Imagine that you're Bill Clinton. You want to spend tens of billions of dollars on new roads and bridges, worker training, affordable housing, and inner-city development. Everywhere you look, you see stunning shortfalls in public investment. But you have no money. And a newly deficit-conscious Senate, which is refusing to pass a modest urban-spending initiative, is not about to provide much help. What's an activist President to do?
In his search for funds, Clinton is casting a hungry eye on the world's biggest pool of money: $4 trillion worth of pension assets. At least three Cabinet chiefs--Robert B. Reich of Labor, Henry G. Cisneros of Housing & Urban Development, and Federico Pea of Transportation--have urged pension-fund managers to target some of their investments toward public needs. The Clintonites "are absolutely passionate about rebuilding America," says one congressional aide, "and they are desperate to find ways to finance it." But only one small pilot project has gotten under way: Cisneros has joined in a partnership with the AFL-CIO's Housing Investment Trust that will pump $500 million of union pension money into low-income housing.
FEW OPTIONS. Clintonites came to Washington gung-ho for turning pension assets into public infrastructure. But while they are pressing ahead with a sweeping review of pension policy, officials don't expect much action this year. So far, they haven't found a way both to boost public investment and protect retirement money. Congress is already worried about the solvency of the Pension Benefit Guaranty Corp., which insures private pensions. Any attempt to push plans into taking bigger risks will meet stiff resistance both on Capitol Hill and from pension-fund administrators.
Alternative routes to the pension pot of gold face similar opposition. Administration officials have discussed taxing the assets of plans or setting targets of, say, 5% of assets to be earmarked for social investment. At least half a dozen states have set investment goals for public-employee funds, but most have failed to meet the targets because available opportunities are too risky.
But don't underestimate Clinton. He could settle on a federal revolving fund that would provide seed money to encourage private infrastructure-investment. Trouble is, he doesn't have the money to get such a program off the ground. There is a less expensive alternative, proposed earlier this year by a congressional infrastructure commission. It recommended federal loan guarantees to insure pension investments in roads, bridges, and the like. But Clinton aides are wary of yet another quasi-governmental enterprise that will create liabilities for the Treasury.
FRESH PLAY. In the short term, Clinton may settle for symbolic efforts and a lot of jawboning. Some aides favor a national data base, which would offer a list of projects for pension investors to peruse. That may appeal to some pension fund managers, who face their own challenge. Thanks to low interest rates and a stagnant stock market, high returns are hard to find. So they are interested in the potentially high yield from privatized infrastructure.
Since pension law already permits such investments, activity could easily pick up. "Structured properly, there's an appetite to finance these projects in the private market, even without government guarantees," says Eileen Austin, a partner at Elkind & Austin, Los Angeles consultants. "The government's role may be to encourage them from the bully pulpit." For now, that may be all that Bill Clinton--whose will is so much greater than his wallet--can afford.