Friday, February 04, 2005



The governor of the great State of New York is either crazy or stupid.

Thanks to our current economic crisis (or, as the president would say, "Crisis, what crisis?" -- that's a nod to Supertramp, by the way, for you youngsters), New York, like most states, is facing economic difficulty.

So Governor George Pataki (he's a Republican, don't you know) is investigating the idea of selling public infrastructure to private companies to raise funds.

Like many failed business ideas, this is a short term victory that will lead to long-term disaster.

Companies that buy the New York State Thruway or the Second Avenue Subway are (*gasp*) going to want to make a profit. Here's the thing: If those things were profitable, the state wouldn't want to sell them. So one of two things will happen: Either the new owners will lose money operating the facilities, first letting them deteriorate, then going bankrupt and letting them wither away and die, or, worse, they're going to raise rates on the public so that only the few will be able to afford to take the subway or the Brooklyn Bridge.

Free marketeers generally have their pulse on a good idea -- a free market is great for innovation and reducing consumer costs on consumer goods. But roads, bridges, subways, tunnels and the like are not consumer goods. Public utilities are created because it's insane to have competing power companies, e.g., or because there's a greater public good involved in having a municipally managed water supply, sewer line, subway, or bridge. The rabid free marketeers -- the ones who conveniently forget that even Adam Smith was of the belief that taxes were a good thing because they let the government do things for the whole population -- believe everything should be privately held and government should do nothing.

Washington State has a similar problem now, thanks to the Bush Administration. Washington State law for years permitted taxing estates, and took a share of what the federal government took. When Bush led the fight to reduce estate taxes, Washington State did not reduce what it took. Yesterday, the Washington State Supreme ruled that Washington State could not do that, and must reduce what it takes in from now on and repay what it took in since the federal estate tax reduction. The result is another $400 million or so that Washington State will have to tax from somewhere else or reduce already bare-bones public services. This in a state with no income tax (unless you're self-employed, in which case you must pay a fee for the right to possibly make money), so it sends out armies of "assessors" to invent real estate values, the better by which to steal money you may or not be able to afford. (I.e., if I own a house and am unemployed for a year, I still pay tax on the house, even though I may not have the money to do so, which means the state can steal my property. If I didn't owe property tax, but the state had income tax, the state could charge me zero in this year of unemployment, but receive its full fair share when I was back and employed.)

New York State's problem is that the public interest will not be served by putting these things under private ownership. A business is obliged to cut its losses if things don't go well. Pataki is short-sighted and will help return New York to the depths of its financial problems from the 1970s.

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