“Asset recycling” is back. This time with flowery language to hide its very real and documented risks.
During a Senate hearing Tuesday, Sen. Bill Cassidy (R-La.) praised the selling off of public goods like roads, water systems, and electric utilities. He described it as a “virtuous cycle,” like a “soufflé rising.”
Called “asset recycling,” Australia pioneered long-term leases of public assets like Port Darwin, now operated by Chinese investors, and a state-owned electrical grid that was leased out for 99 years.
Proponents argue that the lease money can be used to fund the construction of new infrastructure, which in turn stimulates the economy. Asset recycling “builds upon itself,” Cassidy said.
This argument first appeared in the U.S. from the Trump administration. “The bigger the thing you privatize, the more money we’ll give you,” said Gary Cohn, former director of the National Economic Council said in 2017, as Trump was trying to sell his plan to use federal dollars to “incentivize” private, state, and local infrastructure spending.
But, a virtuous cycle, asset recycling is not. More like a soufflé collapsing into a soupy mess.
As we explained during the Trump administration, asset recycling isn’t some new invention but simply privatization rebranded. It’s the textbook definition of snake oil, a “quack remedy or panacea.”
Australia actually ended its asset recycling program in 2016, only two years after starting. An Australian Senate committee said it was “concerned about the possibility that incentives under the Asset Recycling Initiative may encourage privatization without effective public consultation and communication strategies, and without appropriate consideration or analysis of future costs.”
They were probably referring to what happened when the Northern Territory rushed into leasing out Port Darwin. A year after the deal, officials still had no idea what they were going to spend the lease revenue on. Talk about reckless.
There’s just no shortcut when it comes to infrastructure. We must invest public dollars in our roads, bridges, water systems, broadband, school buildings, and other public goods. Especially when we’re facing an estimated infrastructure spending gap of $2.6 trillion.
The private sector doesn’t hand out free dollars. In fact, their money comes at a high cost. Corporate profits, dividends, and income taxes can add 20 to 30 percent to operation and maintenance costs of privatized infrastructure.
You wouldn’t know that from listening to Cassidy.
Or Sen. Bill Haggerty (R-Tn.): “To pay for [infrastructure] by raising taxes is the opposite of what we should do … we should be incentivizing private capital.”
Or Sen. Kevin Brady (R-Tx.): “So rather than tax increases that kill Main Street businesses and workers, or lavish green subsidies that go to the wealthy, why are we not attracting more private capital?”
We can’t let asset recycling—or any privatization, for that matter—find its way into new federal infrastructure spending.
Photo by Arizona Department of Transportation.