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Infrastructure Build or Privatization Scam?
(you can guess Prof. Krugman's conclusion, I think)
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.
First, why involve private investors at all? It’s not as if the federal government is having any trouble raising money — in fact, a large part of the justification for infrastructure investment is precisely that the government can borrow so cheaply. Why do we need private equity at all?
http://krugman.blogs.nytimes.com/2016/11/19/infrastructure-build-or-privatization-scam/
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.
First, why involve private investors at all? It’s not as if the federal government is having any trouble raising money — in fact, a large part of the justification for infrastructure investment is precisely that the government can borrow so cheaply. Why do we need private equity at all?
http://krugman.blogs.nytimes.com/2016/11/19/infrastructure-build-or-privatization-scam/
I'd add that the reasoned points about making government borrowing look smaller than it effectively is and so on apply whoever is using this scheme (both Tory and Labour governments did it here in the UK). But with the cabinet of grifters he's assembling, the corruption potential becomes enormous.
(and talking of the cabinet, I just have to quote this thing of beauty:
"As the terrifying hive organism that will eventually be the Trump cabinet continues to coagulate into a pulsing, living thing of eldritch horror..."
Read more at http://wonkette.com/608722/team-of-evils-mitt-romney-saves-the-universe#wSd2RGfrHRw6Gfad.99
Read more at http://wonkette.com/608722/team-of-evils-mitt-romney-saves-the-universe#wSd2RGfrHRw6Gfad.99
2 replies
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= new reply since forum marked as read
