Solution No. 1: The big fix-up

With governments at both the federal and local level burdened, we need to find a creative way to finance and manage new infrastructure projects. Preferably, it should tap into the massive hoard of private capital (all that wealth the top 10% have accumulated) and use private ingenuity and the profit motive to deliver projects on time and under budget.

I'm talking about public-private partnerships, which the British are already using to fund new infrastructure. Such partnership projects now account for between 10% and 13% of all U.K. public infrastructure investments.

A recent report by Deloitte outlines the options and benefits. The basics are that, instead of issuing bonds or using savings, a transportation authority authorizes a private company to build and operate a road, school or water facility in exchange for revenue from tolls or usage fees. Standards of service are determined. Deals can be structured so that, after a certain time, asset ownership transfers to the government.

Risks, such as project cost and completion time, are transferred to private entities.

There are many benefits to doing it this way. New sources of capital become available. Project timetables can be moved up and social benefits accrued sooner. And the faster we fix the problems, the better: The World Economic Forum ranks America 23rd in the world for overall infrastructure quality, between Spain and Chile.

The U.K.'s National Audit Office reported in 2003 that 73% of construction projects that were not public-private partnerships were over budget and 70% were delivered late. In comparison, only 22% of PPP projects were over budget and 24% were late. As for quality of service, more than three-quarters of U.K. end users reported PPP projects were performing as expected or better than expected.

A few states here at home are dipping their toes in. The Virginia Pocahontas Parkway project avoided a 15-year construction delay by eliminating the need for public funding. (Search on Bing to learn more.) Private funding accelerated South Carolina's toll road system by 20 to 30 years.

It's worth remembering that no less than President Abraham Lincoln was a firm believer in the public-private partnership model. He used it to complete the first transcontinental railroad in the 1860s.

Solution No. 2: The wealth tax

Frequent readers know I've been hammering on about how terrible it would be to try to close the government's budget deficit by relying on higher taxes for the rich. Not only would it not solve the problem, it would actually make it worse by damaging CEO and small-business confidence, further reducing capital expenditures and investment, and limiting new hiring. (See "Why CEOs need our love, too.")

Already, the NFIB Small Business Optimism Index has fallen to a record low in November due to an "overwhelmingly negative response" among small-business owners to Obama's re-election.

But there is still a need to use the incredible wealth that has accumulated to the top to "reset" this morass and get us back on track. I'm talking about a one-time wealth tax, an idea that was recently proposed by the folks at the Boston Consulting Group (.pdf file).

To make it work and reduce the economy's debt-to-GDP ratio to a sustainable 180% level, BCG calculates that we would need to raise nearly $11 trillion. That translates into a 26% wealth tax. The money would be used to reduce both public and private indebtedness -- think Treasury bond repurchases, paying off mortgages and paying off student loans.

(I think we could make do with less, say a 10% wealth tax, by not focusing as intently on reducing corporate debt -- big business is just fine -- and keeping some government debt on the books, since Treasury yields are still low.)

Money would also be raised by levying higher capital-gains taxes on real estate and taxing corporate profits that aren't reinvested.