Rich Pedroncelli/AP Photo
First100-040621
Thanks to private sector consultants, this is pretty much what we have to show for high speed rail in California.
It’s April 6, 2021 and welcome to First 100. You can sign up to have First 100 delivered to your email by clicking here.
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The Chief
Republicans are finding it very hard to come up with a credible argument against the American Jobs Plan. Their real argument is “we don’t want to pass anything that makes the opposition look good, and especially nothing that would damage our argument that government doesn’t work,” but you can’t say that one out loud.
The past few days they’ve hit on the idea that the infrastructure bill doesn’t really contain infrastructure. As long as the ideas are popular, I don’t think anyone in the country cares what you call it. But they’ve overreached with this argument to disqualify anything not involving concrete, as if lead pipes and EV chargers and even broadband internet aren’t essential infrastructure in the 21st century. The wastewater leak in Florida endures as a testament to the idea that not every piece of infrastructure is a road.
Republicans tested out a concept to oppose public investment during the Obama years. They called it “crony capitalism,” a shorthand for saying that Democrats dole out government favors to their benefactors. Roughly speaking, any public good that ended up not delivering was a product of crony capitalism; Solyndra, a failed solar startup that received a $535 million government loan guarantee, was the archetypal example.
Of course, Solyndra was just one among many recipients of a stimulus program that succeeded in driving down the cost of renewable energy manufacturing and deployment. The loan guarantee program carried risk and reward; elevating the risk and discounting the reward does not form an argument about the evils of government assistance.
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But crony capitalism, in another context, does threaten the promise of President Biden’s public investment plan. The fear is not that the government takes risks; the fear is that all this investment gets intermediated through consultants and privatizers who steal all the money.
Infrastructure in the United States is famously expensive to build, but only under certain circumstances. The public power utility in Chattanooga, Tennessee built out relatively cheap fiber-to-the-home broadband service with a stimulus investment, which paid for itself faster than expected, with electric ratepayers seeing reduced bills within a few years (along with access to the fastest internet service in the world). The more cautionary tales almost always involve an intermediary.
Matt Stoller ran down a good example involving McKinsey, the corporate consultant who has been advising Puerto Rico the past several years, through a damaging hurricane that ruined the island’s infrastructure. It remains degraded and corruption has increased on the island, to the extent that the governor had to resign a couple years ago. McKinsey consultants, meanwhile, ran off with insane amounts of money.
Another good example is high speed rail in California. Between a bond measure in 2008 and Republican rejecting virtually all $8 billion in rail stimulus funds, which California gladly grabbed, things looked bright for a Los Angeles-San Francisco bullet train that would trim hours off the trip and provide a comfortable ride.
While I’m a huge supporter of the concept, I think we have to admit that it failed, almost entirely because the state outsourced decision-making to high-paid consultants. One of the main ones, WSP, was also involved in Boston’s disastrous Big Dig; as of 2019 they’d siphoned $666.4 million out of the project. Contracts for California’s project have averaged nearly half a million dollars per engineer. Consultants had an interest in downplaying ballooning costs and delays, to justify their continued salaries. One “low-cost” plan from a low-bid outside consultant led to $800 million in overruns. Endless tweaks from so-called “efficiency experts” directly contribute to these delays and cost increases, as projects get diverted mid-stream.
In America generally there is no long-term planning staff to manage large projects, so when states are fortunate enough to secure infrastructure financing, they bring the planners in from the outside. I don’t expect governments to have public-sector construction workers sitting around waiting for a hole to dig, but we should have public servants controlling who to hire for those digs and what parameters to set.
Instead, private consultants look the other way as private contractors rob the public treasury. At the federal and state level, contractors dictate procurement rather than government, and billions leak out. Then the concept of “public” infrastructure, defined as this private consultant/private contractor relationship, is tarnished, and the real benefits are seen in privatizing the public investment entirely, which leads to more profit for contractors and less democratic control of the public commons.
We think of the Reagan era in terms of disinvestment, rollbacks of welfare and tax cuts. But privatization was a pillar of Reaganism, and it carried through the neoliberal interludes between hard-core conservatism as well. This ideology guaranteed that a hobbled government could not live up to its promise. I referenced Noah Smith’s disquisition on Bidenomics yesterday, and he focuses on investment, care jobs, and cash assistance. But macro-economists and political trendspotters always overlook the fundamental problem of power.
Right now, private financiers, private consultants and private contractors have the ability to pull out government investment and render it ineffective. If Biden can minimize this leakage he can show a path to smart government investment again. If he can’t, we’ll have sunk money into private pockets, given the public little to show for it, and reinforced the tenets of Reaganism. This is a choice, and Biden’s team had better choose wisely.
Reconciliation, Again and Again
Senate Majority Leader Chuck Schumer has engineered the biggest change to how we legislate in decades. The traditional conception was that you could have one bill a year where you used budget reconciliation instead of subjecting legislative priorities to minority rule through the filibuster. But Schumer asked the parliamentarian for and received dispensation to revise a budget resolution throughout the year with reconciliation instructions, and therefore get two or more filibuster-free bills to play with.
“This confirms the Leader’s interpretation of the Budget Act and allows Democrats additional tools to improve the lives of Americans if Republican obstruction continues,” said a spokesperson for Schumer in a statement. We haven’t seen the parliamentarian’s opinion yet, and it could certainly require more hoop-jumping. But in theory, it gives Democrats many more options, perhaps to really split the infrastructure and the social welfare elements of the infrastructure package, or to come up with more creative means to get policy priorities with a patina of budgetary impact through Congress.
This is important, as it does show Democrats working around obstacles in their path rather than accepting them. But another way of getting multiple bills to pass by a majority is to change filibuster rules to pass all bills by a majority. Reconciliation is still tied to the budget process; voting rights or other social issue bills will have a tough time getting through the parliamentarian’s whims. Ultimately we still need to let Congress govern.
What Day of Biden’s Presidency Is It?
Day 77.
Today I Learned
- All adults will be eligible for a vaccine by April 19. (CNN)
- Even with many reconciliation bills, you need all Senate Democrats to agree on bills right now, and Joe Manchin doesn’t agree with the corporate tax hikes. (HuffPost)
- This Democratic plan for international corporate taxation doesn’t look very good either, it appears to give multinationals a break. (Wall Street Journal)
- Not great to see Democrats abdicating their responsibilities on border issues either. (The Hill)
- Caregiving infrastructure is infrastructure, just try to go to work without someone to tend to the kids. (HuffPost)
- FDR historian Eric Rauchway on the Biden-FDR parallels. (Washington Post)
- CFPB proposes banning foreclosures for the rest of the year. Advocates are actually against a blanket moratorium with an end date, instead of forcing servicers to work out payment solutions individually. (CBS News)
