Paul Krugman is suspicious of Trump’s infrastructure proposal. The question is whether Trump will invest public funds and build or hand out tax breaks and privatize. Krugman is betting on Build he won’t.
Steve Bannon, Donald Trump’s chief strategist, is a white supremacist and purveyor of fake news. But the other day, in an interview with, um, The Hollywood Reporter, he sounded for a minute like a progressive economist. “I’m the guy pushing a trillion-dollar infrastructure plan,” he declared. “With negative interest rates throughout the world, it’s the greatest opportunity to rebuild everything.”
So is public investment an area in which progressives and the incoming Trump administration can find common ground? Some people, including Bernie Sanders, seem to think so.
But remember that we’re dealing with a president-elect whose business career is one long trail of broken promises and outright scams — someone who just paid $25 million to settle fraud charges against his “university.” Given that history, you always have to ask whether he’s offering something real or simply engaged in another con job. In fact, you should probably assume that it’s a scam until proven otherwise.
And we already know enough about his infrastructure plan to suggest, strongly, that it’s basically fraudulent, that it would enrich a few well-connected people at taxpayers’ expense while doing very little to cure our investment shortfall. Progressives should not associate themselves with this exercise in crony capitalism.
Damn! And just when I thought there might be some common ground - as in my posts from yesterday.
To understand what’s going on, it may be helpful to start with what we should be doing. The federal government can indeed borrow very cheaply; meanwhile, we really need to spend money on everything from sewage treatment to transit. The indicated course of action, then, is simple: borrow at those low, low rates, and use the funds raised to fix what needs fixing.
If Trump pursues this large scale program, his legacy would be right up there with Eisenhower and the interstate highway system. But …
But that’s not what the Trump team is proposing. Instead, it’s calling for huge tax credits: billions of dollars in checks written to private companies that invest in approved projects, which they would end up owning. For example, imagine a private consortium building a toll road for $1 billion. Under the Trump plan, the consortium might borrow $800 million while putting up $200 million in equity — but it would get a tax credit of 82 percent of that sum, so that its actual outlays would only be $36 million. And any future revenue from tolls would go to the people who put up that $36 million.
With a few investors kicking in only $36 million, who will pay the rest? You know the answer.
Krugman raises questions about why we would want to go through all that when the objective and solution is so much simpler.
… all of this is unnecessary. If you want to build infrastructure, build infrastructure. It’s hard to see any reason for a roundabout, indirect method that would offer a few people extremely sweet deals, and would therefore provide both the means and the motive for large-scale corruption. Or maybe I should say, it’s hard to see any reason for this scheme unless the inevitable corruption is a feature, not a bug.
Now, the Trump people could make all my suspicions look foolish by scrapping the private-investor, tax credits aspect of their proposal and offering a straightforward program of public investment. And if they were to do that, progressives should indeed work with them on that issue.
But it’s not going to happen. Cronyism and self-dealing are going to be the central theme of this administration — in fact, Mr. Trump is already meeting with foreigners to promote his business interests. And people who value their own reputations should take care to avoid any kind of association with the scams ahead.