"America First" and public infrastructure
Monday, August 21, 2017

"America First" and public infrastructure

President Trump signed his executive order July 19th, establishing a "Presidential Advisory Council on Infrastructure." It was "to advance infrastructure projects that create high-quality jobs for American workers, enhance productivity, improve quality of life, protect the environment, and strengthen economic growth." Infrastructure areas in scope included "surface transportation, aviation, ports and waterways, water resources, renewable energy generation, electricity transmission, broadband, pipelines, and other such sectors as determined by the Council."

President Trump had already formed the council informally in January, led by his New York real estate magnate friends Steven Roth and Richard LeFrak — the July order made it official. They were anticipated to oversee a council of engineers and builders. Trump praised the council: “They’re pros. That’s what they do. All their lives, they build. They build under-budget, ahead of schedule.”

In the wake of the controversies over his reaction to the events and the vehicular murder[1] of Heather Heyer, this is yet another council the president has disbanded, even as he signed a new order this week intended to loosen environmental impact assessments for federally funded projects. President Trump's lates executive order revokes President Obama's executive order regarding projects built in flood plains, which required projects built with Federal dollars include sea level rise in their environmental assessments. Our advice? If you live somewhere at risk of a "100 year flood" (1% chance a year) or "500 year flood" (0.2% chance a year) or where a levee or embankment — nearly 4,000 miles worth along the Mississippi and tributaries alone — stands between you and flooding, it's time to move to higher ground.

We are distressed that the administration and many Republicans have decided to make science into just another opinion, that their belief that climate change is a hoax is an equally viable opinion. That is how propagandists work. Reduce everything to an opinion absent facts. Dispute facts with non-facts. Sow doubt. Propose conspiracy theories. Remember "chemtrails"? That the vapor trails behind high-altitude aircraft easily explained by science are a massive government conspiracy dousing the public with chemical and biological agents for sinister purposes. A photo of ballast tanks on a prototype 747, used to simulate a fully loaded plane, has been widely circulated as "proof". Climate change denial is a scaled-up version of "chemtrails."

Ballast barrels which conspiracy theorists describe as containing substances being sprayed from high altitude

With the dissolution of the infrastructure council, it is worth reviewing the original framework for the President's initiative, to anticipate what Congress might consider later this year. We tracked down the administration's white paper discussing infrastructure, which was submitted with the 2018 budget.[2]

Privatizing public infrastructure

The administration's proposal is smoke and mirrors. It purports to spend $200 billion to "leverage" a total spend of $1 trillion. That $200 billion is not money spent on building, but on tax incentives — $137 billion worth in the latest proposal circulating in Congress. It also suggests discontinuing Federal funding and forcing states and localities to fully fund vital investments which do not generate a monetary return, calling that an "innovation" in Federal funding. We're frankly confused by the administration's logic in which not doing something becomes "innovation" in doing something.

The president's focus on monetary return is misplaced. By the same logic, hospitals should be funded based on their ability to generate a profit, not their ability to effectively and efficiently serve the health needs of their community. Private financing would do nothing to address America's most pressing infrastructure issues. There's no profit in repairing roads or replacing leaking water mains in poor communities. The sort of public-private partnerships proposed would neglect the projects rural area need for sustenance and rebirth, where private enterprise can't earn back its investment costs through ongoing revenue.

And how has this sort of revenue-stream driven privatization worked out where it has taken place?

  • In 2008, Chicago sold its parking meters to Morgan Stanley for more than $1 billion. In four years, parking rates jumped 800%. Moreover, the city of Chicago has already paid $31 million to cover "lost revenue" when a street is temporarily closed for maintenance.
  • In 2011, Virginia signed a 58-year contract with a private company to maintain and manage tolls on Norfolk's mid-town tunnel, turning over a projected $22 billion in future revenue in return for $2.1 billion in investment. And if Norfolk builds another tunnel, it must pay "lost revenue" penalties. Meanwhile, the company can raise tolls 3.5% a year.
  • In June, tolls more than doubled on a privatized road in Indiana. Costs had been kept down through a government subsidy after privatization. That subsidy expired, meaning the end-to-end toll for users using electronic payment, the cheapest, is jumping from $4.65 to $10.52. Meanwhile, the road has not been maintained, and rest stops are described as having long waiting lines and unsanitary conditions.
  • In Bayonne, water rates have jumped nearly 30% since 2012, when its water system was sold to a private equity firm. One example quotes a quarterly water bill of $500 — $2,000 a year — for a single mother with two children. While old pipes have been replaced, such private equity deals typically offer a lucrative 8% to 18% rate of return. Moreover, firms then "flip" their investments to other firms to cash in the future revenue stream. In and out, with the public left holding the profits bag. The equity firm which bought Bayonne's water is looking to sell 90% of their share to cash out their profit. Meanwhile, people are falling so far behind on payments that the city is now placing liens against their homes.

The fallacy, it seems to us, that something that corporations do for a profit cannot be done by municipalities or states at no profit with equal results and therefore reduced ongoing cost to the public. Not everything worth doing or needing doing should, or can, generate profits. Profits siphoned off to corporations are funds lost to future public infrastructure investment.

President Trump's idea for funding infrastructure improvements sounds to us like the 100-year mortgages which were offered in Japan at the height of the real estate market, where one's grand-children and great-grand-children would still be paying off the loan. The administration's solution to our infrastructure crisis is a program of give-aways which mortgages our future.

Read more

  • Presidential Executive Order Establishing a Presidential Advisory Council on Infrastructure, White House. LINK
  • Trump Abandons Plan for Council on Infrastructure, Bloomberg. LINK
  • President Trump Gives Up On Infrastructure Council, Fortune. LINK
  • How Donald Trump Made Millions Off His Biggest Business Failure, Fortune. LINK

[1]As of this writing, charges filed against the driver, James Fields, include second-degree murder, five counts of malicious wounding, three counts of aggravated malicious wounding, and failure to stop in an accident that resulted in death.
[2]FACT SHEET 2018 BUDGET: INFRASTRUCTURE INITIATIVE, White House. LINK
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