Monday, May 18, 2015

Burning Our Bridges - Republicans Oppose Public Infrastructure

Infrastructure is America’s backbone!  It’s the water supply to your home and the system of water reservoirs,it's the power lines feeding electricity to your home from the electrical generation grid, it's the street in front of your home connecting you with the roads and bridges of your community and the interstate highway system; It's the nation's seaports, airports, communication systems, power plants, schools, water and sewage systems, energy pipelines, railways, National Parks and lands, and more.

Infrastructure, in a word, defines all the public systems and services that allows our American society and economy to function.

It is nearly impossible to keep track of the myriad ways America is falling behind the rest of the industrialized world due to Republican opposition to progress and refusal to invest even a penny in the nation's infrastructure or its people. It is not, as Republicans claim, that America is broke; not when Republicans always find money to give the rich and corporations tax cuts, or devote well over half of the nation’s annual spending for defense despite the nation is not at war. Just last month, House Republicans, en masse, voted for another $269 billion tax giveaway to the wealthiest 0.2% Americans by repealing the estate tax.

America's infrastructure is in grave disrepair. Analysts have determined that one-third of the nation's roads are in poor or mediocre condition, and the Federal Highway Administration recently estimated that one out of every four bridges is either structurally deficient or functionally obsolete. Every infrastructure sector, from rail, air and seaways, to water supply, sewage and irrigation, to energy pipelines and the electric grid, are in need of significant capital. The American Society of Civil Engineers give America's infrastructure a grade of only D+.

To upgrade our infrastructure up to 21st century standards, the American Society of Civil Engineers (ASCE) estimated in 2013 that it would cost $3.6 trillion by 2020. “As President Barack Obama put it in this year’s State of the Union address, ‘21st century businesses need 21st century infrastructure — modern ports, stronger bridges, faster trains, and the fastest internet.’  Instead, the Republican controlled Congress has slashed infrastructure spending to the lowest levels since the post-WWII era…

As the 2007 I35 bridge collapse in Minneapolis and Amtrak train derailment last week showed (again), the refusal to spend on infrastructure literally kills.

Infrastructure spending: (i) is necessary and unavoidable (failure to timely spend on infrastructure increases the deficit in real terms), (ii) improves the gross domestic product and competitiveness, (iii) is an obvious source for increased employment, particularly in currently hard hit segments, and (iv) saves lives.  Moreover, infrastructure spending remains unambiguously popular.  Indeed, infrastructure spending historically has had bipartisan support.   

So, why are Republicans ideologically opposed to infrastructure spending?

Republicans really, deeply want to privatize the nation's infrastructure and turn such public resources into privately owned, profit centers.  More than anything else, this privatization fetish explains Republicans' efforts to gut and discredit public infrastructure, and it runs the gamut from building only toll roads to plans to privatize the federal highway system.  to plans to privatize public water supplies.

Indeed, if you listen to Republican proposals for "infrastructure reform," what you hear is: privatization and a longing for private tolls, tolls, tolls.  As the Cato Institute explained in Senate testimony, now is the time to go back in time:
The way to do that is to reduce hurdles to entrepreneurship and more private investment. Private infrastructure is not a new or untried idea. Urban transit services in America used to be virtually all private. And before the 20th century, private turnpike companies built thousands of miles of toll roads. The takeover of so much infrastructure by governments in the 20th century was a mistake, and policymakers should focus on correcting that overreach.
If the goal is to privatize and monetize public assets, the last thing Republicans are going to do is fund and maintain public confidence in such assets. Rather, when private equity wants to acquire something, the typical playbook is to first make sure that such assets are what is known as "distressed assets" (i.e., cheaper to buy).
Republicans want to render the federal government powerless by starving the beast. For readers who don't know what I'm talking about: Ever since Ronald Reagan, the GOP has been run by people who want a much smaller government. In the famous words of the conservative activist Grover Norquist, conservatives want to get the government "down to the size where we can drown it in the bathtub."  But there has always been a political problem with this agenda. Voters may say that they oppose big government, but many of the federal programs Republicans actually want to cut or privatize -- Medicare, Medicaid and Social Security -- are very popular. So how can the public be persuaded to accept large federal spending cuts, and privatization?
The conservative answer, which evolved in the late 1970s, would be dubbed "starving the beast" during the Reagan years. The idea was basically that sympathetic politicians should engage in a game of bait-and-switch. Rather than proposing unpopular spending cuts, Republicans would push through popular tax cuts, with the deliberate intention of worsening the government's fiscal position. Spending cuts could then be sold as a necessity rather than a choice, the only way to eliminate an unsustainable budget deficit. And the deficit came.  Republicans need not lift a finger to cut spending because it will magically come down, just as a child will reduce her spending if her allowance is cut — the precise analogy used by Ronald Reagan to defend this doctrine in a Feb. 5, 1981, address to the nation.
Starving the Beast puts government entities from the city and state levels all the way to federal levels in such a financial bind that they must sell off (privatize) public assets to both cut costs and generate cash to pay the bills. "Private Activity Bonds" are directly related to both the goal of privatizing public assets and services.  Under current law, state and local governments are allowed, effectively, to delegate the ability to issue tax-free Private Activity Bonds to private corporations and investors.  As a result, the private investors have the lower borrowing costs associated with government financing and the interest earned on such bonds is tax-free at both the federal and state level.  Said more directly --  Local governments are financing the privatization of their own public assets with 'low interest rate' public dollar loans to private equity investors who earn tax free profits on their investment.  Privatization is not just a golden opportunity, but a tax-payer subsidized, tax-free opportunity - - with no demonstrated public benefit:
What is more, the projects are often structured so companies can avoid paying state sales taxes on new equipment and, at times, avoid local property taxes. While some deals might encourage businesses to invest where they might otherwise not have invested, there are few guarantees that job creation or other economic benefits actually occur.  
Another reason Republicans refuse to budget funds for infrastructure maintenance is because they want to first repeal or weaken labor and environmental laws associated with infrastructure construction projects.  For example, Republicans want to repeal the Davis-Bacon Act, a 1931 New Deal law which requires payment of the local prevailing wages on all public works projects for laborers and mechanics. Repealing this employment protection law is a much larger Republican priority than repairing any specific bridge or tunnel.  As Republican Senator Mike Lee explained the priorities of his "infrastructure proposal":
“The Davis-Bacon Act exemplifies how big government hurts the people it purports to help, gives unfair advantages to favored special interests, and squeezes the middle class,” said Sen. Lee. “It crowds out low-skilled workers in the construction industry, preventing them from getting a fair shot at a job, and funnels taxpayer money to prop up big labor unions, which accrue windfall profits as Davis-Bacon removes the incentive for federal contractors to hire unskilled, non-unionized workers.”

Forcing the American citizens to subsidize labor unions in this way artificially inflates the costs of construction projects to repair and improve our national infrastructure. This is unfair, and unsustainable, and costing taxpayers billions of dollars every year. Senator Lee’s “Davis-Bacon Repeal Act” removes these government-imposed obstacles to economic opportunity facing low-skilled workers and returns wasted taxpayer dollars back into the hands of the American people.

Senator Lee will offer the bill as an amendment to legislation that addresses the funding of our nation's highway and transportation systems.

Fleecing mom and pop taxpayers even further, Republican members of Congress are now offering to a "revenue neutral" plan to budget a little money for infrastructure project funding by granting multinational corporations a large tax cut on their untaxed offshore profits. Under current law, corporations can defer US tax payments on overseas earnings until they bring the profits to the United States. The proposed “tax holidays” would generate a relatively small, one-time revenue bump while allowing large corporations to avoid much larger amounts of tax owed over the longer term. In exchange for raising a smaller amount of tax revenue in the near term, all of these proposals forgive larger amounts of tax owed over the longer term. 

The last time we tried this, in 2004, it failed miserably. Corporations that participated shaved nearly $100 billion off their long-term IRS bills. And instead of boosting investment, they used the windfalls to buy back their stock and boost dividends while laying off more workers than they hired. Once the holiday was over, they began rebuilding their overseas profit stashes.

“Burning Our Bridges,” a new report from the Center for Effective Government and the Institute for Policy Studies, examines the infrastructure crisis in America. “All businesses — large and small — rely on our nation’s infrastructure for their success,” the report notes.  This report identifies the 26 US corporations with the largest stockpiles of untaxed overseas profits and analyzes how much these firms could help meet US infrastructure needs if they actually paid the taxes they owe — but can legally put off paying — on their offshore profits. Below are
  • Just 26 firms account for more than half of the $2.1 trillion in untaxed profits US corporations are currently holding offshore. Each of these firms has accumulated more than $20 billion in overseas earnings. Together, they operate 1,086 subsidiaries in tax haven nations.
  • These 26 firms’ offshore profits have exploded more than five-fold since the last tax holiday on overseas earnings. Microsoft, Google, Apple and Qualcomm each grew their offshore stashes by more than twenty-fold between 2005 and 2014.
  • If these 26 mega-stockpilers were to pay what they owe on their overseas profits, the federal government could gain a one-time revenue boost of an estimated $364 billion. That would be more than enough to cover the cost of repairing all of the country’s wastewater and stormwater systems, with enough left over to repair or replace all of the country’s dangerous and deficient dams and restore all the nation’s local, state and national parks.
  • Apple is the largest offshore profit stockpiler. If the highly profitable tech firm were to pay what it owes on those earnings, it would be enough to cover 17 percent of the cost of needed repairs on all public school buildings.
  • The second-largest offshore stockpiler is General Electric. If GE paid the taxes it owes on the $119 billion it holds offshore, that estimated revenue would be more than enough to pay for all of the unmet maintenance needs in local, state and national parks.
  • Seven pharmaceutical firms are among the 26 mega-stockpilers. This sector has become adept at avoiding US taxes by shifting ownership of patents and trademarks to subsidiaries in tax havens. If these seven drug companies were to pay the taxes they owe, it would generate an estimated $82 billion, enough to replace all of the deficient bridges in the United States.
  • If just two major oil companies — ExxonMobil and Chevron — were to pay the taxes they owe on their offshore profits, it could cover nearly a quarter of the cost of repairing all of the country’s levees. This is infrastructure critical for responding to the more volatile and extreme weather we are now experiencing.
  • Closing the offshore tax dodging loophole for all corporations could raise at least $590 billion over the next decade, and $90 billion more every year thereafter. This would represent a significant down payment on the nation’s overall infrastructure investment needs and could create an additional 1.8 million jobs.

It is obvious Republicans lawmakers at the federal and state levels have no intent to invest funds for any infrastructure repairs or improvements.

The following is a script of a CBS 60 Minutes featur story, "Falling Apart," which aired on Nov. 23, 2014 and was rebroadcast on May 17, 2015. Steve Kroft is the correspondent. James Jacoby, Michael Karzis and Maria Gavrilovic, producers. 

There are a lot of people in the United States right now who think the country is falling apart, and at least in one respect they're correct. Our roads and bridges are crumbling, our airports are out-of-date, and there are many miles of railroad track lacking safety technology that might have prevented last week's derailment of an Amtrak commuter train outside of Philadelphia.

The situation is the result of decades of neglect. As we reported last fall, none of this is really in dispute. Business leaders, labor unions, governors, mayors, congressmen and presidents have all complained about a lack of funding for years, but aside from a one-time cash infusion from the stimulus program, nothing much has changed. There is still no consensus on how to solve the problem or where to get the massive amounts of money needed to fix it, just another example of political paralysis in Washington.

Tens of millions of American cross over bridges every day without giving it much thought, unless they hit a pothole. But the infrastructure problem goes much deeper than pavement. It goes to crumbling concrete and corroded steel and the fact that nearly 70,000 bridges in America -- one out of every nine -- is now considered to be structurally deficient.

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