Thursday, January 01, 2009

Privatization Train Chugs into 2009

The election of Barack Obama did nothing to stop the runaway train of privatization of public resources. State and local budget deficits have government leaders looking to put significant projects on EBay. More than Sarah Palin's plane, they range from public water systems to toll roads to state lotteries.

Who is ready to buy into those revenue producing projects? It's Wall Street and the big money boys who brought us last fall's financial meltdown. Goldman Sachs and company are joined by nearly every private equity underwriter (PEU) with billions in infrastructure cash. They hope to buy government revenue streams at distressed, fire sale prices.

Who else is ready to give them projects? President elect Barack Obama appointed Republican Ray LaHood as Secretary of Transportation. The Bush administration used "free market" strategies to address our nation's transportation problems. Not long ago, Tyler Duval burrowed into the permanent Transportation bureaucracy. Tyler is a free market cheerleader, leading the department's congestion pricing efforts.

While Rep. LaHood is a gentleman and truly nice person, the appointment of a Republican points toward continued privatization. A nearly $1 trillion stimulus package, mobilized quickly, means the money will be spent under the remnants of Bush's carnage. How badly did eight years of George W. decimate government's internal capabilities? My guess is he did serious managerial damage, the kind that takes years to rebuild.

Most of the $1 trillion will be spent the Bush way, through contracts with the private sector. Projects offer the PEU boys a 15-20% annual return, virtually risk free. Who says the go-go days of private equity are over? Get on board, the Privatization Train is reaching ubiquitous speed.

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