Barack Obama, the President of
US, was indeed in a subdued
mood while presenting the record deficit budget of $1.56 tn for
the year 2010. The challenges that the country was facing were reflected in
his speech when he said, "We're at war. Our economy has lost 7 million jobs over
the last two years. And our government is deeply in debt after what can only
be described as a decade of profligacy." In the budget, titled "A New Era of
Responsibility: Renewing America's Promise", the President also
suggested a solution to counter the challenges—"save where we can so that we can
afford what we need."
Most notably, one idea that has cropped up as the only way out of
the perennial budget crisis is the wholesale privatization of US infrastructure
assets. In fact, in the present circumstances, it is virtually impossible
to fund deficits by using the two traditional levers—increases in taxes or
increases in debt. Therefore, one solution to the debt-stricken municipalities
and states is to monetize their assets. The underlying idea is that with the
initiation of wholesale privatization program, a huge market for
infrastructure finance will be created and at the
same time the burden on US finances will also be eased out. In the earlier
years, the question of monetizing government assets did not arise as the country
never encountered the kind of fiscal crisis that it is facing in recent times. But with
the onset of the financial crisis, the financial position of the US deteriorated
dramatically—now the country finds itself in a situation akin to where
Australia and United Kingdom were two decades ago. Also, the public perception
on privatization of government assets is changing and even a section of the
politicians are voting for the passage of private sector money into
infrastructure sector which has so far been under
the jurisdiction of the government sector. Given these changing
circumstances, private participation in
infrastructure sector as well as Public-Private
Partnerships can definitely reduce the burden on public finances as well as
create a huge private infrastructure market.
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