Among the most significant public finance challenges facing many countries is the need to find innovative solutions to sustainable pension funding — ensuring that pension contributions, investment returns and tax-based supplements will meet promises made to public sector beneficiaries. A parallel public finance shortfall is infrastructure underinvestment, which can seriously impair economic performance. The United States, for example, now faces both a $1.6 trillion public pension funding gap and a $2 trillion public infrastructure investment gap. These are two “boiling frog” problems of immense significance, which, if left unaddressed, will gradually lead to a deterioration in economic growth, competitiveness and social equity.
The pension and infrastructure challenges need not be viewed as distinct problems that can be addressed using distinct remedies. There are useful policy initiatives that can bridge both the pension funding and infrastructure investment gaps — c