Commentary: Privatizing what the public paid for

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Privatizing What the Public Paid For
Special to the Star-Telegram
By Ed Wallace
September 5, 2008

“Right. It takes unconventional and courageous thinking to come up with a plan that clears a highway lane for the well off, while the middle class and working poor are left to inhale each other’s $5-a-gallon exhaust fumes. The worst thing about this ill-conceived decision … is it allocates freedom of movement according to income.” –From “Diamond Lanes for the Rich,” by Tim Rutten (Los Angeles Times, April 26, 2008)

Few think of it this way, but America already has a major flat tax that we all pay equally: the 18.4-cent federal tax that is applied to each and every gallon of gasoline we purchase, or the 24.4 cents on every gallon of diesel. Say a young person, who just lost his job at McDonald’s, buys a gallon of gas to get to an interview at Burger King at the same time Warren Buffet buys a gallon of gas to get to the airport in Omaha to board his personal jet: Both the unemployed, below-minimum-wage worker and America’s richest billionaire contribute the exact same amount toward the nation’s highway system on that day.

Now, however, we are being told – to an increasingly urgent drumbeat – that America can no longer afford the luxury of building new infrastructure or even maintaining our current road system, because there’s just no funding for these programs. It’s here that the complete absence of critical thinking about America’s future should astonish and dismay anyone who looks at the facts even casually.

Just for the Rich?

In just a few months America has come up with nearly $1 trillion to cover foolish losses on Wall Street and in the nation’s banking system – losses primarily self-caused in the investor-driven buildup to the mortgage crisis over the past three years. But at the same time we’re being told flat out that Social Security is a disaster waiting to happen, because it will be $1 trillion in default somewhere around mid-century. Yes, you read that right: We can save our financial centers today in mere weeks when it looks like they are over $1 trillion upside down, but there’s no way we can find that much money over the next 40 years to secure all working Americans’ retirement.

And on Wall Street, many firms are pleading poverty and demanding federal intervention, claiming to be incapable of rescuing themselves from the disaster they have brought on the nation. But, according to a New York Times article from August 27th on privatizing the nation’s infrastructure, “Kohlberg Kravis Roberts, the Carlyle Group, Goldman Sachs, Morgan Stanley and Credit Suisse are among the investors that have amassed an estimated $250 billion war chest – much of it raised in the last two years [emphasis added] — to finance a tidal wave of infrastructure projects in the United States and overseas.” (The last Federal Highway Bill appropriated $286 billion over a multi-year period, only $36 billion more than Wall Street has escrowed to buy up our infrastructure now.)

Likewise, Washington cries poormouth when asked how much we can spend in our next highway bill to fix and expand our nation’s highway system. Yet in less than one month Washington easily found $168 billon to send out in tax rebate checks to spur the economy – so the second-quarter GDP figures would look stronger.

Yes, America once found it necessary to “kick start” our economy in tough financial times. But back then the sudden infusion of $168 billion was spent on things everyone could use, like new highway projects: The money still had the same impact on the economy, but America gained something of lasting value to show for it. Long after the economic slowdown turned around and became a recovery, we would all benefit from better transportation.

It’s the bitterest irony of all that today elected officials talk about how great our economy has been on Monday, then on Tuesday say America doesn’t have the money to improve our nation’s infrastructure.

Which is it? Are we rich or broke?

Happy Motoring Now Has a Price

What’s even sadder is the fact that Washington is actually paying out taxpayers’ money to take the highways away from everyone who contributed to them; your dollars are being used to carve out separate lanes, so that those who can afford to pay additional tolls every day can drive unfettered by the congestion that traps the rest of us.

In Los Angeles the federal government allotted $213.6 million to convert many of that city’s HOV lanes into toll roads, on which drivers pay variable surcharges based on peak driving periods. Keep in mind that the unemployed of LA who bought gasoline paid the exact same highway taxes toward the construction of those roads as did the wealthiest individuals in Beverly Hills. What that means is that we have all contributed equally to create a system of motoring exclusion. Then again, that’s how flat taxes work. Everybody pays, most are excluded.

Recently it was mentioned that, just like LA’s, Interstate 30’s new HOV lanes could be turned into toll lanes for the well off. As they do in other cases around the nation, advocates of this divisive and unfair move claim that it will cut congestion and save fuel; but a daily casual observation of the road quickly exposes the difference between reality and that PR spin.

For if you really wanted to cut congestion and save fuel, those lanes should be immediately opened to everyone when an accident turns I-30 into a parking lot. That way, thousands upon thousands of motorists could start moving again – saving untold gallons of gas and tons of air pollution – not just the chosen few. Of course, that’s not the plan.

Just Plane Elite-Friendly

It should also be mentioned that a relatively large infrastructure campaign is now going on to improve the nation’s secondary airports. For the most part those airports are serving the ever-growing number of private aircraft; personal jets have become all the rage in the last decade. As David Cay Johnston points out in his excellent book, Free Lunch; How the Wealthiest Americans Enrich Themselves at Government Expense, airport expansions for private jets continue unabated, but it’s the average American taxpayer footing the bill.

Johnston further discusses the $31 million airport expansion for the field that serves the Bandon Dunes Golf Course in Oregon, where 5,000 private jets land each year; that’s up from three or four landings a year as recently as 1999. That airport expansion’s costs are covered by taxes paid by all fliers on commercial airlines and by a hefty chunk of the monies paid by Oregon Lottery gamblers – even though the improved airport mostly benefits executives flying in for a round of golf.

A similar report, put together by the Institute for Policy Studies, shows that private jet ownership has risen from 1,000 in 1970 to 10,000 in 2006; and, while these jets use 16 percent of the nation’s total air traffic services, they pay just 3 percent of the costs. Although this is assuredly on a different plane (pardon the pun) than selling off the nation’s already paid-for highways, the overall concept is the same: The majority of the people pay to build and improve infrastructure that will benefit and convenience only a tiny minority: the ultra-rich.

Private and Public: Don’t Mix

This is the modern politics of exclusion. But privatizing a country’s public infrastructure has already proven to be a bad business model, one that can and will reverse a half-century of smart economic expansion. One has only to look at England to find the truth behind today’s political spin.

Today England’s largest airports “… are in shambles. Terminals and runways are so overcrowded that flights depart late and bags are lost. Faulty plumbing has become a point of pride for many visitors from Africa; the lavatories at the airports back home work better.” And that’s the opinion of the very conservative Economist magazine, which blasted the fact that 21 years ago the Thatcher administration’s sold London’s three largest airports to one private company.

When I returned from London in June, my plane’s passengers were all loaded onto buses and driven to our jumbo jet, which was parked nowhere near the terminal; there aren’t enough passenger gates to handle all of Heathrow’s flights. Of course, private industry’s job is to cut expenses and maximize quarterly profits; but that’s never the priority in intelligent long-term planning for public transportation — whether it is for highways or airports. England privatized its utilities, airports and other government functions in the eighties, and today that nation is paying an enormous cost, with their equivalent of our Treasury Secretary calling its recent economic downturn the worst in 60 years.

Then again, now England is saying that the current private owners should divest of many of their airport holdings to other private ownership groups (and possibly back to government hands), but this will only extend the country’s current problems. It could even make them worse.

It’s true that many things our government does, it does poorly; but there are things that government does exceptionally well. The problem today is that our government wants to sell off what it does best and keep what it demonstrably isn’t very good at.

We’ve paid for all of it; yet now government is asking the majority of us to pay so the smallest minority can enjoy the benefits. Not only is that not a sustainable plan, it’s not even remotely American.

© 2008 Ed Wallace

Ed Wallace is a recipient of the Gerald R. Loeb Award for business journalism, given by the Anderson School of Business at UCLA, and is a member of the American Historical Society. He reviews new cars every Friday morning at 7:15 on Fox Four’s Good Day, contributes articles to BusinessWeek Online and hosts the talk show, Wheels, 8:00 to 1:00 Saturdays on 570 KLIF. E-mail:

Private industry’s job is to cut expenses and maximize quarterly profits; but that’s never the priority in intelligent planning for public transportation — whether it is for highways or airports.

2 Replies to “Commentary: Privatizing what the public paid for”

  1. LVTfan

    I tend to think that user fees are a good idea, and that we might be wise to collect high user fees from those who are willing to pay them for the privilege of using less congested lanes. Well-structured user fees can move some of the demand to less-congested hours, and thus make traffic flow better for everyone.

    It seems to me that when we create an HOV lane, we probably increase the land value in the area, and that we should be collecting a significant portion of that higher value from those we have favored. This way, not only do the users of the highway pay for it via a user fee, but their landlords, who have benefited, will also be relieved of the unearned increment.

    I agree with Wallace that when an accident blocks the main highway, the HOV lanes should be available to all, at no charge.

    And yes, those who operate the private jets ought to be paying their own way, not be financed by the rest of the flying public or the general public, and those whose land value has been driven skyhigh by the effects of public spending ought to be taxed (locally at least, but I could also justify federal taxation) on that land value, month in and month out. That seems to me to be the most valid tax base we could ever utilize. And we ought never to permit things like California’s Proposition 13 to limit the use of such a wise tax.

    We’ve paid for the airports, and for the air traffic control system. We have a vested interest in it being run well and run smartly and run safely, and we must never permit its privatization, or allow it to be run for private gain.

  2. terrih Post author

    I might be on board if they were truly charging user fees and erased the gas tax (otherwise tolls are a double tax), but the way they’re doing them in Texas is anything but. They’re subsidizing these tollways with heaps of taxpayer money and even cashing out the future projected profits up front and using that money to build yet more toll roads, making toll rates unnecessarily higher. So those users are being taxed to the hilt to build everyone else’s roads. Tolls open the door to runaway, unaccountable taxation and tolls are a sloppy tax that costs more to collect.

    This shift to tolling has opened a pandora’s box to raid commuters’ wallets. We need to return to sensible transportation funding (gas taxes, they’ve worked for decades, the trouble is politicians keep raiding the funds for no-highway uses) and building a highway system all members of the public can afford, not build special lanes for those who afford to get out of congestion while still charging us all gas taxes and a host of “fees” for public highways.

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