot be done. There is a way to do it. And the way to do it is to invite other people's money, the private sector, not tax dollars, to come to the table and invest in these projects, where these projects have revenue streams that will support that kind of investment.

One of the important features of the infrastructure bank that I ask colleagues to focus on is the fact that this bank is not a grant entity. There will be no grants. It is exclusively loans, and exclusively loans that meet the fiduciary test of their ability to be able to be repaid, to have a revenue stream that will support the loans themselves.

I would say to my colleagues, some of them I know have asked me occasionally: Well, is this going to be an entity such as Fannie Mae or Freddie Mac? Is it going to be one of those government-supported entities that got some folks in trouble? The answer is no, resoundingly and profoundly no. It is not similar in any way whatsoever. Fannie Mae and Freddie Mac issued stock. They were for-profit entities listed on the New York Stock Exchange. They were using the Federal guarantee on a loan to actually leverage their position in the marketplace in competition with other entities and for-profits. This bank is not for profit. No issuance of stock will be listed on any exchange. It will exist exclusively for the purpose of lending to those types of projects that meet the highest fiscal standards with respect to the ability of those projects to be repaid.

In fact, in each and every lending situation, the infrastructure bank will make a risk analysis, just as you do on any deal in Wall Street. There is a risk analysis, and a risk factor will be assigned to that deal. In fact, fees will be charged to the borrowers, to the dealmakers, in order to cover that level of risk. That will be part of the cost of the transaction.

The benefit of this infrastructure bank is that by virtue of the Treasury Department providing a discount for the Federal Treasury guarantee, you actually make the loan attractive in terms of the private sector in competition, and it does so at a level, as I said, of risk analysis that does not put the Federal Government or the taxpayer on line and at risk for the measured level of the loan itself, but only the risk which is credited or put on the books in terms of what is carried by the Treasury Department as the risk of this particular loan.

So, in fact, if you look at the type of projects that are authorized by this--only energy projects, transportation projects, and water projects--in the better part of the country, they are limited to $100 million size or up, and there is a set-aside for rural communities. In the rural communities, the level of loans could be $25 million or up, because obviously in parts of rural America, you have smaller kinds of projects, and we want everyone in the country to be able to share from the benefits of this kind of an infrastructure bank.

I would say to my colleagues, this bank has bipartisan support. It has been introduced in slightly different forms from what the President has put it in. But the fundamentals of the bank in structure and concept are the same. It has been introduced by Senator Kay Bailey Hutchison of Texas, who is a coauthor; Senator Lindsey Graham, Senator Mark Warner are the original cosponsors. But it has other cosponsors and broader support including, I might add, the U.S. Chamber of Commerce, which is a strong supporter of the infrastructure bank, and was present at the announcement of this legislation, as well as the AFL-CIO.

Why is this infrastructure bank necessary? What is it we need? Well, everybody knows that the experts are telling us we have a $2.2 trillion infrastructure deficit in America. That means there are over $2.2 trillion of projects around the country, countless bridges in countless communities around the country, roads or tunnels or airports, countless projects which need to be repaired, upgraded, or put in place at first instance.

We are that far behind, a $2.2 trillion deficit to what we ought to be doing. The American Civil Society of Architects and Engineers tells us that we could spend about $250 billion a year for the next 40 years just to bring our roads up to par, and we are not about to do that, we know, because we do not have the money, because we are not getting that kind of an appropriation now for our initiatives.

Listen to what Oklahoma City Mayor Mike Cornett says: Mayors see up close the deferred maintenance that is going on in the Nation's cities. It is a ticking timebomb. We also know it puts people to work.

Well, Cornett is president of the Republican Mayors and Local Officials Coalition within the U.S. Conference of Mayors. He knows what he is talking about in terms of this deferred

maintenance. But the truth is, every Senator here knows. You can go back home and find mayors and State senators, State representatives, Governors, Departments of Transportation--all of them are pleading with us to try to help provide the kinds of funding necessary because they are simply overwhelmed. I might add many of our States are living under court orders to do some of these projects, particularly the water, the combined sewer overflow-water treatment facilities, where communities have sued and you need to do those projects in order to meet the standards. And they are under court order, without understanding where the money is going to come from. But they are under a court order.

The fact is that whether we decide to do these things is going to determine how competitive America is going to be. Right now, everybody knows we are facing a transformational economic challenge. It is different from the challenge we faced in the last century. During that period of time, as we came out of World War II, we were the only major economy in the world left standing. At the end of the war, we had both the vision and foresight as well as the courage to put a lot of money on the line in the Marshall plan to help rebuild Europe and rebuild Japan. And we saw throughout the Cold War the ways in which that investment paid back for the United States of America, indeed for the western world and for the values that we made central to that kind of an investment.

That has changed. It started to change in the eighties and nineties, and now we are seeing, with the rise of less developed countries that are, after all, doing the very things that we encouraged them to do--we told them you have got to liberate your societies to be able to go out and compete in the marketplace, that they needed to open up that market, they needed to trade, they needed to excite capital formation and invest and so forth. That is exactly what they have done. They have not changed their political systems, in many cases, which remain totalitarian and closed, one party, but they have certainly changed their economic systems, and in doing so, they have transformed the marketplace we are competing in. So the United States is not looking at the same playing field, where we had unlimited resources, unlimited capacity to go out and, frankly, win. We could win many times without even trying that hard. But now other people are doing the same things we took for granted. They are competing in science, they are competing in technology, they are competing in manufacturing, they are competing in software, and they are competing all kinds of things that were our domain for a long period of time.

The market globally has changed significantly enough that we are facing a challenge to our ability to be able to remain the No. 1 economy. I heard today that China will probably be the No. 1 economy in the world within 5 or 6 years, much faster than we had anticipated previously. So if the United States is going to compete and get its act together going forward, we have to invest in the infrastructure of our country, because that is how you, No. 1, create jobs, but, No. 2, you provide the ability to move goods, to provide for people, to provide for the quality of life and the kinds of institutions that make a difference to our ability to be able to compete and to live the quality of life we want.

The figures of other people's commitment to infrastructure tell us the story. China is investing 9 percent of its gross domestic product in infrastructure. Europe is investing 5 percent of its GDP in infrastructure. Here in the United States, we are investing somewhere around 2 percent. Figures vary--2.2, 2.1, 2 percent. I think Brazil invested over $240 billion in its infrastructure in the last 3 years, and the Brazilian economy is growing in double digits. North Korea, Mexico, Brazil, China, India, all growing in double digits, and the United States is stuck in this recession, maybe just breaking out of it, but with very uneven growth.

The infrastructure bank is geared to fill a void in our investment abilities in this country. Again, Senators know we are not going to invest billions of dollars of appropriated money--taxpayer dollars--because of the competition we have in our discretionary funds now because of the way we are heading in terms of the fiscal cliff and debt cliff and because of the challenge of the rising costs in health care and entitlements. We don't have that money.

While we get control of those components of our economy, we need to be investing in the infrastructure of our Nation and putting people back to work. We need to invest in highways, roads, bridges, mass transit, inland waterways, commercial ports, airports, air traffic control systems, passenger rail, including high-speed rail and freight rail systems, and the water sector. We can invest in wastewater treatment facilities, storm water management systems, dams, drinking water treatment facilities, levees, and open space management systems.

In the energy sector, we need transmission in America. We need an energy grid that is modern. We need distribution, storage, energy enhancements for buildings, public and commercial.

There is an extraordinary amount of work to be done--if we decide to do it. Hundreds of billions of dollars is sitting on the side lines right now. It could come in and help us with these projects. The infrastructure bank is precisely the entity that will bring that private capital to the table so that it is the Chinese who are investing in an American infrastructure project that they cannot take back to China; it is here in America. It improves our lives, but it gives them a return on investment for the money they put on the line in a deal, which, frankly, is the kind of deal that will produce the sort of long-term, patient capital investment that I think a lot of people are going to be turning to given the nature of the financial turmoil we see going on in the world today.

We are in a competitive race with other countries to attract this private equity investment. An infrastructure bank could help us put that money to work here at home.

Some people say: Senator, why do you need the infrastructure bank to do this if these deals are so attractive? Why doesn't the money come and they will invest it anyway and so forth?

It doesn't work that way for a number of reasons. First of all, our financial institutions have not developed a long-term infrastructure-lending business. We don't have that in this country the way other banks in other parts of the world do.

If you look at a major American infrastructure transaction over the last few years, guess what. Non-U.S. banks--mostly Australian and European--are the ones providing most of the financing. They are doing it at an average of 20 to 1--20 parts by the non-U.S. banks, the European and Australian banks, and 1 part U.S. investment. Given the troubles the European sovereign market has today, I think it is going to be a very long time before we see a lot of European banks looking to invest over here. Maybe I am wrong.

The lack of investing by our institutions is not because the investment is too risky. The problem is that for a very long time, the vast majority of American infrastructure has been financed through the municipal bond market, the rest largely through Federal grants, which I have said are now under pressure. So there has been no need for large bank lending to be created. As we all know, large bank lending--that market just doesn't happen overnight.

The municipal bond market also relies principally on small retail investors for most of its funding. Because of the way it is designed, it can't access large global pools of capital or, for that matter, pension funds. Pension funds are prohibited from investing in those bonds.

The municipal bond market is not well-suited to fund large, cross-State, cross-boundary projects, so we need something else. That something else is this kind of infrastructure bank, with all of the very strict limits that have been put into place to keep it from reaching too far. It doesn't cost a lot of money--$10 billion of startup funding. It becomes self-financing. Every loan is a loan that can be repaid because they rely on sources of revenue that are among the most dependable sources of revenue in the marketplace--from energy projects that sell electricity, and you have a pretty regular stream of buyers for that. You have a pretty regular stream of people who need water in their homes and pay for the water. All of these revenue streams--the tolls on bridges, for instance, and these others--have a certainty and longevity to them that make these kinds of deals very attractive.

I say to my colleagues that one of the silver linings of this kind of infrastructure investment is this: For every $1 billion, the Federal Highway Administration tells us you will create, I think, 30,000 jobs. The range of jobs, depending on whom you listen to, goes from about 20,000 to 35,000. Let's say it is 20,000 jobs per billion. People say this bank investment of $10 billion can leverage more than $ 1/2 trillion--$500 billion--of investment, so you are talking 20 million jobs over the course of perhaps 10 years.

I think there are so many compelling reasons for engaging this. Europe has an infrastructure bank. We have State infrastructure banks, but the State infrastructure banks don't have the advantage this bank has of being able to do transboundary, cross-State deals. They also don't have the advantage of having a discount on the lending component coming through the Treasury Department of the Federal component of this--done, as I said, under the strictest fiduciary standards. Only 50 percent of any project can be lending. The rest has to be equity and has to be invested by the other investors in the deal. It could be a combination of investors, but they need to invest.

I close by saying that a modern infrastructure is really the lifeblood of our economy. I don't know how many of my colleagues have taken the Acela to New York, but it is a train that has the ability to go 150 miles an hour. It only goes 150 miles an hour between here and New York for about 18 miles of the trip because you cannot go fast under the Baltimore tunnel because vibrations might cause it to fall in. You cannot go fast over the bridges of the Chesapeake because the train will wind up in the Chesapeake. This is absurd.

Many of us have had the pleasure of having a train ride in China. I rode recently from Beijing to Tianjin--a trip that used to take 8 to 10 hours takes 29 minutes. You are going 200 miles an hour. The water on your table is barely jiggling during the entire ride. It is an extraordinary accomplishment. They are building something like 55,000 miles of that kind of high-speed rail system over there, as they spend their 9 percent of GDP on infrastructure.

We can do better. The United States of America can do better. We know that. We are the country that had invention and building construction in our DNA, the country that went to the Moon and developed these extraordinary technologies that connect human beings around the world instantaneously.

I am convinced that if we put this infrastructure bank together, all of a sudden the United States will attract capital, create jobs, modernize our economy, and have benefits that spill out all across our Nation. I hope our colleagues will get rid of the politics and embrace this idea, which is long overdue.

I yield the floor.

BREAK IN TRANSCRIPT


Source:
Skip to top
Back to top