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How Should We Pay For Infrastructure Improvements?

by David Teitelbaum (Principles: It all begins with Respect. ) - 1 year ago

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Don’t be fooled by magic sounding terms like “public-private partnerships.” It all comes down to us paying more in taxes, tolls and fees or simply adding the cost to our state and federal debt.

Despite the enormous political divides in our country, there is one thing on which nearly everyone agrees. Yes – Democrats, Republicans, Trumpists, Sanderistas, Bannonites, globalaists, America-firsters, communists, libertarians, north, south, east west, and central all agree that our infrastructure needs to be improved. Whether your thing is safety, productivity, environmentalism, quality of life, or international competitiveness, you want to see improvements to our roads, airports, internet and a host of other items which we rely upon to live our lives in 2018.

There is also general agreement that the federal government must play a role. Infrastructure projects frequently involve multiple states and can be accomplishment most efficiently when coordinated on a federal level. Equally important is that states and municipalities, which are required to maintain “balanced” budgets, simply don’t have the money.

Money, of course, is where the across the board agreement an infrastructure collapses.  How do we pay for everything we need?  As this debate intensifies over the next few weeks, you can expect to hear several wonderful sounding terms that make funding seem easy. Don’t be fooled.  As a public service, let me help you to understand what those terms really mean:

Public-Private Partnerships (PPPs): PPPs. have become the new gold standard for improving infrastructure. Federal and State governments working with private industry so that everyone benefits. There are several examples already of this approach and the results have been impressive. However, private for-profit companies do not get involved in these projects unless there is the promise of a….profit.  Those profits come from collecting tolls and other fees. We therefore have the underbelly of PPPs: increased tolls, reduced income to state agencies in future years thus increasing state debt and private control over the public’s safety.

Leveraging: Early insights into the Trump proposal are that he plans to “leverage” Federal money. For example if the federal government kicks in 1 dollar for every 4 that comes from the states and municipalities, a $200 Billion Infrastructure plan becomes a $1 trillion infrastructure plan. Still unanswered though is where are the states going to get the $800 billion from. One answer, courtesy of former New Jersey governor Jon Corzine is:

Monetizing State Assets: Do you want to own a piece of the New Jersey Turnpike? You could put up your own EZ Pass scanners to cover the cost of your investment and turn a nice profit. When there is nothing bad to report, you can even sell space on the various screens along the highway that are there to warn of accidents or traffic ahead. Of course, if you make those advertisements interesting enough, you may soon have some accidents to report. Monetizing government assets is just another way of saying that private companies will turn a profit and that future government revenues will be reduced.

Investments: This is the term of choice used by Democrats to describe putting the tab for infrastructure improvements on our national credit card. We invest in building better commuter rail systems and ultimately the increased productivity will generate enough tax revenue to more than cover the cost. This is the Democratic equivalent of the Republican claim that tax cuts are more than offset by increased tax revenues – and it is just as dishonest.  

Deregulation: The Republican magic bullet (train) for everything. If projects were not subject to government oversight for safety, it would be so much cheaper to complete those projects. Tell that to the families in Flint Michigan after the city saved a bundle bypassing environmental rules and ended with thousands of children suffering life changing lead poisoning.

Repatriating Corporate Profits:  Parked offshore are trillions of dollars that corporations won’t bring back because of our heavy corporate taxes. Why not allow corporations to bring these profits back at a lower tax rate and then use that tax money for infrastructure? Oh, sorry. Republicans already thought of this and used those profits to fund their tax cut bill. This actually, was the only “free” way to rebuild our freeways. Democrats will probably talk about this lost opportunity but it is indeed, lost.

For once, we need to have an honest national dialogue about how to pay for the work that all of us agree needs to be done. Politicians need to stop using big words that hide the true costs. We have a national consensus that we need to spend money on infrastructure. Most people are smart enough to understand that the money must come from somewhere. Let’s ask the questions:

-  Are users of public transportation willing to pay higher fares for better service?

-  Are we willing to pay higher gasoline taxes so that potholes don’t puncture our tires?

- Are we willing to soften some safety regulations so that we can afford to fix structurally deficient bridges?

-  Are there projects that can be handled more efficiently by private industry rather than the government?

-  And, finally, are we willing to issue government bonds to immediately raise money knowing that those bonds will add to our state and federal deficits?

I say the answer to all of those questions is yes – as long as it is understood and generally perceived that the costs are shared equitably.

Let the discussion begin. 

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