November 18, 2016

Trump wants to turn public works into private profits

Popular Resistance - In Donald Trump’s victory speech after the presidential election, he vowed:
We are going to fix our inner cities and rebuild our highways, bridges, tunnels, airports, schools, hospitals. We’re going to rebuild our infrastructure, which will become, by the way, second to none. And we will put millions of our people to work as we rebuild it.
It sounds great; but as usual, the devil is in the details. Both parties in Congress agree that infrastructure is desperately needed. The roadblock is in where to find the money. Raising taxes and going further into debt are both evidently off the table. The Trump solution is touted as avoiding those options, but according to his economic advisors, it does this by privatizing public goods, imposing high user fees on the citizenry for assets that should have been public utilities.

The infrastructure plan of the Trump team was detailed in a report released by his economic advisors Wilbur Ross and Peter Navarro in October 2016. It calls for $1 trillion of spending over 10 years, funded largely by private sources. The authors say the report is straightforward, but this writer found it hard to follow, so here the focus will be on secondary sources. According to Jordan Weismann on Slate:
Under Trump’s plan … the federal government would offer tax credits to private investors interested in funding large infrastructure projects, who would put down some of their own money up front, then borrow the rest on the private bond markets. They would eventually earn their profits on the back end from usage fees, such as highway and bridge tolls (if they built a highway or bridge) or higher water rates (if they fixed up some water mains). So instead of paying for their new roads at tax time, Americans would pay for them during their daily commute. And of course, all these private developers would earn a nice return at the end of the day.
The federal government already offers credit programs designed to help states and cities team up with private-sector investors to finance new infrastructure. Trump’s plan is unusual because, as written, it seems to be targeted at fully private projects, which are less common.

David Dayen, writing in The New Republic , interprets the plan to mean the government’s public assets will be “passed off in a privatization firesale.” He writes:
It’s the common justification for privatization, and it’s been a disaster virtually everywhere it’s been tried. First of all, this specifically ties infrastructure—designed for the common good—to a grab for profits. Private operators will only undertake projects if they promise a revenue stream. . . .
So the only way to entice private-sector actors into rebuilding Flint, Michigan’s water system, for example, is to give them a cut of the profits in perpetuity. That’s what Chicago did when it sold off 36,000 parking meters to a Wall Street-led investor group. Users now pay exorbitant fees to park in Chicago, and city government is helpless to alter the rates.

You also end up with contractors skimping on costs to maximize profits.

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