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April 6, 2021

Public Investment Can't Be a Jackpot for Private Thieves

Plus, Senate Democrats find an extra way around the filibuster

 

Thanks to private sector consultants, this is pretty much what we have
to show for high speed rail in California. (Rich Pedroncelli/AP Photo)

The Chief

**** Republicans are finding it very hard to come up with a credible
argument against the American Jobs Plan. Their real argument is "we
don't want to pass anything that makes the opposition look good, and
especially nothing that would damage our argument that government
doesn't work," but you can't say that one out loud.

The past few days they've hit on the idea that the infrastructure bill
doesn't really contain infrastructure. As long as the ideas are
popular, I don't think anyone in the country cares what you call it.
But they've overreached with this argument to disqualify anything not
involving concrete, as if lead pipes and EV chargers and even broadband
internet aren't essential infrastructure in the 21st century. The
wastewater leak in Florida
endures as a
testament to the idea that not every piece of infrastructure is a road.

Republicans tested out a concept to oppose public investment during the
Obama years. They called it "crony capitalism," a shorthand for
saying that Democrats dole out government favors to their benefactors.
Roughly speaking, any public good that ended up not delivering was a
product of crony capitalism; Solyndra, a failed solar startup that
received a $535 million government loan guarantee, was the archetypal
example.

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**** Of course, Solyndra was just one among many recipients of a
stimulus program that succeeded in driving down the cost of renewable
energy manufacturing and deployment. The loan guarantee program carried
risk and reward; elevating the risk and discounting the reward does not
form an argument about the evils of government assistance.

But crony capitalism, in another context, does threaten the promise of
President Biden's public investment plan. The fear is not that the
government takes risks; the fear is that all this investment gets
intermediated through consultants and privatizers who steal all the
money.

Infrastructure in the United States is famously expensive to build, but
only under certain circumstances. The public power utility in
Chattanooga, Tennessee built out relatively cheap fiber-to-the-home
broadband service with a stimulus investment, which paid for itself
faster than expected, with electric ratepayers seeing reduced bills
within a few years (along with access to the fastest internet service in
the world). The more cautionary tales almost always involve an
intermediary.

Matt Stoller ran down a good example

involving McKinsey, the corporate consultant who has been advising
Puerto Rico the past several years, through a damaging hurricane that
ruined the island's infrastructure. It remains degraded and corruption
has increased on the island, to the extent that the governor had to
resign a couple years ago. McKinsey consultants, meanwhile, ran off with
insane amounts of money.

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Another good example is high speed rail in California. Between a bond
measure in 2008 and Republican rejecting virtually all $8 billion in
rail stimulus funds, which California gladly grabbed, things looked
bright for a Los Angeles-San Francisco bullet train that would trim
hours off the trip and provide a comfortable ride.

While I'm a huge supporter of the concept, I think we have to admit
that it failed, almost entirely because the state outsourced
decision-making

to high-paid consultants. One of the main ones, WSP, was also involved
in Boston's disastrous Big Dig; as of 2019 they'd siphoned $666.4
million out of the project. Contracts for California's project have
averaged nearly half a million dollars per engineer. Consultants had an
interest in downplaying ballooning costs and delays, to justify their
continued salaries. One "low-cost" plan from a low-bid outside
consultant led to $800 million in overruns
.
Endless tweaks from so-called "efficiency experts" directly
contribute to these delays and cost increases, as projects get diverted
mid-stream.

In America generally there is no long-term planning staff to manage
large projects, so when states are fortunate enough to secure
infrastructure financing, they bring the planners in from the outside. I
don't expect governments to have public-sector construction workers
sitting around waiting for a hole to dig, but we should have public
servants controlling who to hire for those digs and what parameters to
set.

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Instead, private consultants look the other way as private contractors
rob the public treasury. At the federal and state level, contractors
dictate procurement rather than government, and billions leak out. Then
the concept of "public" infrastructure, defined as this private
consultant/private contractor relationship, is tarnished, and the real
benefits are seen in privatizing the public investment

entirely, which leads to more profit for contractors and less democratic
control of the public commons.

We think of the Reagan era

in terms of disinvestment, rollbacks of welfare and tax cuts. But
privatization was a pillar of Reaganism, and it carried through the
neoliberal interludes between hard-core conservatism as well. This
ideology guaranteed that a hobbled government could not live up to its
promise. I referenced Noah Smith's disquisition on Bidenomics
yesterday, and
he focuses on investment, care jobs, and cash assistance. But
macro-economists and political trendspotters always overlook the
fundamental problem of power.

Right now, private financiers, private consultants and private
contractors have the ability to pull out government investment and
render it ineffective. If Biden can minimize this leakage he can show a
path to smart government investment again. If he can't, we'll have
sunk money into private pockets, given the public little to show for it,
and reinforced the tenets of Reaganism. This is a choice, and Biden's
team had better choose wisely.

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Reconciliation, Again and Again

Senate Majority Leader Chuck Schumer has engineered the biggest change
to how we legislate in decades. The traditional conception was that you
could have one bill a year where you used budget reconciliation instead
of subjecting legislative priorities to minority rule through the
filibuster. But Schumer asked the parliamentarian for and received
dispensation

to revise a budget resolution throughout the year with reconciliation
instructions, and therefore get two or more filibuster-free bills to
play with.

"This confirms the Leader's interpretation of the Budget Act and
allows Democrats additional tools to improve the lives of Americans if
Republican obstruction continues," said a spokesperson for Schumer in
a statement. We haven't seen the parliamentarian's opinion yet, and
it could certainly require more hoop-jumping. But in theory, it gives
Democrats many more options, perhaps to really split the infrastructure
and the social welfare elements of the infrastructure package, or to
come up with more creative means to get policy priorities with a patina
of budgetary impact through Congress.

This is important, as it does show Democrats working around obstacles in
their path rather than accepting them. But another way of getting
multiple bills to pass by a majority is to change filibuster rules to
pass all bulls by a majority. Reconciliation is still tied to the budget
process; voting rights or other social issue bills will have a tough
time getting through the parliamentarian's whims. Ultimately we still
need to let Congress govern.

What Day of Biden's Presidency Is It?

Day 77.

We Can't Do This Without You

Today I Learned

* All adults will be eligible for a vaccine

by April 19. (CNN)

* Even with many reconciliation bills, you need all Senate Democrats to
agree on bills right now, and Joe Manchin doesn't agree

with the corporate tax hikes. (HuffPost)

* This Democratic plan

for international corporate taxation doesn't look very good either, it
appears to give multinationals a break. (Wall Street Journal)

* Not great to see Democrats abdicating their responsibilities

on border issues either. (The Hill)

* Caregiving infrastructure is infrastructure
,
just try to go to work without someone to tend to the kids. (HuffPost)

* FDR historian Eric Rauchway on the Biden-FDR parallels
.
(Washington Post)

* CFPB proposes banning foreclosures
for
the rest of the year. Advocates are actually against a blanket
moratorium with an end date, instead of forcing servicers to work out
payment solutions individually. (CBS News)

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