Infrastructure Dollars Might Divert to the Very Rich


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Franklin Roosevelt’s New Deal, whether it was the WPA, the PWA, the CCC, the TVA or the NRA, was all directed at putting unemployed men back to work. And it succeeded in this gloriously. Men of all kinds, day laborers, artists, shopkeepers, who had been formerly in dole lines, regained their self respect and were able once again to put food on their family table. 

And now

Bernie Sanders first came up with the idea of a giant works program similar to those of the New Deal for repairing all our decaying infrastructure in order to provide work for the millions of still unemployed men and women resulting from the Great Recession. It was one of the most appealing aspects of his program. When Sanders dropped out, Hillary Clinton picked up the idea and adopted it as one of the planks of her platform. We were once again enheartened.


When Donald Trump gave it high priority on his platform, some of us began to see some hope in his new administration. “Our new president really seems to care for the down-and-outers.”

But then this Sunday the following article appeared in the New York Times business section, making it abundantly clear that all this talk about infrastructure repair is simply another way for those who already have money (i.e., the mutual funds) to become even richer by milking the federal government and—effectively—us, the tax payers. What a cheat!

We reprint the article, somewhat  abbreviated, below:

By NORM ALSTER, January 15, 2017

President-elect Donald J. Trump has spoken of spending a trillion dollars over the next decade to rebuild and repair the nation’s sagging infrastructure. Apart from offering big tax breaks to participating developers, few details of the Trump plan have emerged.

But a trillion dollars is hard to ignore, and investors looking to profit have numerous infrastructure mutual funds and exchange traded funds to choose from, though all of them have certain drawbacks.[Hey, wait a second, investor! This isn’t about you. Or wasn’t supposed to be.]

For one thing, most infrastructure funds own assets of limited scope, such as utilities, pipelines and railroads. “That doesn’t capture the full scope of infrastructure investment,” said Peter Santoro, lead portfolio manager for the Columbia Global Infrastructure fund.

Mutual funds and exchange-traded funds (E.T.F.s) are unlikely to own United States roads, bridges and airports, which are typically owned by states and municipalities. “None of these assets are publicly traded [thank God! Imagine if they were],” said Randle Smith, co-manager of the Virtus Global Infrastructure fund. . . .

Still, several fund managers insist their holdings are likely to benefit from an eventual Trump infrastructure program.[We didn’t think that benefitting mutual fund holdings was the point of the infrastructure program. Were we wrong?] Mr. Santoro, manager of the Columbia fund, says investors don’t need to own roads and bridges. They can own the concrete manufacturers who will supply developers. He cites two of his fund’s holdings, Eagle Materials and Cemex.

Lead contamination in the water system of Flint, Mich., has sharpened focus on the need for upgrading water systems. Most drinking-water and sewer systems are government-owned but “in contrast to roads and airports, water public entities are privatizing,” said Mr. Smith of Virtus. [They can’t even leave our drinking water alone.]

One such privatizer is American Water, which the Virtus fund holds. Two other holdings are makers of water pipes: Forterra, which manufactures concrete pipes, and Advanced Drainage Systems, which produces resin-based pipes.

Many infrastructure portfolios have also loaded up on energy pipelines, which seem likely to benefit from Trump policies. Scott Hammond of the Guggenheim World Equity Income fund expects the resumption of some projects that have been long and bitterly opposed by environmentalists, such as the Keystone XL and Dakota Access pipelines. And as pipeline capacity is increased to bring domestic shale oil to ports for export, companies like Kinder Morgan should profit, he added.

Mr. Santoro said the Columbia fund owned the oil service giants Schlumberger and Halliburton “because they have the engineering and construction expertise that’s needed.”

Railroads will also almost surely benefit from any uptick in economic activity set off by infrastructure spending. CSX, Norfolk Southern and Union Pacific are three of the largest holdings in the Lazard fund.

But the reality is that private equity funds for wealthy investors may be best positioned to take advantage of future tax breaks. For one thing, they have the capital. And where roads are now in private hands, private equity funds are typically the owners, so they can make the tax-advantaged repairs and recover their investment with tolls.

How good all of this will be for the general public remains to be seen. Some critics have questioned whether private developers would undertake needed public-interest projects that do not offer the prospect of profit. And on projects that do offer profit, ordinary people may end up footing the bill.

“Trump might dispute that his plan would require raising more in taxes,” said Hunter Blair, federal budget analyst with the liberal Economic Policy Institute, “but it will certainly cost money through tolls and other user fees.”

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