Trump's infrastructure scheme will help his business friends by privatization

Trump has long promised a $1 trillion investment program in U.S. infrastructure but it seems that the program will actually be an excuse to privatize for the benefit of his business friends.

Trump's program would actually cut existing infrastructure programs, privatize the U.S. air traffic control system and provide incentives for public-private partnerships. As well, the Trump administration says it is considering paying state and local governments to sell of their public infrastructure. Using a process called "asset recycling," states, cities and counties would lease assets such as roads and water systems to private equity investors in exchange for cash to build new infrastructure. The federal government would pay a bonus to state, or local governments who make such deals.

The idea of asset recycling, which has an environmentally friendly sound, is actually the latest capitalist scheme to ensure that government helps out banks and big investors. It re-brands privatization and tries to disassociate it from failed neo-liberal privatization policies. It is now a trend not just in the U.S. but in Australia and is being considered by Canada's Liberal government. As the Canadian Union of Public Employees(CUPE) puts it:"CUPE has previously explained, 'Asset Recycling' is a new phrase describing corporatization, marketization and privatization of government assets. An asset is 'recycled' when a government, corporation or bank either sells or borrows against its physical assets to get money for investment in new capital... Asset recycling is just another scheme driven by bankers and governments desperate to hide past failures of neo-liberal privatization policy."

Trump can please Wall Street even more and perhaps he will be forgiven for his foibles. Even if it is found necessary to dump Trump the policy will no doubt remain. Gary Cohn, the director of Trump's National Economic Council and a former president of Goldman Sachs said: “The bigger the thing you privatize, the more money we’ll give you.”

Slate's Henry Grabar writes:“The megafunds aiming at American infrastructure investment, like a Saudi-backed $40 billion fund run by Blackstone, whose CEO Steve Schwarzman heads Trump’s business council, could buy airports or bridges, while local governments use the new cash to pay for the new projects—like pipes for Flint—that the private market can’t or won’t provide. In the long term, governments would be left with money-losing assets while Wall Street runs more lucrative public assets such as bridges, airports, utilities, and prisons.”A perfect example of what can happen with asset recycling is provided by Chicago's leasing of the city''s parking meters in 2008 to Morgan Stanley shoring up the city's operating budget in the short term but losing taxpayers nearly $1 billion over the 99 year of the terms lease.

We still do not know what Trump's actual infrastructure plan will be. Transportation Secretary Elaine Chao says a legislative package will be released later this year. The need for infrastructure investment is dire. Infrastructure spending has already dropped by half over the past three decades. Trump's budget will create a situation where state and local governments have nowhere to turn except to private sector and asset recycling programs. Trump may find support from Wall Street and international investment firms. Will Trump's working class supporters see what is happening?

Back in 20016 the Center on Budget and Policy Priorities warned that state and local spending on infrastructure including highways, bridges, schools and waste water treatment plants was at a 30-year low. A 2013 report by the American Society of Civil Engineers claimed the U.S. had infrastructure needs of $3.4 trillion up to 2020 including $1.4 trillion for roads, bridges and transit plus $736 billion for electricity and power grids. It also needs $391 billion for airports and $131 billion for waterways and related projects. The only problem is that such needs can be met only if it profits Wall Street, and big investment banks, in the U.S. and elsewhere. Trump no doubt thinks he has the final and best solution.

Conservatives attack Trump's expensive infrastructure program

One of Trump's key economic policies was a trillion-dollar infrastructure spending program to rebuild U.S. highways, bridges and airports.

Certainly many of Trump's policies and policy directions such as those on the environment are opposed to those of liberals and leftists but not all his policies are such, including his view on the necessity of rebuilding U.S. infrastructure. Indeed, it is conservatives who already are criticizing his plans to spend up to a trillion dollars over 10 years. Trump claims that his program will create ""millions" of jobs, and compared it to Eisenhower's creation of the interstate highway system. While Trump is no doubt inflating the job creation numbers a bit, this is the sort of program that Democrats could support and attempt to modify. Obama also had an $832 billion dollar program a target also of conservative criticism. During the campaign, Hillary Clintonadvanced her own infrastructure spending campaign of $275 billion over five years financed partly by oil revenue and also a tax overhaul. Trump points out his plan is much larger than that of Clinton's and boasts: “We are going to fix our inner cities and rebuild our highways, bridges, tunnels, airports, schools, hospitals. We’re going to rebuild our infrastructure — which will become, by the way, second to none — and we will put millions of our people to work as we rebuild it.”

According to an article in Politico, Trump has not made it clear how much if any of the funds for the project would come from Federal coffers. However, it seems clear that his most recent views are quite different from those he outlined earlier in the summer to the Fox Business Network. He said then that the government would spend as much as $550 billion at phenomenally low interest rates. The Politico article notes:“Donald Trump Proposes $550 Billion in New Government Debt,” the resulting Wall Street Journal headline read, suggesting the difficulties such a plan could face in a Republican Congress that has spent eight years lambasting President Barack Obama over deficit spending. The conservative site Newsmax called his idea “a steaming pile of hogwash.”

His more recent plan crafted by economist Peter Navarro and financier Wilbur Ross would rely heavily on private funding driven by a tax credit. They claim that costs would be reaped from tax revenues that would come from the resulting jump in business activity. The plan is said to leverage public-private partnerships, and private investments through tax incentives, to spur one trillion dollars in infrastructure development over ten years. This language suggests that there will be relatively little or even no federal money being invested in the development. Trump claims the plan could be revenue neutral. A comparison of Hillary's plan and Trump's can be found in this article by Navarro.

Dan Holleer, spokesperson for Heritage Action for America, questioned Trump's assessment of the job-creation potential of the program: "Conservatives do not view infrastructure spending as an economic stimulus, and congressional Republicans rightly rejected that approach in 2009. It would be a mistake to prioritize Big Government endeavors over important issues like repealing Obamacare, reforming our regulatory system and expanding domestic energy production.” The group is the political arm of the conservative Heritage Foundation. The Trump initiative also was criticized by the Competitive Enterprise Institute(CEI) ironically a group that Trump's own transition team has used for advice on environmental issues. Marc Scribner of the CEI wrote: “There is little evidence that these public works projects promote long-run economic growth.” in a blog post called "The Great Infrastructure Myth".

While the idea of infrastructure improvement has support among some key Republicans in Congress and is likely to gain the support of many Democrats the issue of how to pay for such improvement has been divisive. House minority leader, Nancy Pelosi said the the Democrats want to work with Trump "to pass a bill very fast". The group Building America's Future chaired by former Democratic Pennsylvania Governor Ed Rendell and former New York mayou Michael Bloomberg pledged to work with Trump and Congress to "tackle this unifying issue in the first 100 days."

Bud Wright, executive director of the Association of American State Highway and Transportation said: “Financing is a nice piece of the puzzle. We certainly believe that we need additional federal investment, but really finding funding to do that — using some traditional or creative sources to generate new revenues — is important." Ed Mortimer, of the U.S. Chamber of Commerce said that the group would tell the Trump administration that some kind of sustainable funding must be part of any new infrastructure spending plan. With respect to this issue there is general agreement that it needs to be addressed urgently and it is possible that both parties can work together to come up with a plan to improve U.S. infrastructure.