FRI MAY 15, 2015 by RETIII
As the Amtrak derailment showed (again), the refusal to spend on infrastructure literally kills. Also, infrastructure spending: (i) is necessary and unavoidable (failure to timely spend on infrastructure increases the deficit in real terms), (ii) improves the gross domestic product and competitiveness, and (iii) is an obvious source for increased employment, particularly in currently hard hit segments. Moreover, infrastructure spending remains unambiguously popular. Indeed, infrastructure spending historically has had bipartisan support.
So, why are modern Republicans ideologically opposed to infrastructure spending today? For example:
In 2012, House Republicans introduced a transportation bill (including cuts in Amtrak subsidies and increases in truck-weight limits) that Ray LaHood, secretary of transportation during Obama’s first term, called “the worst transportation bill I’ve ever seen during 35 years of public service.” LaHood himself had been a seven-term Republican congressman from Illinois before he agreed to serve in Obama’s cabinet.
The most accepted (or easily reported) explanation is that today’s Republican party is dominated by Southern states, the center of heavy infrastructure (and costs) is located in the Northeast, and Republicans refuse to spend on states that don’t vote Republican. There is truth to this explanation and, frankly, it is not properly reported as part of the wider partisan scandal that it is. For example, although federal disaster relief is uniformly passed in the wake of hurricanes, tornadoes, floods, etc., the Hurricane Sandy relief bill was passed only when (as one of a few instances) the “Boehner Rule” was lifted to allow a bill to pass with largely Democratic votes. Why? Because only 70 House Republicans could be found who were willing to vote for federal emergency hurricane relief if the affected area was the the East Coast. Nice.
While as egregious as that geographic partisanship is, there are also at least four other fundamental reasons that explain the new Republican refusal to invest in infrastructure – all of which are largely undiscussed in general reporting.
1. Starve the Beast: While Republicans continue to refuse to raise revenue necessary to fund infrastructure spending (traditional Starve the Beast), the latest application – Starve the Beast 2.0 – looks to hold hostage any and all necessary spending for cuts to other, unfavored, government spending. In that sense, you have to understand the crucial (even threatening) need for infrastructure spending as identical to the “debt ceiling.” For Republicans, the hundreds of billions to trillions of unmet infrastructure spending represents a massive, annualgolden opportunity to extort draconian cuts to social, regulatory, non-defense spending. That is why Republicans also reject deficit-financing for infrastructure spending (at historically low interest rates) or alternative proposals like a private-public infrastructure bank. The goal here is not to invest in the country, but to seize upon any vulnerability to “drown the government in a bathtub.”
This is plainly evident, btw. When President Obama proposed increased infrastructure spending in 2011 Republicans opposed it with a plan that would have “paid for the spending with a $40 billion cut in unspent funding for other domestic programs . . . and would block recent clean air rules and make it harder for the administration to issue new rules.” In 2014,Eric Cantor explained that “Congress should not be adding new money, but instead streamlining the process for getting current resources to state and local governments.” In 2015, Republicans opposed Democrats’ proposed additional infrastructure spending by proposing instead to create a “deficit neutral reserve fund,” that didn’t identify the amount of such fund, or how – or whether – it would be funded. Just yesterday I saw Paul Ryan flatly reject any increased spending for infrastructure, regardless of the fatal Amtrack crash.
2. Privatizing the nation’s infrastructure: This is the big kahuna that the press generally feels uncomfortable reporting. Republicans – at the behest of their mega-bank/private equity patrons – really, deeply want to privatize the nation’s infrastructure and turn such public resources into privately owned, profit centers. More than anything else, this privatization fetish explains Republicans’ efforts to gut and discredit public infrastructure, and it runs the gamut from disastrous instances of privatizing private parking meters to plans to privatizethe federal highway system.
Indeed, if you listen to Republican proposals for “infrastructure reform,” what you hear is: privatization and a longing for private tolls, tolls, tolls. As the Cato Institute explained in Senate testimony, now is the time to go back in time:
The way to do that is to reduce hurdles to entrepreneurship and more private investment. Private infrastructure is not a new or untried idea. Urban transit services in America used to be virtually all private. And before the 20th century, private turnpike companies built thousands of miles of toll roads. The takeover of so much infrastructure by governments in the 20th century was a mistake, and policymakers should focus on correcting that overreach.
If the goal is to privatize and monetize public assets, the last thing Republicans are going to do is fund and maintain public confidence in such assets. Rather, when private equity wants to acquire something, the typical playbook is to first make sure that such assets are what is known as “distressed assets” (i.e., cheaper to buy).
3. Private Activity Bonds: This one is a real unreported doozy, and is directly related to both privatization efforts and the Starve the Beast scheme. Known as “Private Activity Bonds,” under current law, state and local governments are allowed, effectively, to delegate the ability to issue tax-free bonds to private corporations and investors. As a result, the private investors have the lower borrowing costs associated with government financing and the interest earned on such bonds is tax-free at both the federal and state level. Do you get that? Local governments are financing the efforts to privatize their own public assets and the private equity investors earn tax free profits on their investment. Privatization is not just a golden opportunity, but a tax-payer subsidized, tax-free opportunity – – with no demonstrated public benefit:
What is more, the projects are often structured so companies can avoid paying state sales taxes on new equipment and, at times, avoid local property taxes. While some deals might encourage businesses to invest where they might otherwise not have invested, there are few guarantees that job creation or other economic benefits actually occur.
4. Repeal Labor and Environmental Laws: Finally, Republicans refuse to fund infrastructure spending because the larger goal is to repeal or weaken labor and environmental laws associated with such large scale construction projects. For example, while you may be rightly worried that your commuter bridge is structurally unsound, Republicans are much more concerned with first repealing laws like the Davis-Bacon Act, a 1931 New Deal law which requires payment of the local prevailing wages on all public works projects for laborers and mechanics. Repealing this employment protection law is a much larger Republican priority than repairing any specific bridge or tunnel. As Republican Senator Mike Lee explained the priorities of his “infrastructure proposal”:
“The Davis-Bacon Act exemplifies how big government hurts the people it purports to help, gives unfair advantages to favored special interests, and squeezes the middle class,” said Sen. Lee. “It crowds out low-skilled workers in the construction industry, preventing them from getting a fair shot at a job, and funnels taxpayer money to prop up big labor unions, which accrue windfall profits as Davis-Bacon removes the incentive for federal contractors to hire unskilled, non-unionized workers.”
Forcing the American citizens to subsidize labor unions in this way artifically inflates the costs of construction projects to repair and improve our national infrastructure. This is unfair, and unsustainable, and costing taxpayers billions of dollars every year. Senator Lee’s “Davis-Bacon Repeal Act” removes these government-imposed obstacles to economic opportunity facing low-skilled workers and returns wasted taxpayer dollars back into the hands of the American people. Senator Lee will offer the bill as an amendment to legislation that addresses the funding of our nation’s highway and transportation systems.
In sum, the question of why we cannot enact needed, common-sense infrastructure spending is truly mystifying . . . so long as we ignore that the Republican party is hyper-partisan, engaged in a destructive Starve the Beast agenda, wants to privatize public infrastructure, promotes an increasing “financialization” of the economy, and is ideologically opposed to labor and environmental laws. Most importantly, all of the above must not be even acknowledged in public reporting on this vital issue. Right?