Treasury Secretary Jack Lew and Transportation Secretary Anthony Foxx spoke with Bloomberg Television’s Peter Cook today about investing in infrastructure, ending tax inversions and Russian sanctions.
Secretary Lew said a “broken” tax system is what prompts tax inversions: “The right solution, if we cannot enact tax reform quickly enough, it’s for Congress to enact legislation that would close the door to these inversions. What I’ve said is that if Congress doesn’t act, we have to take the steps we can which will reduce the economic value of inversions. And I’m looking at options, as I said yesterday, we’re going to make decisions in the very near future. And it will not take away the need for legislation. But it will take a lot of the value out of these inversions, which I hope will change the decisions companies make.”
On the Russians threatening to shut down Russian airspace to sanctioning countries, Secretary Lew said: “Russia is feeling the impact of sanctions in its economy and they’re not even denying the impact of it…The president’s been abundantly clear that if Russia withdraws its military support, it stops being engaged, recognizes Ukrainian sovereignty, we will be delighted to roll back sanctions. So Russia really controls the direction that this goes. They should make the decision to work this out diplomatically and resolve the situation. But they need to know that if they fail to do that, they’re going to face additional costs.”
Jack Lew Urges Infrastructure Spending, Tax Code Changes
COOK: Let me start with you first, Secretary Lew, and talk big picture here about infrastructure investment.
How big a hole does America have right now when it comes to infrastructure and what’s it going to take to get out of it?
JACK LEW: Peter, you know, we have a big hole. It’s been the better part of a decade that we haven’t seen the investment that we need, notwithstanding the major investments we made early in this administration to repave roads and build bridges and tunnels.
The backlog is deep. We know from the history of our country that building infrastructure is a way to take care of two things at the same time. First, it creates good, solid middle class jobs; secondly, it builds an economic foundation for the future.
We don’t get to take any decades off and the needs are great, wherever we look, whether it’s the highways, the ports, the airports, our electric grid, the water utilities. And we’ve got a group of people assembled here today who have the right background to be able to the problem and we’re very excited by the enthusiasm for working together to tackle this.
COOK: Secretary Foxx, there’s been some discussion about the U.S. maybe the U.S. isn’t keeping up when it comes to its peers around the world. Is China eating our lunch when it comes to infrastructure?
ANTHONY FOXX: Well, as Jack can tell you, the share of GDP that’s being used for infrastructure in the U.S. versus countries like China is much smaller by, in some cases, about half.
And so we’ve got a lot of distance to make up in this country. But downstairs, we’ve got about $50 billion dollars worth of investors that are really looking to figure out how to connect into U.S. infrastructure and at a time like this when we have a country that’s growing by 100 million people over the next 35 years, we’re going to have to basically double the freight capacity in this country over the next 35 years. We don’t have a second to lose because it’s cheaper to invest today than it will be tomorrow.
COOK: Tell me what it is you all are prepared to offer those private investors, the real money you talked about in the room here, to try and get them to park their money in U.S. infrastructure because certainly there’s been some investment, but not the numbers you all would like to see.
What can you offer them differently going forward? I know you are working on some recommendations. Can you give us one idea, for example?
FOXX: Well, the president has asked us to take a look at infrastructure writ large through the Build America investment initiative. We owe him some recommendations by the middle part of November.
But what we’re doing at the U.S. Department of Transportation is we’re already standing up a Build America investment center. This is going to be a place — kind of a repository, if you will, of model legislation, technical assistance to state and local governments as well as private sector investors who are looking to do infrastructure projects.
It’s going to be a place where we can really try to make some headway. And we’re also working to accelerate project delivery so that projects can get done faster and remove a bit of uncertainty that sometimes causes private sector investors to go away.
COOK: Is this an acknowledgment Mr. Secretary, this summit — You’re getting private sector folks here — that the federal government, given the gridlock here in Washington, can’t get this job done? Are you going to have to hand the keys effectively over to the private sector to do this in the future?
Jack Lew: Peter, the thing about partnership is we all have to do our part. There is an enormous role for the federal government. And as you know, the president is pushing very hard for a four-year extension of our transportation program so that we can get the certainty out there, that the federal government will be there as a partner.
But it’s also no secret that these are years of budgetary constraints, at — all levels of government — and if we look around the world, the countries that are doing well on infrastructure have figured out how to use all the tools available, public and private investment.
I certainly hope we can get a multi-year highway bill enacted. I think we can. And if we can, we still need to do what we’re doing here today. We certainly need to do it in the event that we don’t SEE quick action.
COOK: Those private investors down there, Mr. Secretary, they’re looking for a return on investment. They want less red tape. It’s hard to get these projects done anywhere in this country still in this environment.
Again, what are you going to offer them? Are we welcome to looking at perhaps more privately managed roads in this country?
FOXX: Well, let’s start with the fact that the American people want more investment and less red tape. They are the ones who are stuck in traffic; they’re the ones who are trying to get to work to get to soccer practice. Those are the ones that have businesses that need to move goods from one place to another.
And so this is a problem that is not invisible to Americans. It’s one that’s very up close and personal for them. And again, I think Jack said it exactly right, which is that what we’ve got to do is we’ve got to use all of the tools in the toolbox and one of those that has been underutilized in this country is public-private partnerships.
COOK: Let’s talk about