Sam Pizzigati edits Too Much, an online weekly on excess and inequality.
Fifty years ago, almost all major corporations and wealthy individuals in the United States paid a hefty chunk of their income in local, state and federal taxes. Those tax dollars, in turn, helped build and maintain roads and bridges, sewers and schools, airports and harbors—what economists call our “public infrastructure.”
This tax-and-spend cycle helped keep America both relatively equal and efficient. The taxes on high incomes discouraged grand accumulations of private wealth. The spending on infrastructure encouraged economic growth and opportunity. In today’s United States, unfortunately, this virtuous cycle no longer spins. The wealthy no longer pay hefty taxes. Local, state and federal governments no longer invest in infrastructure. Yesterday’s United States built bridges. Today’s builds fortunes.
And now those private fortunes are taking aim at America’s public infrastructure. Wall Street bankers and investment firms, Business Week reports, are rushing to raise cash for public infrastructure buyouts.
“Investors can’t get in fast enough,” the weekly notes. “They recently deluged Goldman Sachs with $6.5 billion for its new infrastructure fund, more than twice the $3 billion it was seeking.”
The buyout artists at outfits like Goldman Sachs, analysts estimate, will soon have $500 billion to wave before governors and lawmakers “scrambling for cash to solve short-term fiscal problems.”
These governors and lawmakers, unwilling to tax the rich to maintain America’s roads, are now taking bids to sell these roads to the rich. In Harrisburg, for instance, Democratic Governor Edward Rendell is busy privatizing the 537-mile Pennsylvania Turnpike. Last year, in Indiana, state lawmakers cut a $3.8 billion deal that gives private investors a 75-year lease to run the Indiana Toll Road. In all, $7 billion worth of public infrastructure has gone private over the last two years. The next two years, Business Week predicts, could see “$100 billion worth of public property” turn private.
Why the investor rush to public infrastructure? Leases to run toll roads and bridges amount to licenses to print money. Government highway officials generally need to win public approval before they can raise tolls. Private road managements can charge whatever tolls the market can bear.
Tolls on the Chicago Skyway stood at $2 in 2005, the year the road became the first modern thoroughfare to go private. The Skyway toll, investors expect, will hit $5 by 2017.
Private investors have, of course, other ways to squeeze earnings out of infrastructure. They can skimp on maintenance—or attack worker wages. Toll-takers on the Chicago Skyway, Business Week points out, “used to be full-time city employees with rich benefits.” The Skyway’s new private operators now run their show with a mostly part-time, no-benefit workforce.
Higher tolls, cheaper workforces. Do the math. Wall Street analysts certainly have. They now see infrastructure, notes Business Week , “as a separate asset class, safe like high-grade bonds but with stock market-like returns.”
In today’s America, the ultra-affluent are having an increasingly hard time getting those “stock market-like returns” from marketing private-sector products and services to an increasingly over-indebted American middle class.
Middle class Americans, our deepest pockets have figured out, are already paying for public-sector products and services, and these affluents have convinced themselves that they richly deserve a piece of this public payment pie. In a deeply unequal America, with ever-greater pools of wealth concentrating at the top, they so far seem to have the dollars—and the power—to get it.