I Fear The Beef May Be Rotten

Infrastructure: It is much needed in America and I’m in favor of it. A massive swindle: I’m opposed to it and I certainly don’t want to fall victim to it. In his State of the Union Address President Trump talked about a $1.5 trillion infrastructure project. He gave few details but they, coupled with his previous remarks on the topic, and his history has me concerned. Let’s explore.

Trump spoke of a $1.5 trillion infrastructure program but didn’t say those would all be federal dollars. Most observers would say they can’t be because he and his supporters just spent that same amount on the ill-advised Trump Tower Tax Cut.

Trump proposed a partnership including local and state governments along with the private sector. There are a lot of flies in that ointment and I’d like to explore a few.

Most local and state governments are basically broke so they can’t spend extra dollars lying around that don’t exist. They are also very limited when it comes to borrowing and unlike the federal government they cannot run deficits. That makes their participation extremely limited at best when it comes to a source of funding. I’ve sat in countless local government meetings over the years and when it comes to funding a project the first order of business is most often the idea of getting a grant which directly or indirectly means federal money.

It is the private part that most concerns me. From almost its first day I have viewed the Trump administration as an organized criminal enterprise focused on enriching the Trump family and a few major donors. In previous iterations of the Trump infrastructure plan the deal for private concerns (many of which may be Trump owned) was too lucrative. It often went along the lines of a huge government investment coupled with a much smaller private enterprise one. The private business would receive a tax credit (importantly not tax deduction) equal to or slightly larger than the investment. Under that plan a business could borrow their entire investment and pay the loan back in total after they got their tax return.

Now here come the scary parts. In the past when a public project was completed the public owned it. The best example is the Interstate Highway System. It is something we collectively own and benefit from. Under the Trump plan the private firm would own the project being able to collect rent (in the economic term sense) for decades to come. Under this scheme a bridge is built largely using public funds but the corporation ends up owning it and charges a toll every time anyone crosses it.

Public entities can build and manage facilities without a profit. Private businesses operate on a profit which inherently increases the cost. I pay my taxes and get my government services which include driving over the bridge. If I’m an investor in the bridge building company I expect a healthy return on my investment (profit); that has to drive the cost up.

Color me a skeptic but I simply see too much of an opportunity for Trump and/or his friends to make a ton of money on these projects.

My other major concern is with Trump in charge and aided by his business financiers I see too many future oriented projects being ignored because of the lack of “private investment”. Why would fossil fuel people invest in clean energy? They won’t. The Rural Electrification Project was one of the great public infrastructure achievements of the last century. Government had to make the investment specifically because it was not financially promising enough to attract sufficient private funds.

Since there was no talk of additional federal funds I am left to ponder where they will come from. My conclusion is that the Republicans will raid social safety net, regulatory and consumer protection budgets for their infrastructure funding. They certainly are not going to scale back the corporate tax cuts they just handed out to their financiers who incidentally will be the largest beneficiaries of the infrastructure projects.

Trump’s proposal is hollow and reminds me of the old Wendy’s commercials with the tagline “Where’s the beef?” In this case not only do I see a lack of beef, I’m afraid when it is revealed it will be rotten.

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