Jae C. Hong/AP Photo
Traffic on the old Gerald Desmond Bridge next to its replacement bridge under construction in Long Beach, California, July 2018
President Trump has said he wants a big infrastructure program as part of the next federal rescue bill. So do Nancy Pelosi and Chuck Schumer. So here is another potential area of bipartisan collaboration, just like the expanded unemployment compensation and small-business payroll protection plan in the most recent CARES relief bill, right?
Well, no.
When the Trump administration and the Democrats propose major spending on public infrastructure, they actually mean drastically different things. The Democrats have in mind outlays to modernize items like electric grids, bridges, roads, rail systems, ports, public buildings, and so on. The American Society of Civil Engineers puts the past-due bill for modernizing outmoded infrastructure at $4.5 billion.
Democrats also want a start on what some have called a Green New Deal—public investment in renewable energy, a shift to electric cars, updating green-energy systems for buildings, more investment in wind and solar, as well as necessary investments to make the country more resilient in the face of climate threats that are already inevitable. Trump, by contrast, has said that none of the outlay should go for green public investments.
But it gets worse. Progressive Democrats want these to be public investments. That mean publicly owned and publicly financed—paid for either by taxes or by long-term bonds.
What does Trump want? He wants something euphemistically called public-private partnerships. In practice, that means the government puts up a small amount of the money, a public asset is sold to a private company, and the cost is shifted onto the suckers who pay increased user charges or tolls. The public part of the partnership is that the public gets fleeced.
Trump has not provided any details of his latest plan other than a $2 trillion price tag and a tweet calling for it. But Trump’s concept of public-private partnerships was spelled out as part of his 2019 budget proposal (mercifully, it was not enacted, but it provides a window on what his administration means by public infrastructure).
Under that plan, the federal government would come up with only 20 percent of the money. The rest would be the responsibility of state and local governments (which are tapped out) or the private sector. The plan proposed selling off public assets, and it mentioned by name the Reagan National and Dulles International Airports, the George Washington and Baltimore-Washington Parkways, and the Tennessee Valley Authority. Much higher user fees would return the profits to the private “partners” that purchased them from the federal government.
Some mayors and governors have tried this trick and left citizens holding the bag. In Chicago, Mayor Richard M. Daley leased the city’s parking meters for 75 years to a private company in 2008, for $1.15 billion. The mayor got a nice windfall with an up-front payment, which made his budget look good fiscally; the company (a partnership of Morgan Stanley and Abu Dhabi Investment Authority and Alliance Capital Partners) fired civil servants and jacked up charges; and citizens paid much higher hourly parking rates over an infinite time horizon.
The same kind of scam had been used with privatization of highways and water systems. So-called public-private partnerships duck a debate we should be having about what is properly private and what is necessarily public. The corona pandemic shows that when government is in competent hands, it does a great deal better than profit-motivated entrepreneurs out for a quick buck.
The fiasco of the $349 billion payroll protection program for small businesses, part of the recent CARES relief law, is a perfect example of how public-private partnerships often work out in practice. It is managed by the Small Business Administration, but run through private banks.
The impending corona depression provides a rare chance to expand public functions, and make sure that they are truly public.
The banks do not view it as a profit center, so they devote far too few resources. Priority goes to existing bank-loan customers; millions are made to wait. Small businesses go broke as applications pile up. This program would be far more cost-effective if the Federal Reserve or IRS (which does fine with EITC checks) just ran it directly.
One of the casualties of past privatization is that government has been denuded of necessary management resources. So it has no choice but to contract out a great deal of ostensibly public systems to private companies.
Ever heard of an outfit called Keolis? They are a France-based, $7 billion multinational that has contracts to manage public subway, commuter rail, and tram systems in 22 large cities worldwide. Keolis manages the MBTA commuter rail system in my hometown of Boston. Might the MBTA do a better job managing its own suburban trains, without having a contractor skim off profits? We may never know, because Keolis has soaked up so much of the needed expertise that turning MBTA commuter rail management back into a public function is probably impossible.
The impending corona depression provides a rare chance to expand public functions, and make sure that they are truly public. And with business screaming for more relief from the government, progressives have some rare leverage to insist that the job is done right.
Of course, that, in turn, requires Democratic leaders to be crystal clear about their own values and goals, and not be corrupted by their own links to big business. Don’t get me started on that.
