Asset Building

In a contribution to the Christian Science Monitor, Donald Marron discusses the estimates of America's debt which vary by tens of trillions of dollars, depending on how you count. The bottom line: It's deep but not yet fatal.

Funding and investing in infrastructure are not only about finding adequate resources to meet the demands of citizenry, but rather requires understanding of how infrastructure fits into the broader functions of government. This brief examines the key role of pricing infrastructure projects and how the total cost of a project (including lifetime maintenance costs) should be included in funding decisions. Current federal and state policies often encourage new building rather than maintenance and care of existing infrastructure. The role of public-private partnerships in infrastructure projects is also sometimes more about political rather than economic considerations. The author presents options to better coordinate infrastructure financing and payments across levels of government.

This commentary reflects on a profound impact that the fiscal crisis has on management of public property and overall lack of advanced asset management practices at local governments even though 65-99 percent of the value of the wealth owned on the taxpayers' behalf is concentrated in public land, built-up property and infrastructure.

Land assets have become an important source of financing capital investments by subnational governments in developing countries. Land sales, often with billions of dollars per transaction, rival and sometimes surpass subnational borrowing or fiscal transfers for capital spending. However, the use of land-based revenues for financing infrastructure can entail substantial fiscal risks and requires development of ex ante prudential rules for land financing comparable to those governing borrowing. This paper is part of a larger effort at the World Bank to develop knowledge products on subnational finance and fiscal reforms.

Realized income is a widely accepted measure of well-being. This paper examines the relationship between realized income and wealth and economic income, using a national sample of income tax returns matched with estate tax returns to compare the realized property income of individuals with the with the associated amount of wealth that generates that income. The study demonstrates that with respect to those who hold a significant amount of wealth, realized income is an extremely poor measure of well-being. This leads to inequity in tax and welfare programs. Finally, this study illustrates the usefulness of estate-income collation in studying wealth-income relationships.