Build He Won’t Paul Krugman NOV. 21, 2016

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Build He Won’t

Paul Krugman NOV. 21, 2016




Credit Fred R. Conrad for The New York Times

Steve Bannon, Donald Trump’s chief strategist, is a white supremacist and purveyor of fake news. But the other day, in an interview with, um, The Hollywood Reporter, he sounded for a minute like a progressive economist. “I’m the guy pushing a trillion-dollar infrastructure plan,” he declared. “With negative interest rates throughout the world, it’s the greatest opportunity to rebuild everything.”

So is public investment an area in which progressives and the incoming Trump administration can find common ground? Some people, including Bernie Sanders, seem to think so.
But remember that we’re dealing with a president-elect whose business career is one long trail of broken promises and outright scams — someone who just paid $25 million to settle fraud charges against his “university.” Given that history, you always have to ask whether he’s offering something real or simply engaged in another con job. In fact, you should probably assume that it’s a scam until proven otherwise.

And we already know enough about his infrastructure plan to suggest, strongly, that it’s basically fraudulent, that it would enrich a few well-connected people at taxpayers’ expense while doing very little to cure our investment shortfall. Progressives should not associate themselves with this exercise in crony capitalism.
To understand what’s going on, it may be helpful to start with what we should be doing.

The federal government can indeed borrow very cheaply; meanwhile, we really need to spend money on everything from sewage treatment to transit. The indicated course of action, then, is simple: borrow at those low, low rates, and use the funds raised to fix what needs fixing.

But that’s not what the Trump team is proposing. Instead, it’s calling for huge tax credits: billions of dollars in checks written to private companies that invest in approved projects, which they would end up owning. For example, imagine a private consortium building a toll road for $1 billion. Under the Trump plan, the consortium might borrow $800 million while putting up $200 million in equity — but it would get a tax credit of 82 percent of that sum, so that its actual outlays would only be $36 million. And any future revenue from tolls would go to the people who put up that $36 million.

There are three questions you should immediately ask.

First, why do it this way? Why not just have the government do the spending, the way it did when, for example, we built the Interstate Highway System? It’s not as if the feds are having trouble borrowing. And while involving private investors may create less upfront government debt than a more straightforward scheme, the eventual burden on taxpayers will be every bit as high if not higher.

Second, how is this scheme supposed to deal with infrastructure needs that can’t be turned into profit centers? Our top priorities should include things like repairing levees and cleaning up hazardous waste; where’s the revenue stream?

Maybe the government can promise to pay fees in perpetuity, in effect “renting” the repaired levee or waterworks — but that makes it even clearer that we’re basically engaged in a gratuitous handout to select investors.

Third, what reason do we have to believe that this scheme will generate new investment, as opposed to repackaging things that would have happened anyway?

For example, many cities will have to replace their water systems in the years ahead, one way or another; if that replacement takes place under the Trump scheme rather than through ordinary government investment, we haven’t built additional infrastructure, we’ve just privatized what would have been public assets — and the people acquiring those assets will have paid just 18 cents on the dollar, with taxpayers picking up the rest of the tab.

Again, all of this is unnecessary. If you want to build infrastructure, build infrastructure. It’s hard to see any reason for a roundabout, indirect method that would offer a few people extremely sweet deals, and would therefore provide both the means and the motive for large-scale corruption.

Or maybe I should say, it’s hard to see any reason for this scheme unless the inevitable corruption is a feature, not a bug.

Now, the Trump people could make all my suspicions look foolish by scrapping the private-investor, tax credits aspect of their proposal and offering a straightforward program of public investment. And if they were to do that, progressives should indeed work with them on that issue.

But it’s not going to happen. Cronyism and self-dealing are going to be the central theme of this administration — in fact, Mr. Trump is already meeting with foreigners to promote his business interests.

And people who value their own reputations should take care to avoid any kind of association with the scams ahead.

KL
Matthews, NC 16 hours ago

If you would like to see an example in action look to the toll road being added to Interstate 77 just north of Charlotte, NC.

It's being built by the Spanish company Cintra. They will hold the rights to the tolls for 50 years. If they don't make a set amount of money from the tolls, the state will pay the difference. It is estimated that at rush hour it will cost approximately $20 to make the drive from Mooresville to Charlotte. Truly a road for the 1%.


David Ohman
Denver 13 hours ago

If, with an emphasis on "if," Don the Con actually puts forward a plan for putting millions of Americans back to work through infrastructure spending (think WPA2), he will do so by making sure he will make a lot of money from it.

Specifically, he will go into no-bid contracts to his friends, think of Cheney and his no-bid contracts for Halliburton/KBR in the Iraq invasion. I have always believed Veep Dick Cheney reaped a billion or so for himself by hiring his former employer as the primary contractor in Iraq. And I will assume there will be an offshore account on Cayman Island for The Donald and his family when the tea publicans in the house and senate suddenly approve of infrastructure spending.

Of course, the conservatives will tell us that the ONLY way they can approve of such a program is to kill other federal programs: the EPA, Department of Education, Social Security and Medicare. They will probably propose the idea of selling off federal lands to the states who will, in turn, sell those lands to forest products and energy extraction corporations. The Republican Party today is all about hostage negotiations.

Let's face it: the Republican Party has devolved to the point of diving back into a primordial ooze. It is not about seting poliicy for the good of the country. It is all about self-preservation.

In Don Imus's 1995 critique of Newt Gingrich (who shut down the government), he described Newt's attitude: "What's the point of having power if you don't abuse it?"

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