“We are going to fix our inner cities and rebuild our highways, bridges, tunnels, airports, schools, hospitals…. And we will put millions of our people to work as we rebuild it.”
~ President Donald Trump
In Pete Dolack’s Feb. 25 ‘The Bait and Switch of Public-Private Partnerships’ he laughs that in these days of genteel pubic relations, the public/private trope is used instead of ‘corporate plunder, as it ain’t ‘the public’ who get the benefits. He notes that with the massive tax cuts that Herr Trump has promised big bidness and the 1%-ers, his promised $1 trillion in new infrastructure investments is just another global neoliberal way to shovel lucre ‘into the maws of corporate wallets’, and we’ve seen it at work, and as per Trump’s ‘putting Amerikans back to work: Jobs, Job! Jobs!©’, Dolack reminds us that privatized (formerly public) services and infrastructure are always more expensive in the end, and workers end up as wage slaves by way of low-paying contractors in the end, and an added benefit to the privatizers is that there’s zero public accountability.
The new ‘private’ company will always seek to maximize profits by keeping ‘costs’ under control and maximizing revenues. But wait! If there’s nowhere else to ‘shop around’ for those private products, ya get a little older and land in debt-prison, while the parasites get a free lunch.
“To return to my use of the word parasite, any exploitation or “free lunch” implies a host. In this respect finance is a form of war, domestically as well as internationally.
At least in nature, “smart” parasites may perform helpful functions, such as helping their host find food. But as the host weakens, the parasite lays eggs, which hatch and devour thehost, killing it. That is what predatory finance is doing to today’s economies. It’s stripping assets, not permitting growth or even letting the economy replenish itself.
The most important aspect of parasitism that I emphasize is the need of parasites to control the host’s brain. In nature, a parasite first dulls the host’s awareness that it is being attacked. Then, the free luncher produces enzymes that control the host’s brain and make it think that it should protect the parasite – that the outsider is part of its own body, even like a baby to be specially protected.”
“What this means in the most general economic terms is that finance and property ownership claims are not “factors of production.” They are external to the production process. But they extract income from the “real” economy.
They also extract property ownership. In the sphere of public infrastructure – roads, bridges and so forth – finance is moving into the foreclosure phase. Creditors are trying to privatize what remains in the public domains of debtor economies. Buyers of these assets – usually on credit – build interest and high monopoly rents into the prices they charge.” (Michael Hudson)
So as Dolack says, the neoliberal scheme is that public assets are sold far below cost (I might say ‘value’), and the public has to pay more for crappier service. But back to Pete:
Corporate subsidies, not $1 trillion in new spending
“The use of the word “plans” is rather loose here. No more than the barest outline of a plan has been articulated. The only direct mention of his intentions to jump-start investment in infrastructure is found in President Trump’s campaign web site. In full, it states the plan “Leverages public-private partnerships, and private investments through tax incentives, to spur $1 trillion in infrastructure investment over ten years. It is revenue neutral.” The administration’s official White House web site’s sole mention of infrastructure is an announcement approving the Keystone XL and Dakota Access pipelines without environmental reviews, and an intention to expedite environmental reviews for “high priority infrastructure projects.”
Wilbur Ross, an investment banker who buys companies and then takes away pensions and medical benefits so he can flip his companies for a big short-term profit, and who is President Trump’s pick for commerce secretary, along with a conservative economics professor, Peter Navarro, have recommended the Trump administration allocate $137 billion in tax credits for private investors who underwrite infrastructure projects. The two estimate that over 10 years the credits could spur $1 trillion in investment. So the new administration won’t actually spend $1 trillion to fix the country’s badly decaying infrastructure; it hopes to encourage private capital to do so through tax cuts.
There is a catch here — private capital is only going to invest if a steady profit can be extracted.”
He’d clipped these cautionary tales from a Sept. 2016 piece of David Dayen’s:
“Private operators will only undertake projects if they promise a revenue stream. You may end up with another bridge in New York City or another road in Los Angeles, which can be monetized. But someplace that actually needs infrastructure investment is more dicey without user fees. 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.”
He has a long, long section on Privatized Plunder’s results in Britain, Canada, really, much of Europe resulting in disasters to ordinary citizens as well as government debt. He lists a few of the nations that have already, or are in the process of, re-municipalizing those projects in France, Germany, notably water and energy projects. Not in Denmark yet, however, where Goldman Sucks takeover of their formerly state-owned energy company.
Oddly, Dolack hadn’t mentioned the epic privatizations of the commons forced on the Syriza government by the Troika in Greece: 14 airports bought by the Germans, the sale of ports, including Piraeus, and coming soon before the next ‘bailout’ tranche: stakes in state controlled Public Power Corporation (PPC) , in oil refiner Hellenic Petroleum , and gas distributor DEPA, according to the Fiscal Times. Zeus knows where it will all lead, but one of the farmers from Crete rioting in Athens last week said that the PTB have looted everything, and…’we want it all back’. The farmers fought the police with shepherd’s crooks, smashing windows and throwing rocks. Yeah, Greeks are pissed off, and riot against austerity frequently.
But as for water, the wars have already begun, haven’t they? He notes:
“Water is big business. Suez and Veolia both reported profits of more than €400 million for 2015. Not unrelated to this is the increasing prominence of bottled water. Bottled water is dominated by three of the world’s biggest companies: Coca-Cola (Dasani), PepsiCo (Aquafina) and Nestlé (Poland Springs, Deer Park, Arrowhead and others). So it’s perhaps not surprising that Nestlé Chairman Peter Brabeck-Letmathe infamously issued a video in which he declared the idea that water is a human right “extreme” and that water should instead have a “market value.”
He’s joined, of course, by many Congressional ‘leaders’, other kleptocrats, including Donald Trump himself. In this nation, some of the brightest attorneys wanting to make big bucks are going exclusively into water law, given that ‘the law’ effectively is…what judges say it is, down to corporations stealing or filing for water that’s been previously adjudicated.
But back to David Dayen. He describes Trump Trade and yes, now economic advisor Peter Navarro:
“What do “public-private partnerships” and “tax incentives” mean here? This report from Peter Navarro, set to be one of Trump’s leading economists, lays out the blueprint. The government would sell $1 trillion in revenue-producing bonds, needing only to supply an equity cushion to ensure everyone gets paid. Navarro estimates around $140 billion in government funding when all is said and done, which you could easily get through repatriation.
Investors would get a tax credit to entice them to buy bonds, and Navarro claims that the tax revenue from new jobs created by the projects makes up for that cost. He also wants to contract out these projects, building in a 10 percent profit margin for the private contractor. Navarro claims that construction costs are higher when built by the government, and the private sector is more efficient.” He’d referenced the repatriation ‘carrots’ above:
“Another funding scheme has interest from leaders of both parties. Under this plan, Congress would impose a “repatriation fee” on the $2.5 trillion corporations have stashed overseas, to avoid the 35 percent corporate tax rate. A reduced 10 percent tax on this money—which Trump formally called for in his campaign—would yield $250 billion. Trump’s pal, corporate raider Carl Icahn, is one of the country’s biggest promoters of this idea.”
Obama had touted a similar scheme; I don’t remember how well or if it ‘worked’. He also reminds readers that:
“The American Society for Civil Engineers has identified trillions of dollars worth of pressing projects in America: repairing bridges and airports, dams and levees, seaports and waterways, mass transit and freight rail. Add to that corroded water pipes, an aging electrical grid, and insufficient broadband access. We’re going to need to upgrade it all at some point; deferring maintenance just costs more later.” [see graphic at the top from 2013]
‘Trump’s big infrastructure plan? It’s a trap.’ by Ronald Klain, whose bio happens to include: “…served as assistant to President Obama and oversaw the team implementing the American Recovery and Renewal Act from 2009-2011. He was an adviser to Hillary Clinton in the 2016 campaign. The views expressed here are solely his own.
He agrees with the other essayists, selling Clinton’s plans along the way, of course, but adds:
“These projects (such as electrical grid modernization or energy pipeline expansion) might already be planned or even underway. There’s no requirement that the tax breaks be used for incremental or otherwise expanded construction efforts; they could all go just to fatten the pockets of investors in previously planned projects.
Second, as a result of the above, Trump’s plan isn’t really a jobs plan, either. Because the plan subsidizes investors, not projects; because it funds tax breaks, not bridges; because there’s no requirement that the projects be otherwise unfunded, there is simply no guarantee that the plan will produce any net new hiring. Investors may simply shift capital from unsubsidized projects to subsidized ones and pocket the tax breaks on projects they would have funded anyway. Contractors have no obligation to hire new workers, or expand workers’ hours, to collect their $85 billion. To their credit, the plan’s authors don’t call it a jobs plan; ironically, it is Democrats looking to align with Trump who have given it that name. They should not fool themselves.”
Third, because there is no proposed funding mechanism for Trump’s tax breaks, they will add to the deficit — perhaps as much as $137 billion. Yes, some economists think more deficit spending will boost growth. But you can be sure of this: In Trump’s hands, rising deficits will be weaponized to justify future cuts in health care, education and social programs.”
Lemon Socialism: the Rabble pay the price for any ‘socialized’ losses (subsidies, tax breaks) for the oligarchs.
And just in today, ‘Trump’s Infrastructure Boondoggle’, by Mike Whitney, March 15, 2017
He mentions most of the above, but these key bits no one else above had mentioned about the multiplier effect of actual capitalist Keynesian stimulus (3:1 is mentioned often):
“In practical terms, ‘revenue neutral’ means that every dollar of new spending has to be matched by cuts to other government programs. So, if there are hidden costs to Trump’s plan, then they’ll have to be paid for by slashing funds for Medicare, Medicaid, Social Security, food stamps etc. But, keep in mind, these other programs are much more effective sources of stimulus since the money goes directly to the people who spend it immediately and help grow the economy. Trump’s infrastructure plan doesn’t work like that. A lot of the money will go towards management fees and operational costs leaving fewer dollars to trickle down to low-paid construction workers whose personal consumption drives the economy. Less money for workers means less spending, less activity and weaker growth.” [snip]
“If Trump was [sic] serious about raising GDP to 4 percent, (another one of his promises) he’d increase Social Security payments, beef up the food stamps program, or hire more government workers. Any one of these would trigger an immediate uptick in activity spurring more growth and a stronger economy. And while America’s ramshackle bridges and roads may be in dire need of a facelift, infrastructure is actually a poor way to inject fiscal stimulus which can be more easily distributed by simply hiring government agents to stand on streetcorners and hand out 100 dollar bills to passersby. That might not fill the pothole-strewn streets in downtown Duluth, but it would sure as hell would light a fire under GDP.”
And last, but certainly not least: Michael Hudson’s ‘Alluring Infrastructure Income’, part of his Junk Economics series on TRNN
(the transcript) One day Hudson may just flat out come out as being a Marxist-socialist economist. but: some out-takes:
HUDSON: You can take into your own hands, for your own profit, the largest capital investment there is – what used to be in the public domain. The roads, railroads, airline companies, water and sewer systems and everything that people need, including now the schools can be privatized and instead of providing them to the economy, to make the economy operate at a lower cost, you can make people pay two or three times as much as they were doing. Operating this infrastructure for profit (with high-interest credit) will vastly increase the cost of the economy, without increasing wages or the ability to pay for these privatized services. This will squeeze the living standards while sucking up more and more money to the top of the economic pyramid.
If a country does what the United States did, and finances a vast public school system, public extension system for agricultural education, and provides low cost roads, low cost transportation, water and sewers, parks and communications – if you provide all of this either freely or at least at a subsidized price – then you’re going to be able to undersell economies that don’t socialize the means of production.
“…the purpose of public investment for 100 years in the United States was to prevent such monopolies. That’s why we had anti-monopoly regulations. That’s what made America so much more competitive in the late 19th century and early 20th century. It was able to undersell European and other countries that followed the private-sector emphasis.
The public-private partnership isn’t really a partnership at all. It “socializes” the losses, while privatizing the profits. Instead of society – consumers and also business – being the beneficiary of roads, schools, cable TV systems and communication systems, they are victimized. Instead of providing gains in technology to society at a low cost or even freely, so that people don’t have to earn high enough wages to pay these higher privatized costs, you raise costs. The effect is to squeeze family budgets.
By privatizing healthcare, for instance, people have to pay much higher health insurance in America than anywhere else. You have to pay the insurance companies, and you don’t enforce monopoly rules against the pharmaceutical companies. You don’t even bargain with them or buy in the cheapest market. You buy in the most expensive market, because they’re your largest campaign contributors and that’s what you’ve promised to do.
SHARMINI PERIES: Why are you so apprehensive? I mean, when Trump talks about the cost of pharmaceuticals, he says the problem is that we don’t negotiate the price with the pharmaceutical companies, and he’s a negotiator. He’s a businessman. So, why shouldn’t we believe him?
Booyah! From March 13th’s Investing.com: ‘Dow To Go Higher On Trump’s Infrastructure Plan’
“On Friday, U.S. President Donald Trump announced that he would be starting to create his $1 trillion infrastructure plan with his administration that would encourage states to start building and renovating more highways and prioritize new projects.” et cetera.
Ha; why indeed? Hudson’s answer is exactly right; the rest is here.
2007 Minnesota bridge collapse. Almost miraculously, given that there were about 150 cars, trucks, and buses on the bridge, only 12 people lost their lives.