A New Deal for Wall Street: Trump’s Plans for Mass Privatization Are a Colossal Giveaway to the 1%

Trump wants to sell off our infrastructure—and Democrats helped pave the way.

Rebecca Burns July 20, 2017

Donald Trump promises infrastructure investment at the April 2017 conference of North America’s Building Trades Unions.

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:

"I at times tell my colleagues that I kind of feel like a missionary, out trying to sell religion."

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.

HIGH­WAY EVANGELISM

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.”

Rebec­ca Burns is an award-win­ning inves­tiga­tive reporter whose work has appeared in The Baf­fler, the Chica­go Read­er, The Inter­cept and oth­er out­lets. She is a con­tribut­ing edi­tor at In These Times. Fol­low her on Twit­ter @rejburns.
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