Outsourcing Our Political Will

A hat tip to the reader who forwarded this article in Mother Jones about toll roads. The article focuses on the privatization of the Indiana Tollway:

The deal to privatize the Toll Road had been almost a year in the making. Proponents celebrated it as a no-pain, all-gain way to off-load maintenance expenses and mobilize new highway-building funds without raising taxes. Opponents lambasted it as a major turn toward handing the nation’s common property over to private firms, and at fire-sale prices to boot.

It turns out that Goldman Sachs was both an advisor to the State and leads an investment group raising funds for privatization of roads. Maybe that explains some of those record bonuses.

Goldman Sachs’ role has not been lost on skeptics, who accuse the firm of playing both sides of the fence. “In essence, they’re double-dipping,” says Todd Spencer, executive vice president of the Owner-Operator Independent Drivers Association, a truckers’ group that opposes toll road privatization. “They’re basically in the middle, playing one side against the other, and it’s really, really lucrative.”

So perhaps that’s how we’re ultimately going to deal with our trade deficit: we’ll sell off all our freeways to the nations that hold our debt, then they can charge us rent to use our own roads?

But, enter Oregon’s own Peter DeFazio, the incoming chair of the Surface Transportation Sub-committee:

The hearing was a fairly docile affair—that is, until Oregon’s Peter DeFazio, the ranking Democrat on the subcommittee, got his turn questioning Daniels. “So you’re saying that there’s no political will to raise the tolls,” he began, “but if you enter into a binding contract which gives a private entity the right to infinitely raise tolls, then that’ll happen—but politically you couldn’t say we’re going to go out and raise the tolls.”

“Well, you’re a busy man, Congressman,” Daniels responded dryly. “I don’t expect you to understand our state.”

“No, sir. I’m just asking a question,” DeFazio shot back, his voice rising. “Are we outsourcing political will to a private entity here?”

Can we find the political will to have a rational investment strategy that keeps our public infrastructure public?

12 Comments

12 Responses to Outsourcing Our Political Will

  1. Kari Chisholm
    January 2, 2007 at 8:32 am Link

    Same story, on BlueOregon.

  2. Paul Edgar
    January 2, 2007 at 9:57 am Link

    We have come a long way with our federal roads and highways. Now is not the time to give up the ownership to private entities. I do not use Comcast anymore after years of increamental increases in their TOLL on cable access. To turn over paid for right-of-way is the dumbest thing I have ever witnessed.

  3. Nick
    January 2, 2007 at 9:57 am Link

    Sorry guys, but it looks like this is the wave of the future. Mayble the “progresive” Mother Jones rag should take a look a “progressive” France, where I am told by French people that all of the major highways are privately operated toll roads.

  4. Greg Tompkins
    January 2, 2007 at 12:14 pm Link

    How about we outsource the entire government to competitive bidders? I’d start with schools.

  5. Nick
    January 2, 2007 at 12:57 pm Link

    I wouldn’t do that; however, charter and private schools should keep the public schools on their toes by offering competition. Ditto with certain other public services.

  6. Bob R.
    January 2, 2007 at 1:28 pm Link

    I’m all for Charter and Private schools offering real competition to public schools. When will private schools begin accepting the same array of students that public schools are required by law to accommodate?

    – Bob R.

  7. Adron
    January 2, 2007 at 1:34 pm Link

    “How about we outsource the entire government to competitive bidders? I’d start with schools.”

    Haahahaa, they might actually turn into something worthwhile then. :o

    …But I digress.

    For all the bantering about SOV this and SOV that when a REAL solution to cut down on SOV usage based on market demand comes into play the same people hating SOV usage come to its aid.

    What gives?!?!?!?!

    If the roads become privatized (as the first roads in America where) and people actually realized they cost money then real competition in the industry could begin. In primary corridors passenger rail could then again sustain itself. Airlines would become even more efficient as their low prices per mile (YES they are low) become even more apperant. Needless to say, privatization of roads is a REAL solution that socialists should like just as much as market advocates being that if SOV usage reduction is the key, than NOTHING will do it better than privatization of the roads.

    Now if only we could get the Feds/States/Cities to stop taking our money to pay for various transit initiatives and let us pay for usage. That’d be real nice too.

  8. nathan
    January 2, 2007 at 2:31 pm Link

    Adron,

    I’d like to hear your thoughts on the apparent (and probably very real) corruption regarding the privatization of Indiana’s toll road.

    If we turn over those things we own in common to private entities, shouldn’t we expect more regulation of the market in order inhibit corporate corruption?

    In other words, how do we avoid being ripped off in the current corporate climate?

  9. Nathan Koren
    January 2, 2007 at 6:34 pm Link

    I’ve got to partially agree and partially disagree with Adron. It certainly doesn’t make much sense to worry about the social and environmental destruction caused by roads and the things that drive upon them, but then complain when something like privatization threatens to make people pay a more accurate reflection of those roads’ costs! Public transportation suffers an enormous handicap in this country because people wrongly conceive of the roads as being “free”, and something that’s free is pretty much impossible to compete with. Changing that one factor would be the single best way to change the balance of transportation in this country. Privatization seems like as good a way to do this as any.

    On the other hand, I must part ways with Adron when he implies that transportation of any kind flat-out shouldn’t be subsidized. Although subsidies mean that people can use a given resource without truly paying for it — thus meaning that the investment is resulting in a loss, as a first-order effect, there can be dramatic second-order effects that more than make up for the cost of the subsidies. I’m talking, of course, about the development enabled by transit subsidies (of any kind). The streetcar is of course the perfect example of this: billions of dollars of new development that have resulted in large part from a very tiny subsidy. In the long term, this is a GREAT deal for the city, considering the many jobs that are being created and the fact that the Pearl and the South Waterfront will be property-tax cash cows for many decades to come. This would still be a great deal from the city even if the Streetcar were 100% subsidized, collecting no ticket fare at all.

    The same can be said of roads, of course — downtown would be an economic non-entity if it didn’t have any pavement, and it would be wildly economically handicapped if drivers had to fork over cash every few blocks. In both cases, the value of the resource simply can’t be accurately judged by how much one can get away with charging to use it; rather, it can only be accurately judged by looking at its secondary and tertiary socioeconomic effects.

    So, I’m all in favor of subsidizing roads and any other form of transit, provided that their secondary effects are highly profitable and/or in the interests of society. So — for example — if we judge that freeways are the best means of facilitating interstate commerce, and that that the value we obtain from interstate commerce is substantially greater than what it costs us to build and maintain those freeways, then we probably ought to subsidize them. On the other hand, if trains could *also* give us the same benefits, and it isn’t immediately clear which of the two transport methods would be superior, then we should probably subsidize neither, privatize the freeways, and let the marketplace sort it out. On the third hand, if it is clear that trains are the vastly superior choice — and there might be non-economic considerations as well, such as a concern for carbon emissions — then we probably ought to privatize the freeways and subsidize the trains.

    In any case, it seems to me that privatization ought to be the *default* condition, unless one can make a compelling case as to why subsidizing something would produce more benefit to society than it would could. Arguing that public resources are sacred, simply by virtue of their currently being public, and that they therefore ought to remain public forever — is obviously highly circular and faulty logic.

    P.S.: Hey Nathan — I’m a Nathan, too, although I don’t comment quite as often as you do. Is there any way you can change your signature so that we’re a bit more distinct from each other?

  10. Jason
    January 2, 2007 at 7:26 pm Link

    I don’t agree with the idea of toll roads at all, or the way this process is being applied around here.
    If they do want to build toll roads:
    1. The companies that want to do it should get *no* help whatsover from the Federal, state, regional, county, city, etc., governments – no publicly-funded study results, no tax dollars, no public work crews to build it, and definitely NO use of things like condemnation. They should have to purchase the land from the current owners on the local market. If an owner doesn’t want to sell, they have that right, and the company cannot go to the state/county/etc. to force them.
    2. If the Newberg Bypass being privately owned/run is already set in stone as some backdoor deal, why not let them build the McKay Rd. regional bypass instead? That’d probably be much more effective, and serve more people

  11. Jason McHuff
    January 2, 2007 at 8:27 pm Link

    I still don’t understand why we need to privatize toll roads besides politics, including people more willing to pay someone besides the already-funded government. You have a money stream coming in so maintenance shouldn’t be an issue. And if something can be done better, government workers should also be able do it.

    But moreover, private firms demand profits, wiping out savings that privatization may bring. And there was a good column on how PGE is battling for more profit. I worry that the same thing would happen with privately-run roads.

    One other question: would private owners have to pay property taxes?

  12. nate
    January 3, 2007 at 11:42 am Link

    Hey nathan k…. I’ll go by nate from now on so we don’t have any more confusion ;)

    My two cents is that privatization can be a good thing….but there will always be a problem in a privatized market, namely corruption. Corporations will always try to gain the most profits possible, and that can lead to abuse of monopoly power through under-the-table deals or through outright monopolization (u can’t have two roads compete against each other.
    I’m still interested in hearing from Adron regarding regulation of private transportation. We all know the trouble we’ve had with private utilities and telecommunicatons. How can we regulate these companies so we don’t get ripped off??

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