Trump’s Infrastructure Plan: Public Investment, Private Profit
The newly inaugurated president says his plan will benefit all Americans, but the 99% are likely to pay for it while the 1% profit, says economist Michael Hudson
SHARMINI PERIES: It’s The Real News Network. I’m Sharmini Peries, coming to you from Baltimore.
While protestors and police are clashing on the inaugural parade route in Washington, D.C., the newly sworn-in President of the United States is lunching with the establishment in Washington — Some of the very people he called out in his inaugural address. Let’s have a look.
DONALD TRUMP: We are transferring power from Washington, D.C. and giving it back to you, the people.
DONALD TRUMP: For too long a small group in our nation’s capital has reaped the rewards of government while the people have borne the cost. Washington flourished but the people did not share in its wealth.
SHARMINI PERIES: On to discuss with me all of this is Michael Hudson. Michael has a new book out, “J is for Junk Economics: A Guide to Reality in the Age of Deception”. Michael is a Distinguished Professor of Economics at the University of Missouri, Kansas City. Thanks for joining us, Michael.
MICHAEL HUDSON: Good to be here.
SHARMINI PERIES: So, Michael, that first, I think it’s the third or fourth paragraph in, where he really talks about the establishment, how it benefitted Washington, I would think you would have objection to that.
MICHAEL HUDSON: Well, the establishment he talked about wasn’t really Wall Street. He said, “When Washington got rich,” and Bernie Sanders would have said, “When Wall Street got rich, the country didn’t.” So I think when Donald Trump says “Washington” what he means is the government regulatory agencies, he’s going to cut them back. And what he means is that the IRS, the tax collectors, he’s going to cut them back by cutting taxes on all the Americans, meaning all of the 1% that are his Americans.
So, basically, you’re seeing a cutback in government and I’m sure you will see a cutback in the CIA and the NSA that are part of the Democratic National Committee and the Hillary supporters. So I think there is going to be a fight within the foreign policy and the national security establishment. But I think that what Trump is really doing is going to be supporting the same 1% that President Obama and George Bush were supporting.
SHARMINI PERIES: Right. And that’s pretty evident with the cabinet he’s lining up, as well — the richest cabinet in U.S. history. And he’s actually taking from the very establishment in Washington, as well as Wall Street. So I’m sure it’ll be doubled down on, in terms of the kind of establishment we’re talking about.
Michael, President Trump said something very interesting about building America, and building America in his own image, I think. Let’s have a look at what he had to say.
DONALD TRUMP: We will build new roads and highways and bridges and airports and tunnels and railways all across our wonderful nation. We will get our people off of welfare and back to work rebuilding our country with American hands and American labor. We will follow two simple rules: Buy American and hire American.
SHARMINI PERIES: So, Michael, what does he mean by this kind of infrastructure building?
MICHAEL HUDSON: Well, he’s talked a lot about infrastructure and there are a lot of different ways of doing infrastructure, and his way is not the way that it was done a hundred years ago. The whole idea of the Republican Party in the 19th century was for the government to finance infrastructure, and transportation especially, to lower the cost of living and doing business. But I don’t think that’s what Trump is going to do because he wants to cut back government spending and he wants to cut back taxation. So what I worry about is when he says, “I’m going to build infrastructure, I’m going to create a huge trillion-dollar market for Wall Street.”
And they’re going to fund through bond holders, and through private-public partnership, rail lines and transportation lines, and who are going to be the beneficiaries of this and who’s going to pay for it all? If the government doesn’t pay for it all, it’s going to be the bond-holders and Wall Street. And the question is what is the effect of this transportation going to be? A hundred years ago, it was to build free roads and it was to lower the cost of living.
I think the model that you’re looking at should be the New York City subway, which was just finished a couple of weeks ago on the Second Avenue Line — $10 billion for just six stations.
Now, the way this was funded is the Metropolitan Transport Authority that runs the subways, it borrows from Wall Street $10 billion, it pays them interest and they’re going to raise the subway fares for all the riders in New York, to the extent that the New York City and New York State subsidize it. They’re going to raise sales taxes here, they’re going to raise income taxes. So New Yorkers are going to have to pay more for the subway and who are the beneficiaries?
Well, the politicians say, “Well, the people along the transport lines are going to be the beneficiaries, the people who live on Second Avenue and First Avenue and York Avenue who had to take those crowded Lexington subways.” But the real beneficiaries are the landlords. And the $10 billion that’s been spent on the Second Avenue subway is probably increasing the land values, the real estate values, of real estate developers by from $10 to $20 billion.
And already the people who live on Second Avenue, the beneficiaries are saying, “Oh my gawd, we’re being told our rents are going to go up a couple of hundred dollars a month. Because now that we have more easy transport that makes it more valuable, we can’t afford to live here anymore. We’re going to have to move to Queens or to Westchester or outside of New York.”
So there’s this whole give-away of the subway that cost $10 billion, making $10-20 billion for the landlords. All of this could have been financed by a windfall gain tax. If the subway and transportation, such as Mr. Trump wants to build, if that’s going that’s going to increase the value of the rent of location for real estate landlords and developers, then there could have been a windfall gains tax and that would have captured all of this $10 billion added value, from the subway, all to repay the MTA, the subway authority, for the cost of building the subway. But that hasn’t been done.
So what you have is the public paying for the 1% to benefit. That looks to me like the plan that Mr. Trump has. So, again, when he says he wants to help all Americans, he means he wants to help all Americans in the 1% by really letting Wall Street get a huge debt from the 99% of the Americans. And it’s just the opposite of what people believe.
The same fight is going on in Vancouver. They’re trying to spend about $6 billion in transportation up in Canada and how are they doing it? The transportation, the bus lines, the train lines, are going to increase what already is the highest priced real estate in Canada, making a bonanza for the landlords, but they’re paying for this transportation by a 0.5% sales tax that’s going to cost consumers in Vancouver $250 million a year to pay. So, again, the users of the transportation are having to pay, not the beneficiaries along the route.
And it’s just normal, I think you could call it, the Thorstein Veblen Law that whenever there is a public expenditure on infrastructure the benefits go to the absentee owners, the landlords, and it’s all a real-estate development.
So I think Mr. Trump wants to turn the whole U.S. economy into the kind of real estate development that has made him so rich in New York. It’ll make him rich and it’ll make his fellow developers rich and it’ll make the banks that finance it rich, but the people are going to have to pay for it in a much higher cost for transportation, a much higher cost for all the infrastructure that he’s paying. In the case of airports that he talks about, they’re going to have to charge the airlines much more. They’re going to bill it all to the airlines instead of charging the airlines, basically, tax for the public investment that they’re making for private profit.
So I think you could call Trump’s plan “public investment for private profits”. That’s really his plan in a summary, it looks to me.
SHARMINI PERIES: Right. And one interesting thing with the new administration coming in, and you have pointed to this, Michael, is that least the good news here is that we’re not going to be going to war with Russia. Instead, I think we’re poking our finger in the eye of the Chinese government. Give us a sense of what your thoughts are on that.
MICHAEL HUDSON: Well, there’s been a whole argument in the administration between Kissinger and Brzezinski. Both of these men say, “We’ve got to divide and conquer. If there’s going to be another country that tries to go its own way and be independent of America, we’ve got to smash it up. We’ve got to break up Russia and break up China. What do we do first?”
Kissinger says that the long-term enemy is China because they’re smarter and larger and so you want to pry Russia away. You want to do nice to Russia and tell President Putin, “Look, if you go with us, we’ll give you Ukraine, we’ll pull back NATO, but we want to pry you back towards Europe and away from China.”
Brzezinski, being Polish, hates Russia and wants to go with China and he says, “No, no. We’ve got to continue to fight Russia and back the Hillary group within the CIA and the National Security Agency. We’ve got to fight Russia.” And it looks like Trump is following the Kissinger group trying to split it up from Russia. I don’t think he has a chance in succeeding in this because Putin can say, “Look, America changes its policies so much we can’t depend upon you. Obama and Secretary Kerry have broken every agreement that they have made with us. The Clintons have broken every agreement. We don’t trust America anymore. We’re forced to rely on China and Iran.” And you also have China supporting Iran because of its own oil investments there.
So I think what you’re going to have is a failure of the Trump administration to break up Eurasia — to break up Russian, China and Iran. And, at that point, I think you may get angry and you may get back into the Hillary-type confrontation that looks very dangerous.
SHARMINI PERIES: And what do you make of these allegations in terms of the intelligence agencies and the proximity of Trump and some of his aides in terms of their proximity to Russia?
MICHAEL HUDSON: I think the idea of proximity to Russia is all fake. This is a smear campaign and President Putin has already warned Trump that this is an attempt by the Deep State, by the Russia haters, really to make a coup d’état.
And I think one of the first things that Trump is going to do to roll back government is he’s going to clear out the fakers in the CIA — the people who’ve been faking these documents against him. He’s going to move against the fake news outlets, and the press has been throwing up its hands, “Oh, Trump is against us.” But the fake news outlets are led by The New York Times and The Washington Post. They’re pushing all of the unsubstantiated rumors. They’re claiming that it was Russia that somehow threw the election to Trump instead of the leaks from the Democratic National Committee being leaks, not computer rebuffs.
And I think Trump is going to clean out the Democratic policy people from the CIA, from the NSA — and that’s a good thing. I think he feels hostile enough towards Hillary after all of this that you’re going to see a house-cleaning and that’s probably the best thing that could happen. The problem is we don’t know whether the people he’ll bring in will just be mirror images on the other side and instead of being anti-Russian they’ll be equally anti-Chinese and have the same kind of fake news that they give to The New York Times and to The Washington Post that they’ve been giving for the last few months. But there’s certainly a crisis of news reporting, a crisis of accusations and I’ve never seen anything like it.
SHARINI PERIES: All right. I thank you so much for joining us today, Michael. And we look forward a future analysis from you.
MICHAEL HUDSON: Well, it’s good to be here on such an important day.
SHARMINI PERIES: And thank you for joining us on The Real News Network.