Mission & Name
US Foreign Policy (Dr. El-Najjar's Articles)
Tracking the Latest
Disaster in the US Infrastructure Crisis
By Ellen Brown
Al-Jazeerah, CCUN, May 25, 2015
underfunding of US infrastructure was underscored by a fatal train
derailment on May 12th. The tragedy did not deter the House Appropriations
Committee from voting to slash Amtrak funding the very next day. There are
ways Congress could fund its massive infrastructure bill without raising
taxes. But the conservative-controlled Congress seems to have other plans
for the nation’s profitable public assets.
The May 12th train derailment near Philadelphia, which killed eight
people and hospitalized 200, was the deadliest Amtrak accident in recent
history. The train barreled around a dangerous bend at 106 mph, more than
double the 50 mph speed limit for the curve.
Whether this was due to operator error or mechanical issues is not
yet known. But
experts say the derailment might have been averted by a safety system
called positive train control,
which can automatically reduce the speed of a train that is going too fast.
The system must be installed on both the train and the route. The Amtrak
train had it, but on that stretch of track in that direction it was not yet
Why not? The stretch was known to be dangerous. Nearly 80 passengers
died near the spot in an
earlier derailment in 1943. Absence of positive train control was also
cited as a factor in the fatal 2013
crash of a Metro-North train in the Bronx.
The chief problem, as with infrastructure generally, is a woeful lack
of funds. Railroads are under a congressional mandate to install the
positive train control system on passenger routes and major freight lines by
the end of the year, but they are seeking an extension because of the cost
and complexity of the work.
In an article titled “Why
You Can’t Talk About the Amtrak Derailment Without Talking About Our
Infrastructure Crisis,” Aviva Shen observes that the Northeast Corridor
is the busiest and most profitable rail route in the US. The line, which
runs from Boston through New York City, Philadelphia, and Baltimore to
Washington D.C. , is dealing with more riders now than ever. But Amtrak has
been starved of the funds required to keep up with this increased demand. It
faces a backlog of repairs on bridges and tunnels that date back to the
beginning of the 20th century, obsolete rail interlockings, and trains that
rely on 1930s-era components. Repairs for the Northeast Corridor are
expected to require $4.3 billion in fiscal years 2015-2019, while
federal funding is expected to dwindle to $872 million.
these exigencies nor the May 12th crash was enough to stop the
Republican-led House Appropriations Committee from
voting on May 13th, only one day after the tragic derailment, to reduce
grants to Amtrak by $252 million, or about 15% from last year's level. The
measure still needs to clear the full House and Senate before going into
effect in October.
Putting the Squeeze on Amtrak
transportation infrastructure is short of funds across the board, Amtrak has
been pinched more than most. Congress holds the agency to a unique standard
by demanding that it turn a profit per passenger. This is not true for
highways and airports, which receive about
45 times the subsidies that Amtrak does.
Why the difference in
treatment? Perhaps because of Amtrak’s large and growing profit potential.
Trains charge by the rider; roads do not. Republicans have long
called for the privatization of the Northeast Corridor – this despite
failure of the privatization of the British Rail System.
editorial titled “How
Two Billionaires Are Destroying High Speed Rail in America,” Mike
Vainisi obsesrves that the push against public mass transit is being led by
a think tank called the Reason Foundation, which is funded by the notorious
Koch brothers. The Koch brothers’ $44 billion fortune comes largely from
Koch Industries, an oil and gas conglomerate. That means they have a vested
interest in those gas-guzzling single-rider vehicles that are mass transit’s
competitors, the cars and trucks that use the roads that are heavily
subsidized by the federal government.
Congress’s unique treatment
of Amtrak parallels that of the U.S. Postal Service (USPS), for which
privatization has also long been sought. The USPS was successfully
self-funded throughout its long history, until it was pushed into insolvency
by an onerous 2006 congressional mandate that it prefund healthcare for its
workers 75 years into the future. No other entity, public or private, has
the burden of funding generations of employees not yet born. The mandate
appears so unreasonable as to raise suspicions that the nation’s largest
publicly-owned industry has been intentionally
targeted for takedown, either because private competitors want the
business or because
private developers want the valuable postal properties.
Privatization would similarly gut Amtrak’s primary source of revenue and
drive it into insolvency. The privatization proposal has never gained much
traction outside conservative circles, but lawmakers have proposed massive
cuts to Amtrak’s budget virtually every chance they get.
by Debt into the Arms of Investors
The push for cuts is part of the
austerity meme of a Congress bent on “balancing the budget” at all costs.
Conservatives are determined not to breach the artificially-imposed debt
ceiling, which was
hit once again in March. Congress again fixed the books by borrowing
from federal pension funds and other creative accounting techniques. But the
lid has largely been shut on new spending, even for such essential services
The major federal transportation fund will run
out of money by the end of May, and a $478 billion transportation funding
bill is facing an uphill battle. Even if it passes, it will be grossly
inadequate to service the massive infrastructure needs of the country.
According to the American Society of Civil Engineers, restoring US
infrastructure will require an investment of $3.6 trillion by 2020. If the
current level of spending continues,
funds will fall short of that by $1.6 trillion.
If Congress won’t
provide the money, who will?
Infrastructure is the latest investment boom for private funds in search
of safe, lucrative returns. Investors are particularly interested in the
“plum” projects with significant profit potential. That would include
Amtrak’s Northeast Corridor and the US Postal Service.
projects can yield decades of steady, cash-flow-heavy returns of up to 10 to
14 percent –“a
return like a stock's with security like a bond's” – and they are
effectively guaranteed by the government. They are good for investors but
not so good for governments. A rule of thumb is that borrowing to fund
doubles the cost.
Besides loans, infrastructure opportunities
attractive to investors include outright privatization – the sale of public
assets at fire sale prices to meet government budget constraints – and
Public Private Partnerships, which privatize gains while socializing losses,
imposing long-term costs and risks on the public.
Trans-Pacific Partnership passes, investors will be
guaranteed their “expected profits” no matter what. The interests of
capital will, finally and unconditionally, have trumped those of government
and the people.
Taking a Lesson from the Chinese
Congress starves US infrastructure of funds, the ultra-modern, efficient and
comfortable rail systems of Europe, China and Japan are leaving the US in
the dust. The Chinese have built
nearly 10,000 miles of high-speed rail in the last decade, while US
legislators are still just arguing about it.The Chinese have built nearly
10,000 miles of
Where did the Chinese find the money? About 40%
comes from bonds issued by the Ministry of Railway, 10-20% comes from
provincial and local governments, and the remaining 40-50% is provided by
the national government through
lending by state-owned banks and financial institutions. Like private
state-owned banks simply create money as credit on their books. The
difference is that they return their profits to the government, and the
loans can be rolled over indefinitely. In effect, the Chinese government
just decides to do the work, issues Chinese currency to finance it, and pays
Chinese workers to get it done.
The US could fund its
infrastructure in the same way. As financial author Richard Duncan observes,
under current market conditions, direct money issuance can be done without
causing price inflation. Prices go up when demand (money) exceeds supply
(goods and services); and with mechanization and the availability of cheap
labor in vast global markets today, supply can keep up with demand for
decades to come.
Quantitative Easing has only been possible
because it has occurred at a time when Globalization is driving down the
price of labor and industrial goods. The combination of fiat money and
Globalization creates a unique moment in history where the governments of
the developed economies can print money on an aggressive scale without
They should take advantage of this
once-in-history opportunity to borrow more in order to invest in new
industries and technologies, to restructure their economies and to retrain
and educate their workforce at the post-graduate level.
issuing money to bail out the largest multinational banks, the Federal
Reserve could do a round of quantitative easing directed at developing US
infrastructure, creating US jobs using US labor and materials. But Congress
seems bent instead on creating an artificial debt crisis to justify the
privatization of the nation’s choicest public assets, opening them to
exploitation by wealthy investors.
Ellen Brown is an
attorney, founder of the Public
Banking Institute, and author of twelve books including the
best-selling Web of Debt. Her latest
book, The Public Bank Solution,
explores successful public banking models historically and globally. Her
300+ blog articles are at EllenBrown.com.
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