Err, no, really, just no

For example, imagine a private consortium building a toll road for $1 billion. Under the Trump plan, the consortium might borrow $800 billion while putting up $200 million in equity — but it would get a tax credit of 82 percent of that sum, so that its actual outlays would only be $36 million. And any future revenue from tolls would go to the people who put up that $36 million.

That’s both the New York Times and also Paul Krugman.

And it’s not just the billion bit either. WTF does he mean future toll revenues go to the capital owners? Operating costs first, debt second, only the rump of revenue goes to capital.

Has he let his wife write this one?

27 thoughts on “Err, no, really, just no”

  1. Has he let his wife write this one?

    Sounds somewhat misogynistic but Robin Wells has co-written a number of books with hubby Paul

  2. order not quite right – tax due then operating costs then debt repayments then dividend; taxman gets first dibs if there’s anything to be paid

  3. Indeed he has but she is also very much more left wing than he. Which is what the comment is about, not her femaleness nor even her wifeness.

  4. Bloke in North Dorset

    Steve Bannon, Donald Trump’s chief strategist, is a white supremacist and purveyor of fake news.

    *Yawn*. I wonder if there’s a libel case there?

    What FA says. It will be a long time until a profit is turned, if they even manage to make one. During that time everyone benefits, workers pay taxes, the State doesn’t have to borrow, and eventually the public gets better infrastructure, all before the investors can even hope to make money and with the added bonus that politicians get fewer opportunities to grandstand.

  5. What’s your beef with this? Govt puts up 82% of the equity (although it may take time for the value of the credits to be monetised) and gets nothing back for it apart from a toll bridge in which it has no immediate direct financial interest and tax on the eventual profits. Nice idea for a property developer like Trump, but it looks to me as though the gummint is screwed here.

  6. “…building a toll road for $1 billion. Under the Trump plan, the consortium might borrow $800 billion while putting up $200 million…”

    Somebody’s got their millions and billions mixed up. It should read “…borrow $800 million…”

  7. Indeed he has but she is also very much more left wing than he. Which is what the comment is about, not her femaleness nor even her wifeness.

    It doesn’t matter, Tim… You’re are a white male, and as such you are guilty until proven guilty.

  8. Bloke in Costa Rica

    You have to wonder whether Krugman doesn’t know this stuff, or whether he does but he’s just playing to the prejudice and ignorance of his readers. Either way he’s a cunt.

  9. Yeah, Paul Krugman is a cunt. Given that he actually did reasonably good economics a while back when he was an economist and not a punditeer for the New York Times, I think he is indeed playing to the prejudice and ignorance of his readers. And since this is the New York Times we’re talking about, he has pretty plain sailing, given that the prejudice and ignorance of that readership are boundless.

  10. TMB,

    I must be missing something here because Alex’s comment seems reasonable to me.

    What I haven’t seen about the infrastructure plan is who will actually own the infrastructure. It was bad enough having a private company manage our water system. Thanks Veolia(the same company that screwed Flint), now all the poor people that still have old plumbing are drinking lead in Pittsburgh and people of all incomes have had billing problems. Saving a few bucks on water softeners was a great idea. ITR Concession Co’s leasing of the Indiana Turnpike was no better. When a 6+ hour detour is worth considering thanks to poor repair there is a problem. As seen in the real world private businesses simply don’t care if they don’t actually own the infrastructure. I’m not sure if ownership will fix this but other options have failed spectacularly.

    Timmy: I caught your related Forbes piece. Our water problems come from using a private company to try to save money. While PWSA shares responsibility(the board approved everything) for the billions in additional repairs, not to mention the healthcare costs, that are needed you should avoid using cases like Flint or Pittsburgh to defend privatization plans. The cost cutting measures recommended by Veolia are the problem.

    https://www.wired.com/2016/10/pittsburghs-drinking-water-got-contaminated-lead/

  11. Would the tax credit be actual cash paid to the consortium or is it just a credit against future taxable profits? If the latter, then the company genuinely has to pay out $200m.

  12. TMB,

    I wasn’t quite sure what lipouction was. I assumed it was a mispeeled liposuction.

    I use reasonable in that without far more information the question is which crony capitalist will this benefit the most. If it is run like many of the privatization efforts I have seen Trump will end up doing really well personally.

  13. LY

    ” It was bad enough having a private company manage our water system. Thanks Veolia(the same company that screwed Flint), now all the poor people that still have old plumbing are drinking lead in Pittsburgh and people of all incomes have had billing problems. “

    Who supplied the water and sewerage before Veolia got involved?

  14. The government(PWSA) owned, and still owns, the infrastructure up to my property line. Pre-Veolia PWSA handled everything and they did a far better job even though they were a bloated government bureaucracy. Private does not always mean better.

    http://www.pgh2o.com/

  15. So Much For Subtlety

    So the shorter Krugman is that preparing for a fictional alien invasion is a good way to spend public money but repairing roads and bridges is not?

    Ooookaaay.

  16. @TMB
    “Alex: Govt puts up 82% of the equity
    Have you tried lipouction north of the neck?”

    No, just done this sort of thing many times before. The incredible Belgian Leveraged Lease allowed an investor to go into a long term equipment lease with just 5% equity. Signing a deal a few days before the year end but before he actually had to fund the deal the investor could claim back about 12% of the asset cost (30% first year tax depreciation on 100% of the asset cost x 40%-ish tax rate) by reducing their estimated tax payments for the year. The government effectively funded 240% of the equity.

    Did many similar deals in Sweden, Austria, Denmark, Japan, Hong Kong, France & Germany.

  17. “Diogenes
    Would the tax credit be actual cash paid to the consortium or is it just a credit against future taxable profits? If the latter, then the company genuinely has to pay out $200m.”

    As I read it it is a credit against tax liabilities, but perhaps Dennis the P can tell us whether it is just creditable against the profits of that company or can be applied against taxes arising in a consolidated tax return, in which case it can be used almost immediately (in the right circumstances).

  18. Diogenes,

    PWSA didn’t fix the pipes due to a lack of money. The collapse of steel thanks to Nixon and Reagan(union wages were a factor too but they were secondary) left a diminished revenue source. The people who left were scattered so a system that was designed to support 700k now only had ~350k users but still needed to be maintained. Yes there was, and still is, corruption but the economic reason for a deteriorating water system is obvious.

    I’m not saying the PWSA board didn’t screw up. We got board members that believe in limited government oversight. They basically gave Veolia the benefit of the doubt and rubber stamped the suggestions. This allowed them to make most of the water testers redundant(I hope I am using the British term correctly) as a cost cutting measure. Naturally all of the politically connected employees are still there.

    If you want to know specifics I can ask my neighbor(one of the guys who actually knew what he was doing) the next time I see him. Veolia has caused $20-50 billion in damages in his opinion.

  19. Clarification:

    Most of the government water testers. I’m sure Veolia had their own water testers. While I haven’t seen an official company statement on Pittsburgh’s problems yet the excuse used for Flint is that the city didn’t specify that lead had to be tested for*. The stupid Democrats thought that state and federal lead regulations were enough and didn’t bother to add additional lead regulations at the local level.

    Veolia is a perfect example of why regulations get out of control. If the state of Michigan loses their case then it proves the court system is inadequate and we really do need more government.

    I hope that Veolia loses. We are already approaching 50% tax rates, after including all taxes, and more government intervention into the markets will only make us less competitive globally.

    * http://veoliaflintfacts.com/

  20. OK Diogenes: try explaining my cupboards full of lucite tombstones and model aircraft and ships all over the house plus a fine collection of Mont Blanc signing pens.

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