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INFRASTRUCTURE-2008/07/25 1 THE HAMILTON PROJECT THE BROOKINGS INSTITUTION INVESTING IN AMERICA’S INFRASTRUCTURE: FROM BRIDGES TO BROADBAND Washington, D.C. Friday, July 25, 2008 ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 INFRASTRUCTURE-2008/07/25 2 Opening Session ROBERT E. RUBIN, Citigroup Inc. LAWRENCE H. SUMMERS, Harvard University Special Guest: GOVERNOR TIM KAINE, Commonwealth of Virginia Overview of Strategy Paper DOUGLAS W. ELMENDORF, The Hamilton Project, The Brookings Institution Roundtable on Telecommunications Infrastructure Moderator: GLENN HUTCHINS, Silver Lake Panelists: BLAIR LEVIN, Stifel Nicolaus JON M. PEHA, Carnegie Mellon University PHILIP J. WEISER, University of Colorado Roundtable on Physical Infrastructure Moderator: NANCY CORDES, CBS News Panelists: RONALD BLACKWELL, AFL-CIO JASON BORDOFF, The Hamilton Project, The Brookings Institution DAVID LEWIS, HDR Decision Economics DOROTHY ROBYN, The Brattle Group ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 INFRASTRUCTURE-2008/07/25 3 * * * * * ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 INFRASTRUCTURE-2008/07/25 4 P R O C E E D I N G S MR. RUBIN: Good morning. Welcome. I’m Bob Rubin. On behalf of all my colleagues at The Hamilton Project, let me welcome you this morning to our program on infrastructure, from bridges to broadband. As most of you know, The Hamilton Project was begun about three years ago. Our objective was to set forth, which we did in the form of a paper, an economic strategy for the country in the face of a period of change of truly historic proportions, transformational change. And since then we’ve had a series of panels and papers and different policy areas pursuant to that strategy. We believe the United States, with its dynamic economy, its willingness to take risk, its flexibility, can do very well in today’s rapidly changing global economy once we get past this presently exceedingly difficult period. But in order to realize that potential, we must meet the usual consequential challenges, and failure to meet those challenges could lead to serious secular difficulty. We also believe strongly that economic activity should be organized around markets, but that government also has a critical role to play in meeting the many needs for a ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 INFRASTRUCTURE-2008/07/25 5 successful economy that markets by their very nature will not provide. Today we’re going to explore the question of infrastructure. Our distinguished authors and their papers will explore the many issues around this critical area with respect to our economy going forward, providing infrastructure for a successful economy in areas ranging from the traditional, like bridges and water systems, to cutting-edge areas, like broadband. The issues that will be explored will include at least the following: What criteria should be used for evaluating alternative infrastructure investments? How can more effective use be made of existing infrastructure? How should political capital and financial resources be allocated amongst maintenance and repair, measures to create more effective use of existing infrastructure, and investment in new infrastructure? Very importantly, can infrastructure best meet the criteria for economic stimulus in terms of being immediate, being temporary, and maximizing short-term benefit for dollars expended? Or should infrastructure decisions be based on long-term criteria and only be used for fiscal stimulus when they can as well meet these ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 INFRASTRUCTURE-2008/07/25 6 criteria for fiscal stimulation. With fiscal stimulus then obviously provided in other ways that best optimize in terms of the fiscal stimulus criteria. How can infrastructure be financed, including the possibility of more innovative financing using privatization, tolling, and other possible methods? What are the issues around financing infrastructure through a capital budget or through the sale of valuable real estate, valuable government-owned real estate, whose functions could then be moved elsewhere? How could infrastructure be coordinated across state and regional boundaries? And finally, how should we think about expanding access when we evaluate infrastructure investment? Let me now outline our program and briefly introduce the speakers. What I will not do is go on extensively about any speaker because the résumés are in your materials. Our opening session will begin with remarks by Larry Summers. Larry as you know was former secretary of the United States Treasury, former president of Harvard University, and is currently Charles W. Eliot university professor at Harvard University. Larry’s remarks will address, amongst other things, one of the ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 INFRASTRUCTURE-2008/07/25 7 issues I mentioned a moment ago, the role of infrastructure investments in stimulating economic growth from the perspective of demand creation and job creation, with particular focus on the exceedingly difficult economic environment that we’re now experiencing. After that we’ll hear from the Governor of Virginia, Tim Kaine. We’re enormously honored to have Governor Kaine with us. As all of you know, Governor Kaine is very widely respected for the enormous thoughtfulness that he has brought to the issues of his state and to the issues of states more generally. His remarks will deal with the challenges of infrastructure from the perspective of the states and he will focus particularly on his experience in Virginia. After Governor Kaine finishes his remarks, he will then entertain questions before we go on to our next session. Subsequent to the opening session, we will have a summary by Doug Elmendorf of the paper that’s been distributed to you prepared by The Hamilton Project on infrastructure. I thought it was an enormously insightful paper with a really interesting discussion of the pros and cons around the various issues. I would strongly commend it to you. Doug has previously been on the staff of the Federal Reserve ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 INFRASTRUCTURE-2008/07/25 8 Board of Washington, the United States Treasury Department, and the Council of Economic Advisors, and we are absolutely delighted that Doug is now the director of The Hamilton Project as well as a senior fellow at Brookings. After Doug’s presentation, we’ll have two papers, or two Roundtables rather, on papers developed under the aegis of The Hamilton Project with respect to infrastructure. The first Roundtable will be on Telecommunications Infrastructure. The moderator will be Glenn Hutchins, chief executive officer of a highly successful private equity firm that specializes in technology, Silver Lake. He’ll be joined by Blair Levin, managing director of Stifel Nicolaus. And by the authors of two new papers, Jon Peha, professor of engineering and public policy at Carnegie Mellon University, and Philip Weiser, professor of law at University of Colorado. The second Roundtable is on Physical Infrastructure. All of us as we go through our daily lives are aware of the enormous problems with respect to bridges, roads, water systems, and so much else. And the moderator of that discussion will be Nancy Cordes, transportation and consumer safety correspondent at CBS News. She’ll be joined by Ronald Blackwell, the enormously ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 INFRASTRUCTURE-2008/07/25 9 well respected chief economist of the AFL-CIO, and by the authors of three new papers, Jason Bordoff, policy director of The Hamilton Project, David Lewis, senior vice president at HDR Decision Economics, and Dorothy Robyn, formerly at the National Economic Council and now a principal at the Brattle Group. You put it all together, it is a remarkably robust program, intellectually and in terms of the range of issues covered. And I’d like to recognize particularly Doug Elmendorf, who I’ve already mentioned, the director of The Hamilton Project, and Karen Anderson, our managing director, for putting together this terrific program. With that, it is my pleasure and honor to introduce our first speaker, the Honorable Lawrence H. Summers. Larry? MR. SUMMERS: Thank you very much Bob for that. Sometimes it’s better to be introduced by you than to be introduced with you. I remember the time in late 2000 when someone introduced the two of us, and the introduction went something like this: “Bob Rubin is the best secretary of the Treasury since Alexander Hamilton. Larry Summers is the best secretary of the Treasury since Bob Rubin.” ANDERSON COURT REPORTING 706 Duke Street, Suite 100 Alexandria, VA 22314 Phone (703) 519-7180 Fax (703) 519-7190 INFRASTRUCTURE-2008/07/25 10 I am glad to be here and glad to be addressing what I think are a consequential set of issues. Let me say at the outset that I share the general judgment that runs through the papers to be presented here that the greater application of economic logic and analysis can do an enormous amount to support wiser infrastructure investments and equally important, more effective use of the infrastructure investments that we have already made to the very great benefit, not just of measured income and GDP, but also to the quality of lives of American citizens. Those are in economic parlance the microeconomic and growth aspects of infrastructure investment, and ultimately they are probably the more important set of issues that are involved when one is talking about infrastructure.