I can smell the newest giveaway looming a mile off. The Wall Street bailout, health-insurance giveaway and support of real estate prices rather than mortgage-debt write-downs were bad enough, not to mention the Oil War’s Afghan extension. But now comes a topper: the $50 billion transportation infrastructure plan that Obama proposed in Milwaukee — cynically enough, on Labor Day. It looks like the Thatcherite Public-Private Partnership, Britain’s notorious giveaway to the City of London underwriters. The financial giveaway had the effect of increasing prices for basic infrastructure services by building in heavy financial fees — guaranteed for the banks, who lent the money that banks and property owners used to pay in taxes in more progressive times.
The Obama transport plan is like a Fannie Mae for bankers, based on the President’s guiding mantra: “Let’s help Wall Street put Americans back to work.” The theory is that giving public guarantees and bailouts will enable financial managers to use some of the money to fund some projects that employ people — with newly created, non-unionized companies, presumably.
Here’s the problem. Transportation projects will make real estate speculators, the construction industry and their bankers very rich unless the government recovers its public spending through windfall site-value gains on property along the right-of-way.
Hudson does not believe Obama’s plan will accomplish this value recovery. Who would argue against him in America’s “damn the taxes” political environment? He believes, rather, that Obama’s scheme will generate deadweight losses for the public, losses that amount to a wealth transfer to the property owners along the right-of-way and to the financiers of the program. Put into different terms, the transportation infrastructure scheme reveals the Obama government to be a companion predator to an always rapacious and irresponsible Wall Street. There is, of course, political interest at work in the plan:
What’s the point of a party having a constituency, after all, if not to sell it out? Is not the Democratic Party’s role to deliver labor, the minorities and the large cities hog-tied to Wall Street?
Indeed. How else can the Democratic and Republican Parties persuade the FIRE sector of the economy to contribute into their coffers but by providing them with the opportunity to take windfall profits with little or no risk to themselves? They cannot, and this is why we may expect a program like this to quickly make its way through Congress while a crucial unemployment extension can languish for months before Congress passes the bill. As always, the Big People take care of the Big People and the Little People take care of the Big People.