Taxpayer Looting, Part Deux: Taxes, Tolls and Bank Trolls

Taxpayer Looting, Part Deux: Taxes, Tolls and Bank Trolls

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Taxpayer Looting, Part Deux: Taxes, Tolls and Bank Trolls

Posted on May 28 2010 at 07:48:57 AM in Government

Banks having found it ridiculously easy to loot the public treasury are proposing schemes that would impoverish taxpayers yet more.  With casual gall the show is being billed with full frontal nudity (i.e. naked, right in public) and gullible public officials are ready to stampede us through the doors.

Taxpayers still cranky over being fleeced by the original show will be enticed with free cover charge, or perhaps even door prizes, but make no mistake that, once inside, the dancing bankers, plying financial liquor and exotica, will let the taxpayer leave not till his pockets are empty and his credit card is maxed.  The taxpayer already lost his shirt.  Now the banker will take his pants too.

Apparently the Rothschilds in Britain and Goldman in the U.S.  are offering to buy our public highways to enable governments to pay down debt.  Of course, these highways would become toll roads so that the bankers could service the purchase price.  Now I am in favour of toll roads (and congestion pricing), but I take issue with selling public infrastructure to private firms.  It makes little sense on so may levels, but on the whole the entire thing can be summed as an idiotic gimmick sprayed with cheap neo-liberal perfume.

The banks are floating a couple of different scenarios, both equally noxious.  One plan would require governments to pay an aggregate annual toll to the acquirer.  The other would eliminate government as the middleman and allow the acquiror to directly charge tolls to users.  Either way, tolls must be charged to drivers, and tolls are just another tax, but in this case an ingenious way to increase taxes on average households.  Or to put it another way, increasing tolls are a good stealth way to raise the tax burden on average households (who cannot afford it but who might balk at a direct tax increase) so as to prevent any meaningful  shifting of taxes onto the wealthiest 20% of households (to whom much has been gifted during the past thirty years.

The frustrating thing about these privatizations is that they boil down to pushing taxpayer money around a circle - it's just so much financial engineering.  If governments decide to pay an aggregate toll and charge drivers themselves, all that is accomplished is trading general government debt (which it would pay down from the sale proceeds) for an off-balance sheet liability (the aggregate annual toll payment).  If governments allow tolls to be charged directly to consumers, all it is accomplishing is the outsourcing of a critical government service.  Either way, the general taxpayer is on the hook.

But privatizations like these are generally on sweet terms for acquirers.  If tolls are not sufficient to cover some minimum rate of return, there will probably be a guarantee payment to make up the difference - more of the heads they win, tails the taxpayer loses strategy.  It is a great deal for bankers.  For one, they can use the cheap money our central banks are providing them to acquire the assets.  And they can trade in their government bond holdings, which are secured by nothing more than our promise to pay and could be subject to the ravishes of government induced money printing and the consequent inflation, for hard assets that are likely to keep their value no matter what.

Taxpayers will be left poorer, most especially the average household that is barely even now able to keep up some semblance of a middle class lifestyle into retirement.  The plans will make no appreciable positive difference to government debt/deficits and outlays.  I have no doubt the plans will be sold to governments and engineered to provide significant cash flows in the short-term, but the deals will become more raw over time, not unlike mortgages with teaser rates.

The élite and its deficit hawk allies will stop at nothing to maintain their hold on government policy that has been extremely favourable to them during the past thirty years.  And proposals like these are just part of a plan to avoid the one possible solution to the financial crisis Europe and the US face - since the average household is financially stretched and has shared little in the last 30 years of productivity gains whereas the élite have scooped the vast majority of these gains, taxes must be raised and shifted towards the wealthiest households.

Related:

We Live in a Plutocracy

The Peasants Are Storming the Gates. Let Them Eat Cake?

StickyFeet

http://trivcap.wordpress.com

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  Article Information
Author: StickyFeet
Created: May 28 2010 at 07:48:57 AM
Updated: May 28 2010 at 07:50:08 AM
Category: Government
Language: English

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