See the warnings about Trump’s infrastructure plan. It’s betraying populism.

Summary: US stocks have risen since the election on expectations that Trump will bring massive debt-financed infrastructure spending and tax cuts for the rich (with droplets for everyone else). As we learned from the Reagan and Bush Jr. programs, we should beware the details. These articles warn what to expect, giving us time to fight back.

“Like [Andrew] Jackson’s populism, we’re going to build an entirely new political movement,” he says. “It’s everything related to jobs. The conservatives are going to go crazy. I’m the guy pushing a trillion-dollar infrastructure plan. 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.”
— Steve Bannon, Trump’s Chief Strategist, in The Hollywood Reporter.

This massive infrastructure plan sounds alluring, like debt-funded tax cuts. Ronald A. Klain warns us about the probably results: “Trump’s big infrastructure plan? It’s a trap.” To understand why, see the details in “Trump Versus Clinton On Infrastructure” by Peter Navarro (prof of economics and public policy at UC-Irwin) and Wilbur Ross (billionaire LBO entrepreneur) — both senior advisors to Trump. Paul Krugman gives the summary (read it in full).

“Trumpists are touting the idea of a big infrastructure build, and some Democrats are making conciliatory noises about working with the new regime on that front. But remember who you’re dealing with: if you invest anything with this guy, be it money or reputation, you are at great risk of being scammed. So, what do we know about the Trump infrastructure plan, such as it is?

“Crucially, it’s not a plan to borrow $1 trillion and spend it on much-needed projects — which would be the straightforward, obvious thing to do. It is, instead, supposed to involve having private investors do the work both of raising money and building the projects — with the aid of a huge tax credit that gives them back 82 percent of the equity they put in. To compensate for the small sliver of additional equity and the interest on their borrowing, the private investors then have to somehow make profits on the assets they end up owning.

“You should immediately ask three questions about all of this. … All of these questions could be avoided by doing things the straightforward way: if you think we should build more infrastructure, then build more infrastructure, and never mind the complicated private equity/tax credits stuff. You could try to come up with some justification for the complexity of the scheme, but one simple answer would be that it’s not about investment, it’s about ripping off taxpayers.

We have recent experience with this strip-mining of the public for private gain: the privatization of education, including the student loan business. Rana Foroohar reviews seven new books about this at the New York Review of Books.

“When the financial industry — banks, hedge funds, loan companies, private equity — gets too involved in any particular activity of the economy or society, it’s usually time to worry. The financial sector, which represents a mere 4% of jobs in this country but takes a quarter of all private sector profits, is like the proverbial Las Vegas casino — it always wins, and usually leaves a trail of losers behind.

“…It’s an issue that’s been front and center in recent months, not only with the scandal surrounding Trump University and the recent closure of the ITT chain of for-profit colleges, but also the news that Bill Clinton was, during five years, paid a total of $17.6 million to serve as an “honorary chancellor” of the for-profit college company Laureate International Universities. The sector has been raking in money for some time now. …As one Credit Suisse analyst looking at the $35 billion industry put it, “it’s hard not to make a profit” in the for-profit education sector.

“…But education, sadly, did not benefit. As A.J. Angulo outlines in his detailed history of the for-profit sector, Diploma Mills: How For-Profit Colleges Stiffed Students, Taxpayers, and the American Dream, that’s because such schools spend a large majority of their budgets not on teaching but on raising money and distributing it to investors. In 2009, for example, thirty leading FPCUs spent 17% of their budget on instruction and 42% on marketing to new students and paying out existing investors. Is it any wonder, then, that investigations into the industry from 2010 to 2012 found that while it represented only 12% of the post-secondary student population, it received a quarter of all federal aid disbursements and was responsible for 44% of all loan defaults, many of them by working-class students who either couldn’t afford to graduate or, once they did, found their degrees were largely useless in the marketplace?

“All of these changes have their roots in the rise from the late 1970s onward in “neoliberal” economic thinking — which assumes incorrectly that the marketplace is always fair and efficient and better than public institutions at allocating resources — and the subsequent financialization of everything. Neoliberal theory, or at least the twentieth-century, laissez-faire reincarnation of it, assumes that markets empower everyone; in reality powerful institutions, and in particular financial institutions, end up dominating both the economy and society.

“‘Financialization’ is an academic term for the trend by which Wall Street and its methods have come to reign supreme in America, permeating not just the financial industry but also many other parts of both the private and public sectors. …

“University of Michigan professor Gerald Davis, one of the preeminent scholars of the trend, likens financialization to a “Copernican revolution” in which business and society have reoriented their orbit around the financial sector {in Managed by the Markets: How Finance Re-Shaped America}. This revolution is often blamed on bankers. But it was facilitated by shifts in public policy, from both Republicans and Democrats, and crafted by the government leaders, policymakers, and regulators entrusted with keeping markets operating smoothly.

“Greta Krippner, another University of Michigan scholar, whose Capitalizing on Crisis: The Political Origins of the Rise of Finance is one of the most comprehensive books on the topic, believes this was the case when financialization began its fastest growth, in the decades from the late 1970s onward. According to Krippner, that shift encompasses Reagan-era deregulation, the further deregulation of Wall Street under Bill Clinton’s administration, and the rise of the so-called ownership society under George W. Bush that pushed property ownership rates higher and further tied individual health care and retirement to the stock market.

The next wave of privatization in education infected grade schools, a mother-lode of profit opportunities. The results are in: it’s been a disaster. For details see Education and the Commercial Mindset by Samuel E. Abrams and School Choice: The End of Public Education? by Mercedes K. Schneider. A review by Diane Ravitch in the NYRB opens with a powerful summary of the 1%’s new program to strip-mine America.

“The New York Times recently published a series of articles about the dangers of privatizing public services, the first of which was called “When You Dial 911 and Wall Street Answers.” Over the years, the Times has published other exposés of privatized services, like hospitals, health care, prisons, ambulances, and preschools for children with disabilities. In some cities and states, even libraries and water have been privatized. No public service is immune from takeover by corporations that say they can provide comparable or better quality at a lower cost. The New York Times said that since the 2008 financial crisis, private equity firms “have increasingly taken over a wide array of civic and financial services that are central to American life.”

“Privatization means that a public service is taken over by a for-profit business, whose highest goal is profit. Investors expect a profit when a business moves into a new venture. The new corporation operating the hospital or the prison or the fire department cuts costs by every means to increase profits. When possible it eliminates unions, raises prices to consumers (even charging homeowners for putting out fires), cuts workers’ benefits, expands working hours, and lays off veteran employees who earn the most. The consequences can be dangerous to ordinary citizens. Doctors in privatized hospitals may perform unnecessary surgeries to increase revenues or avoid treating patients whose care may be too expensive.

“The Federal Bureau of Prisons recently concluded that privatized prisons were not as safe as those run by the bureau itself and were less likely to provide effective programs for education and job training to reduce recidivism. Consequently, the federal government has begun phasing out privately managed prisons, which hold about 15 percent of federal prisoners. That decision was based on an investigation by the Justice Department’s inspector general, who cited a May 2012 riot at a Mississippi correctional center in which a score of people were injured and a correctional officer was killed. Two hundred and fifty inmates participated in the riot to protest the poor quality of the food and medical care. Since the election, the stock price of for-profit prisons has soared.

“There is an ongoing debate about whether the Veterans Administration should privatize health care for military veterans. Republicans have proposed privatizing Social Security and Medicare. President George W. Bush used to point to Chile as a model nation that had successfully privatized Social Security, but The New York Times recently reported that privatization of pensions in Chile was a disaster, leaving many older people impoverished.”

Since Andrew Jackson, the promise of American populism has been to fight the power of banks and avoid unnecessary foreign wars (those not in America’s interest). These promises got Trump elected. The rumors of his appointees imply that the Trump will betray those promises. The hints about his privatization plan imply further betrayals. We can still stop this.

They still prey upon us, but take new forms.

For More Information

See these recent articles about this. “Five things to know about Trump’s infrastructure plan” in The Hill. “Trump’s $1 trillion plan hits D.C. speed bumps” at Politico — “The president-elect’s pitch for an upgrade of the nation’s roads, bridges, tunnels and airports is already running into Washington reality.”  Brad Plumer at VOX says “Donald Trump’s infrastructure plan wouldn’t actually fix America’s infrastructure problems“.

If you liked this post, like us on Facebook and follow us on Twitter. See all posts about populism, about our infrastructure, about Trump’s campaign, and especially these…

• Watch other nations build infrastructure for 21st C prosperity. We can, too.
• Next phase of the Trump revolution: rise of the new populism.
• What the press won’t tell you about Trump and populism — See Walter Russell Mead’s famous essay about Jackson.
• Here’s the news about Team Trump. See the promises fade away.