Trumps infrastructure plan will further privatize public assets and derail the interests of the American people, says Dean Baker, co-director of the Center for Economic and Policy Research
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Sharmini Peries: It’s the Real News Network, I’m Sharmini Peries coming to you from Baltimore. Did you know that President Trump declared last week to be infrastructure week? He had hoped his announcement would distract attention from the Senate’s Russia hearings involving former FBI Director Comey. The plan that he presented in three separate speeches over the last week was quite general. It involved a new spending of $200 billion, in addition to tax breaks for private investors, and the privatization of infrastructure, such as the nation’s air traffic control system. Also, he promised to reduce infrastructure regulations. Let’s have a look at what he said. Donald Trump: We will get rid of the redundancy and duplication that wastes your time and your money. Our goal is to give you one point of contact to deliver one decision, yes or no, for the entire federal government, and to deliver that decision quickly. Whether it’s a road, whether it’s a highway, a bridge, a damn. To do this, we are setting up a new council to help project managers navigate the bureaucratic maze. Sharmini Peries: With us, to analyze the Trump infrastructure plan is Dean Baker. Dean is co-Director of the Center for Economic and Policy Research, and he’s the author of Rigged: How Globalization and the Rules of Modern Economy Were Structured to Make the Rich Richer. Thanks for joining us, Dean. Dean Baker: Thanks for having me on. Sharmini Peries: Dean, is the infrastructure plan as vague as reporters are saying? What is the Trump proposal anyway? Dean Baker: Well, a few points. First off, it’s a lot smaller than what he had talked about in the campaign. Of course, in the campaign he was often ambiguous, but he’d been throwing around that he was going to spend a trillion dollars over the next decade on infrastructure. Now we’re talking about $200 billion. Just to give people some context, the economy is around $20 trillion a year. If you’re spending $200 billion, that’s equal to 1% of GDP over the next decade, so it’s half a percent of GDP a year. That’s not trivial, but that’s hardly a huge plan in the sense it’s not going to have a huge impact on demand in the economy and fixing our infrastructure. The other major point is that he’s made a big point of saying he’s going to look to public-private partnerships. He’s looking at infrastructure that generates a revenue stream. Now, some of those, it’s obvious. You could have a toll road, a toll bridge. You could do that. I question whether that’s a good thing to do or not, but we do have toll roads and toll bridges. The other thing is to privatize assets that are currently public. We have examples of that, in Chicago, the younger Mayor Daley privatized the parking meters. He sold off the revenue from them for 75 years to Morgan Stanley. It turned out to be a very good deal for Morgan Stanley, not for the people of Chicago. You could do that with other things. I mean, if we think of Flint water system, well, having a public-private partnership isn’t going to do Flint any good unless they sell off their water system. You could privatize the water system, but the track record of privatized water systems, more around the world, there aren’t many in the U.S., tend not to be very good. People get gouged for their water. What he’s looking at here is much less money than he had talked about in the campaign. Also, basically privatizing what are now public assets. Quite likely, in terms that are going to be very bad for the American people. One of the points I keep coming back to, Trump has really been unprecedented in his willing to just ignore basic rules about conflicts of interest. You’re always going to have issues of corruption, but this is virtually, “Come and take it.” The takers are not going to be most of the people in the country, they’ll be Donald Trump’s rich friends. Sharmini Peries: Dean, if the private-public partnerships end up benefiting the corporation and not in the public’s interest, give us some other ways in which we could implement the rebuilding of infrastructure in the country, using one that is more beneficial to us. Dean Baker: Historically, most infrastructure spending occurs at the state and local level. The federal government subsidizes it but state and local governments actually spend the money, decide where it should be spent. Now, there are complex formulas that determine how the money’s allocated and arguably cities have not gotten their fair share because oftentimes state governments are dominated by more conservative interests, rural areas, and suburbs. They’ve often starved the cities. Now, you could try to counter that by increasing the allocations to cities to ensure they have enough money. Important to point out that we should think of infrastructure more broadly, so it should include public transit. That should mean things like buses, not just building subway systems. One of the things I would love to see us do more of is why not just have free buses? You could experiment with that one day a month, two days a month, and see what happens. You don’t lose a lot of revenue that way and if we got more people taking the buses, I just think that would be a great thing. Also, one of the important points to understand … You know, there’s this logic, certainly from conservatives, that somehow the market does things better. You go, “Okay, businesses are there to make a profit.” There’s a great example of the problems here in California, they privatized some toll roads. They had a contract with some companies there. They were going to improve their highway or build a highway, I forget which it was. In any case, they said, “Okay, you’re going to be able to collect tolls on it for however many years.” I’m not sure exactly what the terms of that contract were. What happened was there was a huge amount of congestion on the highway and the state of California said, “Well, we want to relieve the congestion so we’re going to build other roads.” I think they had plans for mass transit as well. Well, there was a clause in the contract that said, “No, you can’t compete with us.” Here, you had this absurdity that they couldn’t take steps to relieve congestion because the private company that’s trying to maximize profit wanted the congestion. They wanted more people on their road. The state was saying, “No, we want people to be able to get to work.” That’s the sort of thing we should expect to see because they’re in business to make a profit. They’re going to try to do it as much as possible. In Chicago, where they privatized their parking meters, they pushed them to the limit in terms of the times that they had on meters. They put meters absolutely everywhere they could so there were people on residential streets that suddenly found meters in front of their house where they’d been parking for years. That’s what you should expect to see. Businesses are there to make money. They’re going to do it in ways that we might like, sometimes, if they produce a better product. Oftentimes, they’re going to do it in ways we don’t like and this is certainly a context where they’re likely to make money in ways we don’t like. Sharmini Peries: Now, we’ve had decades of this kind of privatization in the works. People like Jeremy Corbyn in the UK are now talking about taking back some of that. In fact, he has mentioned the railways as one of those things that was privatized under Thatcher in Britain. He says that these kinds of systems, transportation system, should be nationalized and taken back. How does that benefit the public treasury, for example? Is that the way of the future now? Dean Baker: Well, I think what you have to look at carefully is what sort of service is being provided. The railways, they were privatized under Margaret Thatcher, they previously had been run by the government. The argument was, “Well, the private sector will do it more efficiently.” Now, railways, like highways, like water systems, they’re largely a monopoly. You’re not going to have two rail tracks going right against each other and competing. You certainly won’t have 10 or 20, what we’d like to see with the market, with a lot of competitors. You will not see that with rails. You had a monopoly system. They’d raise their prices, they had poor maintenance, poor on-time performance, but what could people do? You know, if you have to take the railroad, that’s what you do. Obviously, people could look to fly or drive their car but if you want to take the rail, you’re not going to have an option. Corbyn had a loss. This was, no doubt, a popular thing for him in the election. He did better than just about everyone expected, almost pulled it off in terms of actually being able to form a government. In any case, he clearly was a very popular Labour leader and part of that story was making assets public again, taking assets public again that had been privatized in prior decades. Sharmini Peries: All right. Dean, let’s take a look at this money that’s been allocated for infrastructure development here. Trump announced $200 billion, which you have already stated is not enough. What kind of money does it take to be able to do the kind of things that Trump actually talked about, Make America Great Again through infrastructure rebuilding? Dean Baker: Well, we’re at historically low levels in terms of public investment, and projected to go lower. What happened in 2011, of course, there was a budget deal between President Obama and the Republicans who had taken over Congress in the prior election. That set us on a path of lower spending. We were keeping it more or less constant in nominal dollars, but falling when you adjust for inflation. We have roughly 2% inflation every year, so you carry that out over 10 or 15 years, you’re talking about spending 15% less in real dollars. Furthermore, you expect ordinarily that infrastructure spending rises roughly in step with the economy. If the economy’s 20% larger, other things equal, we’d expect you need to spend 20% more. When Donald Trump’s campaign said he wanted to spend a trillion dollars on infrastructure over a decade, that seemed to me a reasonable number, maybe even low end. I should also point out, we have a larger category if we think of infrastructure that’s part of a larger category of what we might think of as public investment, which includes things like research and development, includes things like education. Those are all being cut in a very big way. They’re being cut even in the baseline, but Donald Trump proposes to cut them much further in his budget. He increases for a few years a relatively narrow area of public investment, the direct infrastructure spending. The larger category of public investment falls very sharply under his budget proposal. Sharmini Peries: All right, Dean, thank you so much for joining us today. Of course, we’ll be keeping an eye on this and hope you can join us again. Dean Baker: Sure thing. Thanks for having me on. Sharmini Peries: Thank you for joining us here on the Real News Network.