“Everyone is now excited about infrastructure,” a Democratic Party operative with ties to Wall Street declared late last week following passage of President Biden’s vacuous, $1.9 trillion stimulus bill.
When pressed by Lydia Moynihan of Fox Business on who “everyone” actually is, the operative rattled off the following names: “Progressives, moderates, everyone.”
Translation: Get ready for another mindless spending spree that may even surpass the last one.
Infrastructure spending is all too often mythologized as one of those public-policy concepts that’s a “win-win” for everyone. Potholes get filled, bridges get mended, our electric grid is fortified, and miraculously the whole thing pays for itself.
Jobs are created. The economy improves and if Wall Street makes a few bucks selling municipal bonds to finance the spending, it’s all for the common good.
The reality is often far different. These plans rack up massive debts, and rarely deliver what’s promised in terms of jobs and economic growth.
Bureaucrats make lousy project managers. One major reason taxes remain so high in New York is that we have issued so much debt to fix our “crumbling infrastructure” that’s in a constant crumbling state no matter how much money we spend.
History of this waste is replete with examples. Remember Solyndra? The solar-energy startup received hundreds of millions of dollars in loan guarantees during the Obama years only to file for bankruptcy. On a state level, count the number of “tunnels to nowhere” that have been built with money that was supposed to finance necessary infrastructure.
Also recall how few real “shovel-ready jobs” were created by Nancy Pelosi, Chuck Schumer and then-President Barack Obama and VP Joe Biden via their post-financial-crisis infrastructure-spending bill.
So few, in fact, Obama cracked jokes about it. The US economy struggled for years after his $800 billion “Recovery and Reinvestment Act” that did little more than allow profligate state governments, like the one operating in Albany, to finance budget and pension shortfalls.
But infrastructure spending’s lousy track record isn’t stopping President Biden and Democrats in Congress to triple down on this folly. And I’m told he and his minions are looking for support from the nation’s big banks to help with the pitch.
Biden’s point man in all of this is a bureaucrat named Cedric Richmond. A former congressman whose district covers New Orleans, Richmond’s title is officially “senior adviser to the president.” That underplays his power inside the Biden White House and his role in shaping economic policy including the infrastructure legislation, I am told by banking executives.
In a brief interview last week, Richmond told Fox Business: “We haven’t decided on a number for infrastructure or determined the path to passage. The president will determine those details and announce himself, but we don’t have a timeline or a number.”
Then he hung up.
Richmond, however, has been more forthcoming with bank executives, and has been in constant contact with them discussing the new administration’s economic priorities, I am told.
The thinking is that Wall Street could promote the economic virtues of the plan in research reports. The banks can also pressure GOP lawmakers who receive their campaign cash to support a big infrastructure-spending plan that “is great for everyone,” as one banker put it.
The Biden people won’t have to twist many arms on Wall Street. The banks are heavily regulated, so they need allies in government to blunt anti-bank progressives like Massachusetts Sen. Elizabeth Warren. They also stand to make a lot of money financing various projects in the bill, which according to my banking sources has been whispered at around $2 trillion to $2.5 trillion spread over several years.
Details are still up in the air, but here’s how people on Wall Street believe the legislation might take shape. The federal government might not have to spend the entire $2.5 trillion. Some of the money might be delivered to states and then leveraged when governors float municipal debt (underwritten by banks) for certain projects.
Private equity firms may join with state, local and even the federal government to form “public-private partnerships” to build stuff like roads and electrical grids. Again, the federal money gets leveraged because the PE firms put some cash into projects even if that means every time you pay a toll to cross the Throgs Neck Bridge the money might go in the coffers of, say, a PE firm like KKR.
Again, all this sounds great until you consider the track record of such arrangements: if they are working so well, why is our infrastructure in such a state of disrepair?
Not a single Republican voted for Biden’s COVID-stimulus bill. The American people, at least for now, don’t seem to mind that we’re spending $1.9 trillion to provide little COVID relief other than putting money into people’s pockets who have jobs, while bailing out states that mishandled the pandemic through economy-crushing lockdowns.
They might not care that we blow another trillion or two on infrastructure. But that might change when they see debt levels soar, interest rates spike and their taxes go up to finance a few more Solyndras and some tunnels to nowhere.