Wolf Blitzer did Democratic presidential front-runner Hillary Clinton a big favor on Sunday night. He didn’t ask about what Capitol Hill Blue is calling “Gupta-gate.” Let’s hope that Tuesday night’s CNN-hosted debate of Republican presidential candidates subjects the front-runner, Rudy Giuliani, to the scrutiny he deserves over his controversial foreign connections.
Vin Gupta, an immigrant from India, has been sued by shareholders in his company, InfoUSA, for wasting millions of dollars on the Clintons in order to ingratiate himself with them. He is even building “The Hillary Rodham Clinton Mass Communication Center” in his native India.
His company holds its annual meeting on Thursday in Calverton, Maryland, and that night Gupta is listed as the vice-chair of an event in New York designed to raise one million dollars for the Clinton presidential campaign. He must be pretty confident that major papers like the New York Times and the Washington Post, which have done stories about his ties to the Clintons, will let the story die. We shall see. Former Clinton adviser Dick Morris has been hitting the story hard in his columns and appearances on the Fox News Channel.
On Tuesday night, we will see whether Wolf Blitzer spares Republican presidential front-runner Rudy Giuliani some embarrassing questions about his law firm having represented a foreign company, Cintra, that is building one leg of the Trans-Texas Corridor (TTC) highway system. The TTC is part of what critics call a “NAFTA Superhighway” from Mexico through Texas and the U.S. into Canada.
The question is why a presidential candidate is making money from the sale of America’s assets to foreigners?
Business Week’s Emily Thornton has an important May 7 article, “Roads to Riches,” about this problem. She notes that America’s highways, bridges and even airports are being sold to foreign and other investors. Thornton doesn’t mention Giuliani, but she does note that “?a slew of Wall Street firms—Goldman, Morgan Stanley, the Carlyle Group, Citigroup, and many others” are putting together deals to buy America’s public infrastructure, “following the lead of pioneers like Australia’s Macquarie Group.” Macquarie Group is the firm that announced it was acquiring Giuliani Capital Advisers, an investment banking firm associated with the former New York City mayor, on March 6. But the purchase price was not disclosed.
It turns out that Macquarie is a financial partner with the Spanish company, Cintra, on a toll-road project in Indiana. These two firms also teamed up to buy the Chicago Skyway Toll Bridge for $1.8 billion from the City of Chicago.
Thornton reports the rationale for the sale of America’s assets: “The burden of maintaining roads, bridges, and other facilities, many built during the 1950s, is becoming difficult to bear. Federal, state, and local governments need to spend an estimated $155.5 billion improving highways and bridges in 2007, according to transportation officials, up 50% over the past 10 years. And that’s hardly the only obstacle they face. In 2006 alone, states increased their Medicaid spending by an estimated 7.7%, to $132 billion. And state and local governments could be on the hook for up to $1.5 trillion in retiree liabilities, estimates Credit Suisse. At the same time, politicians find it difficult to raise taxes.”
The sale of America’s public assets demonstrates that politicians have mismanaged and wasted our tax dollars. Looking at both sides of the controversy, Thornton reports that “There are some advantages to private control of roads, utilities, lotteries, parking garages, water systems, airports, and other properties. To pay for upkeep, private firms can raise rates at the tollbooth without fear of being penalized in the voting booth.”
But the “advantage” is for the politicians, not the taxpayers. In the past, politicians were accountable for the infrastructure because they either raised taxes or issued tax-exempt bonds to pay for them. By selling these assets, the politicians raise some quick cash and pass the buck.
But this is now the official policy of the federal government. Jeffrey N. Shane, Under Secretary for Policy at the U.S. Department of Transportation, gave a March 7, 2005, speech noting approvingly that “state and local governments have been actively searching for new ways to fund infrastructure expansion in an effort to meet rising demand without having to raise taxes.” He cited the Trans-Texas Corridor as an example.
Gregory Carey, managing director at Goldman Sachs, has spoken in detail about this new world of “transportation finance.” Goldman executed the $1.8 billion sale of the Chicago Skyway.
A copy of a presentation he made last August lists a variety of “asset classes” that can be sold. In addition to airports, toll roads, bridges and tunnels, he identifies “other revenue producing assets” such as water/sewer systems, hospitals, lottery systems, and government-controlled liquor stores. But there’s more. He says that, “Anything else that produces revenue” is potentially up for sale.
Does the public agree with this? The reaction, as reflected on the Business Week website, was overwhelmingly negative toward the idea of selling public assets.
One said, “If I am paying $50 a month in tolls alone because there are no reasonable alternatives, at the very least I want that money to be spent on upkeep and safety of the highways, not to line the pockets of wealthy investors.”
Another said, “If a company owns the main road I travel on, what alternatives do I have if the fees are too high? There is no market if the consumer doesn’t have a choice.”
One asked, “If I have to pay a toll to drive on the previously public-owned roads, will the taxes I pay now to upkeep them go down accordingly? We all know the answer: no. What is being proposed here is that the government desert what has been traditionally one of its duties and transfer duties to contractors and the control of critical infrastructure to profit-hungry private entities without putting the government’s tax appetite on a diet to compensate.”
Another said, “It boils down to the fact that we as taxpayers have already paid for these public assets. So, I object strongly to leasing them to anyone who will run them for profit. If the governments can’t do their jobs, they need to stop the whining, and deal with the issue of their own financial incompetence instead of abdicating.”
Politicians who have been selling themselves are now selling roads and bridges. The public could use a media that puts these politicians on the spot.