When Barack Obama reaches the White House in January, one of the first challenges his administration will face, after the immediate need to address Iraq and the financial crisis, will be the crafting of a revised transportation policy. The waning years of Republican rule have seen a quietly subversive effort, led by ideologues of the right, to starve public transit and simultaneously privatize the national transportation system in the name of profit and the so-called free market. While far short of reaching fruition, this last gasp of market fundamentalism has nevertheless gained some tenuous footholds and piqued the interest of powerful economic forces with deep pockets and extensive political connections.
As reported by the Washington Post several months ago in a little-noticed exposé, the conservative project to overturn a century or more of settled and successful US transportation policy began in the bowels of the Transportation Department itself. A cadre of committed economic neocons, led by DOT Secretary Mary Peters, Assistant Secretary Tyler Duvall and General Counsel D.J. Gribben, have been working feverishly since 2006 to implement two broad initiatives inspired by the late Nobel laureate and right-wing icon Milton Friedman: (1) the replacement of publicly owned, tax-supported highways with private toll roads and (2) the use of “congestion pricing”—highway tolls that rise with increased traffic.
The first, a philosophical reversion to the primitive, for-profit turnpikes of the early 19th-century, would help satisfy the perennial right-wing objectives of shrinking government and cutting taxes; the second would free up crowded roads by discouraging their use by those unable to afford the tab, thereby easing commutes for the deserving rich. In the process, anti-government conservatives see an opportunity to forego enhancement of the gas-tax-dependent federal Highway Trust Fund, presently in dire need of additional monies, and thereby spur on its eventual dissolution.
The first tentative moves toward a marketplace transportation policy have already been taken. In 2007 the DOT used $1 billion in discretionary money not to address the crying needs of the nation’s mass-transit systems, but to fund congestion-pricing experiments in five cities (New York, San Francisco, Miami, Minneapolis and Seattle) that agreed to participate in order to get at least some form of federal assistance. Meanwhile, encouraged by Washington, individual states have begun to dabble in controversial highway-leasing projects, initiating attempts to turn public roads over to private operators. In most of these instances, notably in Texas and Indiana, the protagonists have been Republican governors and legislatures motivated by budget-cutting priorities and market ideology. Additionally, 23 states, mostly in the South and West, have enacted laws that permit the discretionary sale or lease of public roads to private interests.
As is usual when government functions are privatized or contracted out, there are interested parties — Halliburton and Blackwater in Iraq were two such — lining up at the trough. The beneficiaries in the specific case of transportation infrastructure include large private-equity companies, the same folks who helped bring us the mortgage-based financial collapse. Leading the private-equity money grab is the politically connected Carlyle Group, largest buy-out specialist in the country with managed assets of $81 billion.
Founded in 1987, the Washington-based investment firm has for two decades used the capital’s revolving door to gain insider influence, providing a conduit for government officials shuttling back and forth between the public and private sectors. Although a handful of former Clinton operatives have been ensconced under Carlyle’s umbrella, the dominant corporate culture there has always been reliably Republican. High-profile GOP stalwarts serving on Carlyle boards or in advisory capacities have included both President Bushes, George H.W. and the Current Occupant, former Secretary of State James Baker, former Secretary of Defense Frank Carlucci and former Director of Management and Budget Richard Darman.
Carlyle controls 60 investment funds in 21 countries. One of its recent holdings was Carlyle Capital, a badly managed mortgage-backed securities fund, which made news last March when it went bankrupt after defaulting on $17 billion in debt. Nevertheless, the Group and its political supporters still consider it qualified to operate America’s road network. Carlyle recently created a $1.5 billion fund to invest in US transportation infrastructure and has tapped a one-time Transportation Department functionary, former DOT Chief of Staff John Flaherty, to head it. The fund’s first target of opportunity: Virginia’s proposed public road and rail extension between the capital and Dulles International Airport, viewed as a prime toll-road candidate by the privatizers.
The Carlyle Group is not the only private-equity partnership interested in profiting from highway privatization, nor the only firm hiring former public officials. Australia’s Macquarie Holdings, an international toll-road builder also angling for Virginia’s Dulles project, was the employer of DOT’s present General Counsel Gribben between his stints in government. And HDR, a construction firm specializing in toll roads, was the happy home of DOT Secretary Peters prior to her cabinet appointment. The incestuous network is widespread. Washington Post investigators uncovered nine present and former high-level DOT appointees who were employed over the past three years by transportation-oriented private-equity or construction firms interested in tolling projects under federal review.
Should Americans be worried? The answer is yes, if they value the need for public transportation or view highways as common assets belonging to all and not as commodities for private gain. The General Accounting Office has warned that tolls on private roads are invariably higher than those on public roads because of the need to satisfy hungry investors. And it should be remembered that public highways were made public in the first place due to the inadequacy and unpopularity of private toll roads during the early days of the republic.
The military experience in Iraq alone—millions of dollars wasted in paying off private contractors who successfully bilked the Government for their services—should have been enough to discourage the privatization of our highway system. But those ideological true believers pushing the notion will not be discouraged by adverse evidence. They will have to be literally rooted out of the Transportation Department and sent packing. Let’s hope the incoming administration doesn’t lose sight of them hunkering down under the cover of more pressing problems.
Wayne O’Leary is a writer in Orono, Maine.
From The Progressive Populist, December 15, 2008
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