November 13th was the first Sunday after the election. In a quest to find some reason to be optimistic tellthetruthonthem.com published Looking At The Bright Side that day. In it I expressed the hope that the Congress could agree with President-elect Trump and pass a major infrastructure program. While I expected some self-dealing on the part of Trump and the normal political insider return on investment to financial backers I envisioned a program following a tradition government funded and publically owned model. Monday Paul Krugman, who apparently did more homework than I did, penned an op-ed in the New York Times entitled Build He Won’t that made me look very Pollyannaish. Let’s explore.
What Trump plans to offer for Congress’ approval is a plan that calls for gigantic tax credits to private concerns that invest in projects his people approve which the private concerns, not the public, would then own. A private concern would borrow 80% of a project’s cost and in return receive a tax credit for 82% (2% more than they borrowed and 62% more than they put up the cash for) of it. Here is the real kicker; when all is said and done the corporation not the people would end up owning the project and are able to charge the public for its use.
Part of the allure of an infrastructure project for progressives is that it should create American jobs and profits for American companies. Under Trump’s plan there is absolutely no guarantee that the workers and certain not that the companies are American. We know that Trump has many dealings with foreign entities and that his election has not curtailed his personal meetings with them. With Trump controlling immigration policy what is to stop him from allowing his friends from employing foreign workers that lower their labor cost?
Exploitable, lost cost foreign workers who will send much of their paycheck back home do not add to the multiplier effect of job creation that is spent with local merchants at nearly the same rate as employing those merchants’ neighbors does.
There are many good infrastructure projects, but let’s use the example of a bridge for this exercise. When a bridge is built via the tradition process the work is contracted out to an American firm that uses (mostly local) American sub-contractors employing locals who to a great degree live and spend locally. The taxpayers foot the bill and end up owning the bridge. That bridge promotes commerce and everyone (already having paid for it via their taxes) uses the bridge for free.
Under Trump’s plan a Trump friendly corporation puts up 20% of the cost and borrows the other 80%. The taxpayers only guarantee is that they get to pay for 82% of the project via the tax credit they end up paying for. There is no guarantee that the Trump friendly corporation is American and/or employs locals on the project. When the bridge is finished it is owned by the corporation, not the people. The corporation gets to charge a toll for using the bridge which in time will more than offset the 18% they actually paid for. Remember they own 100% of the bridge forever. You get to pay for the privilege of using a bridge you paid 82% of to someone who paid for only 18%.
I realize that Trump’s scheme is a bit complicated; much like a shell game there are a lot of moving parts meant to distract you. I’m still for finding common ground with Trump and doing a massive infrastructure project. It would be good for the economy, the American people and America’s future. What I am not in favor of is financing a deal to sell American assets to private corporations and have the taxpayer foot the entire bill including 82% of it up front. Trump, like the shell game operator, is a con man and the best way to beat a con man is too slow him down.
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