Nostalgia for the New Deal is not typically the provenance of the Right, but in a November interview with the Hollywood Reporter, right-wing news exec-turned-Trump strategist Steve Bannon suggested the new president’s trillion-dollar infrastructure plan would recreate the heady days of the Works Progress Administration:
“With negative interest rates throughout the world, it’s the greatest opportunity to rebuild everything. Ship yards, iron works, get them all jacked up. We’re just going to throw it up against the wall and see if it sticks. It will be as exciting as the 1930s, greater than the Reagan revolution— conservatives, plus populists, in an economic nationalist movement.”
One might be tempted to dismiss this bizarre pitch as, say, the product of a late-night game of ideological Mad Libs. But Trump and Bannon’s apparent rejection of neoliberal orthodoxies, including fiscal austerity and free trade, inspired hope that progressives might actually be able to negotiate with Trump on a small number of economic issues — if they could avoid collaborating in an otherwise racist, reactionary agenda. Infrastructure, in particular, was an area where the new administration implied it might break with conventional wisdom and endorse massive federal spending. For decades, governing Republicans and Democrats have neglected this sector in the name of fiscal responsibility. As a result, our bridges, levees, water treatment systems and other infrastructure require trillions of dollars in repairs, according to the American Society of Civil Engineers — not to mention the new investments in transit and renewable energy we urgently need to curb climate change. Fast forward to Trump’s “infrastructure week” in June, however, and it’s clear that neoliberalism is alive and well under his administration. In a flashy White House ceremony on June 5 — timed, it seemed, to distract the public from the Comey hearings — the president announced a “great new era in American aviation,” meaning he was asking Congress to privatize the air-traffic control system. In place of actual federal investment, Trump has signaled that he plans to ramp up federal tax incentives for public-private partnerships that hand control of our infrastructure to Wall Street firms, which are ready and willing to manage it in exchange for hefty fees. That’s a strategy pioneered, in part, by Wall Street-backed Democrats such as Chicago Mayor Rahm Emanuel and New York Gov. Andrew Cuomo. Their slow-burn privatization of local assets appears to have laid the groundwork for a scorched-earth campaign by Wall Street to buy up our infrastructure under Trump.
If you want a vision of that future, to borrow from George Orwell, imagine a human hand scrounging up coins to feed the meter — forever. Our highways, airports, sanitation systems, utilities and water systems might start to look a lot more like the parking meters Chicago privatized in an infamous 2008 deal that gave investors, including Morgan Stanley, the right to collect all revenues for 75 years in exchange for an upfront payment to the city. After hiking rates, the new private owners are on track to make their investment back by 2020, not to mention the $41 million and counting in fees for “lost revenue” they receive from the city every time a road closes.
These sorts of deals are more than just a headache for drivers. A 2014 study by Roosevelt University sociologist Stephanie Farmer found that Chicago’s parking-meter deal also tied the hands of city planners in building equitable, environmentally sustainable transit, because the city was contractually obligated to pay Morgan Stanley for each parking spot replaced by a bike or bus lane. That points to perhaps the biggest threat posed by Trump’s plan: By wresting control of key policy decisions from elected government and locking in deals for periods that often exceed human lifetimes, privatization hobbles our collective power to address some of the most pressing challenges we face, from fighting climate change to dismantling racial and economic inequality.
IT CAME FROM THE LAND DOWN UNDER
The White House has yet to release a formal proposal on infrastructure, but there are plenty of indications of the tack it wants to take. Trump’s 2018 budget blueprint actually cuts existing sources of public funding for highways and endorses privatization of publicly owned power grids and highway rest stops. A White House fact sheet released in June suggests the allocation of an additional $200 billion for infrastructure, without specifying whether this would come from direct spending or tax breaks for private developers. The remaining $800 billion, it seems, would be generated through some sort of private-sector alchemy.
In a June op-ed in the Guardian, former Clinton labor secretary Robert Reich noted that, in one such scenario, “for every dollar developers put into a project, they’d actually pay only 18 cents — after tax credits — and taxpayers would contribute the other 82 cents through their tax dollars.”
To be fair, however, Trump’s infrastructure agenda is already creating jobs — or at least, one job: the special assistant to the president for infrastructure policy. In February, that post was awarded to DJ Gribbin, a close family friend of former Vice President Dick Cheney. Gribbin was, until 2015, the managing director and head of government advisory at the financial services firm Macquarie Capital, where he specialized in designing public-private partnerships. This isn’t Gribbin’s first spin through the revolving door. Prior to signing on with Macquarie, he was an official with the Federal Highway Administration in the George W. Bush administration. Before that, Gribbin spent six years as the director of public sector business development for Koch Industries. According to a June report by the Checks & Balances Project, a full 70 percent of senior Trump administration officials have worked for various arms of the Koch advocacy network.
Nicknamed “the vampire kangaroo” for its insatiable thirst for public assets worldwide, Australia-based Macquarie is on a short list of firms that could benefit enormously from a sell-off of U.S. infrastructure. In particular, In These Times identified at least six people (including Gribbin) working on infrastructure and transportation policy for the Trump administration who have direct ties to financial and consulting firms that stand to profit from infrastructure privatization.
Gary Cohn assumed the helm of Trump’s economic council fresh from the presidency of Goldman Sachs, which has discussed in regulatory filings dating back to 2008 its intent to buy and operate U.S. infrastructure, as the International Business Times reported in May. (Cohn has said he plans to recuse himself from any matters directly related to Goldman.) Meanwhile, Blackstone Group CEO Stephen Schwarzman is reportedly advising Trump on infrastructure as the head of his Strategic and Policy Forum, an unofficial cabinet of business advisers. Schwarzman’s firm recently launched a new investment fund it hopes will eventually provide $100 billion of purchasing power for infrastructure projects, primarily in the United States, according to Bloomberg.
Why do some of the world’s biggest banks and private-equity firms want to become toll collectors? For one thing, investments in highways, airports and public utilities are generally considered low-risk, given the likelihood that people will continue driving, flying and using electricity. They also have the potential for high return if the new owners can raise tolls, slash operating costs (mostly from the pocketbooks of workers) or introduce creative new user fees.
A global wave of privatization by cash-strapped governments in the 1990s opened the door for financiers to purchase and manage infrastructure en masse. Macquarie pioneered a new approach when the firm realized that it could purchase the right to manage a public asset, then spin out ownership to investors, collecting fees at every stage of the process. If things went off the rails, the investors — often pension funds or individual retirees — would be the ones left holding the bag. The “Macquarie model” caught fire on Wall Street. Private investment in infrastructure rose to a record $413 billion last year, according to the data firm Prequin.
For the past decade, Macquarie and Goldman Sachs have been instrumental in pushing this model in U.S. cities and states, often with the assistance of local Democratic officials. Macquarie was part of a consortium of investors that pulled off the first privatization of a U.S. public toll road in 2005, when then-Chicago Mayor Richard Daley sold the Chicago Skyway for $1.8 billion, giving investors rights to the road for 99 years; the tolls have since doubled while wages for toll collectors were slashed. (A 2006 review of the lease agreement by the NW Financial Group, an advisory firm, concluded that the public sector could have generated just as much revenue, asking, “If road users are willing to pay higher tolls, why not capture those funds for the public good?”)
Goldman, meanwhile, took home $9 million in fees for its services advising the city of Chicago on the sale. Speaking to Mother Jones in 2007, Mark Florian, then-chief operating officer of Goldman’s municipal finance division, said that this was an “eye-opening” experience. Flooded with calls from eager investors, Goldman realized it could effectively get away with highway robbery by working both ends of road privatization deals: advising local governments for a tidy fee, while also offering its investors a way to cash in. Goldman quickly launched a $6.5 billion dollar infrastructure investment fund, and Florian proceeded to visit more than 35 statehouses to “help spur the market.” He told Mother Jones, “I at times tell my colleagues that I kind of feel like a missionary — out trying to sell the religion.” Among the new converts was then-New Jersey Gov. Jon Corzine, himself a former Goldman Sachs CEO, who tried to sell the New Jersey Turnpike in 2007. (He withdrew the plan after public outcry.)
In May 2006, Florian and a new Macquarie hire, DJ Gribbin, testified before Congress to champion this new mechanism of highway financing. Gribbin lauded the potential to “liberate” dead capital by handing it to the private sector, but called on the federal government to address “the length and the challenges of going through the environmental [review] process.” (Incidentally, Trump is promising to do just that.) Building trades union members protest Trump’s presence at their annual conference in April.
Macquarie also flexed its muscles to influence state and local politics as a member of the Koch-backed American Legislative Exchange Council (ALEC). For decades, the ALEC agenda has helped set the stage for infrastructure privatization by “depriving the government of key revenue,” says Lisa Graves, executive director of the Center for Media and Democracy, which runs the website ALEC Exposed. “If you make it harder for governments to raise taxes, you create a situation where the government has to resort to public-private partnerships.”
That’s not all. In 2011, as chair of ALEC’s subcommittee on transportation and infrastructure, Macquarie senior vice president Geoff Segal introduced a model bill that promoted privatization by establishing a state “office of public-private partnerships.” At least five states and cities have established such offices, most recently Washington, D.C. More than 30 states have passed legislation enabling some form of public private infrastructure partnerships.
While many of these laws have pertained to privatization of transportation, financiers have their eyes on other public assets as well. In 2006, Macquarie bought Thames Water, Britain’s biggest water company. Rates rose steeply, yet quality suffered. In 2011, the company was fined £204,000 over a series of incidents where “untreated sewage burst from a sewer the company had failed to repair into streets and gardens” in a London borough, according to a report in the Guardian.
A handful of U.S. cities have already handed over management of their water systems to Wall Street firms, with dubious results. A December 2016 New York Times investigation found that water rates in Bayonne, N.J., had risen nearly 28 percent since 2012, when the Wall Street-structured privatization deal took effect. Some residents of the working-class city have fallen so behind on water bills that the city has placed liens on their homes, putting them at risk of foreclosure. To quell public opposition to the deal, city officials initially promised residents a four-year rate freeze — one that never materialized, the Times found, because the privatization contract guaranteed a minimum revenue stream.
Such constraints underscore that the problem with such deals isn’t merely financial, says Donald Cohen, executive director of the anti-privatization group In the Public Interest. “It’s the issue of control. You’re giving a corporation contractual power over the stuff that we count on every day. You’re reducing the flexibility of elected officials to do their job for all of us.”
THE ART OF A NEW DEAL
If Wall Street is looking toward the infrastructure market as its next big cash cow, it faces a major challenge: There are only so many projects available to invest in. The United States is an attractive market, but local projects have typically been financed through the municipal bond market, which provides relatively meager returns.
The prospect of a slew of new public-private partnerships under Trump, therefore, has both Wall Street and private operators salivating. Among the industry groups that have lobbied the administration and Congress on an infrastructure overhaul so far this year, according to federal lobbying disclosures, are BlackRock, the world’s largest investment management company; the Securities Industry and Financial Markets Association, a Wall Street trade group; American Water, a private water company; two private tolling companies; and free-market proselytizer Heritage Action for America.
On the final day of Trump’s infrastructure week, a group of two dozen New Yorkers gathered for an unsanctioned rechristening of Penn Station, which the state is considering selling. The new name that community activists announced in a mock ribbon-cutting, “Blackstone Station,” was part protest, part portent. New York Communities for Change (NYCC), the group that organized the action, sought to highlight Trump’s ties to the Blackstone Group, which already invests in railways.
But equally concerning, says NYCC Executive Director Jonathan Westin, are Gov. Andrew Cuomo’s ties to the firm. One of his top advisers previously earned millions as a Blackstone exec and retains a financial interest in the firm, according to a 2015 financial disclosure. Cuomo proposed privatizing the station earlier this year, and it’s not hard to imagine the state selling it to a firm like Blackstone, with a blessing— and perhaps tax credits — from the federal government.
“There’s potential for a very dangerous coalition between Donald Trump and Wall Street-backed Democrats,” says Westin.
In November 2016, top Congressional Democrats, including House and Senate minority leaders Nancy Pelosi and Chuck Schumer, signaled their willingness to work with Trump on infrastructure. They soured on the idea as more details emerged and now vow to oppose “nationwide Trump tolls.” But advocates like Westin worry that when push comes to shove, paving the way for infrastructure privatization will prove a bipartisan issue. Schumer, in particular, isn’t known for his resolve when it comes to Wall Street. Goldman Sachs has donated more than $575,000 to Schumer’s campaigns; Blackstone has given nearly $220,000 and was Schumer’s third largest donor in the 2016 elections. As a member of the Senate finance and banking committees, he voted for the repeal of the Glass-Steagall Act, helped design the 2008 bank bailout and opposed efforts in his own party to raise taxes on private equity and hedge funds.
At the local level, where most infrastructure projects must be approved, politicians, unions and community groups could easily be “seduced” by Trump’s faux-populist rhetoric and the promise of jobs, warns Mark Griffith, executive director of the Brooklyn Movement and co-director of the nationwide Millions of Jobs coalition, which includes NYCC, Indivisible, AFSCME, Communications Workers of America, and other labor and progressive groups. The coalition hopes to make it more difficult for Trump to sell his plan. When the president spoke at a private marina in Cincinnati, flanked by private developers as part of infrastructure week, Millions of Jobs helped mobilize a nearby protest where demonstrators held signs reading, “Cincinnati is Not for Sale.” The coalition is also lobbying local officials to sign on to a set of 10 principles that any infrastructure plan should adhere to, including direct public investment and prioritization of racial and gender equity, environmental justice and worker protections. Nearly 50 local and state leaders have signed on thus far, including Indianapolis Councilmember Jared Evans, whose district is home to the closing Carrier and Rexnord factories that made headlines during the 2016 elections.
In the long run, Millions of Jobs hopes to push for something akin to the alternative infrastructure plan introduced by the Congressional Progressive Caucus on May 25, which would be funded by a Wall Street transaction tax and closure of the tax deferral loophole. The $2 trillion plan, called a “21st century New Deal,” promises to “employ 2.5 million Americans in its first year, to rebuild our transportation, water, energy and information systems, while massively overhauling our country’s unsafe and inefficient schools, homes and public buildings.”
Winning any such new deal will require mass mobilization, a tough prospect when some segments of the labor movement are under Trump’s sway and many vulnerable communities are busy putting out daily fires. While infrastructure isn’t the “sexiest” issue, “it’s important for women, for neighborhoods of color, for rural areas to be centered and understand that their interests are at stake,” says Griffith. “It’s in the interest of the Trump administration to really paper over those equity conversations. We need to make sure that when we talk about infrastructure, we talk about community broadband, about water systems that don’t poison us, about climate change and heat vulnerability.”
That’s particularly important given that a massive infrastructure giveaway to Wall Street could help lock in its dominance of our economy and politics for a generation, further stacking the deck against real populist movements. “When these deals go through, they can last a lifetime,” says the Center for Media and Democracy’s Graves. “If there is not careful attention paid to what is transpiring, this could be an albatross that we’re saddled with long after Trump himself is gone.”