The United States federal government should close the United States Department of Transportation

Net Benefits

Coercion NB

Without privatization, governments will increase coercion.

The alternative to privatization and a market solution is not the status quo but growing government control in the form of mandated employee trip reduction planning, which forces businesses, under threat of fines, to coerce their employees into riding in carpools, vans, and buses and using high-occupancy vehicle (HOV) lanes. Government officials deliberately engineer highway congestion to force more mass transit use.

Elections NB

Privatization of transportation infrastructure is popular with the public.

Public support Despite these issues, public perceptions of the monetization of infrastructure are increasingly positive, and changing directly as a result of the economic and political crises of the past few years. In June 2009 investment bank Lazard commissioned a national infrastructure poll among likely voters. The results make extremely encouraging reading for anyone involved in the infrastructure sector. [TABLE OMITTED] According to the poll results, the economy is the greatest concern for most people and as a result the "majority of likely voters want their elected officials to pursue non-traditional means of addressing their states' fiscal problems, including private investment in infrastructure". The poll went on to indicate a high level of aversion to increases in taxes and debt levels. This is mirrored by an increase in support for private investment in infrastructure. Specifically as a result of the crisis, the poll shows that support for private investment in infrastructure has increased by 9% over the past year alone, with nearly 60% of the respondents saying they favoured it, compared with 34% who opposed it. "Our poll shows that now, across the board, the US public is very supportive of bringing private capital into US infrastructure," says George Bilicic, chairman of power, utilities and infrastructure at Lazard in New York. "This really foreshadows the huge opportunities that are now here."

The American public wants better transportation infrastructure through privatization.

Voters don’t like regulation – inefficiency, bureaucracy, and unnecessary social costs

AT LEAST SINCE RONALD REAGAN’S election in 1980, voters have expressed dissatisfaction with the traditional, 60 year-old model of government involvement in both the economy and society. Yet this dissatisfaction has resulted in relatively little in the way of comprehensive government reform. There is a reason for the relative unresponsiveness: the fact that regulation is allowed, and sometimes mandated, by federal statutes that poorly reflect market conditions. To significantly improve government performance, statutory reform must precede regulatory reform and must be carefully tailored to the specific market imperfections that government involvement is designed to correct. Instead, the outdated structure of government statutes often impedes the economy from adapting to new conditions. Regulation has always been important to economic and social prosperity. But it often imposes unnecessary social costs, reducing competitiveness and economic growth. Over the past few years, the broader public has begun to demand improved government efficiency. In the early 1990s, a book by David Osborne and Ted Gaebler, Reinventing Government: How the Entrepreneurial Spirit Is Transforming the Public Sector, From Schoolhouse to State House (Addison Wesley, 1992), remained on the national bestseller list for over a year. The Clinton administration engaged in a well-publicized attempt to reinvent government led by Vice President Gore’s National Performance Review. Within Congress efforts have focused primarily on regulatory reform, one of the 10 items in the House Republicans’ 1994 “Contract with America.” Although opposition has frustrated reform, congressional Republicans continue to push for key changes in regulatory procedures. These include increased use of cost/benefit analysis, compensation to property owners for the loss in value of private property due to regulation, risk analysis, peer review of agency scientific findings, and broader legal powers to challenge agency determinations in court.

Politics NB

Privatization prevents budget disputes over transportation -- no backlash and Obama won’t have to spend capital.

The CPs popular with politicians and the public.

Of the above-mentioned factors, the ability to provide infrastructure without sizeable public funding and the ability to generate cash through a sale of an asset are the most appealing to government officials and politicians. Because voters are highly resistant to increased taxes and higher public debt at all levels of government, opportunities to shift costs from the public to the private sector are appealing. Canada has been at the forefront of this movement toward privatization in North America, with infrastructure becoming a mainstream asset class that attracts investor capital. Longduration infrastructure investments are especially appealing to pension funds, which have long-dated liabilities.

Privatizations bipartisan -- the CP doesn’t create a political fight.

House Speaker Nancy Pelosi (D-CA) agrees. "Private investment is playing an increasingly larger role in public infrastructure," she observed in an address before a Regional Plan Association luncheon on April 18. "Innovative public-private partnerships are appearing around the country, bringing much-needed capital to the table. "It is important to ensure that the public interest is well-served in public-private partnerships, since they are here to stay and likely to grow in importance," Pelosi continued. "User fees will continue to play a major role in financing many types of infrastructure. Reliance on tolls for transportation funding is likely to continue and expand.." U.S. Secretary of Transportation Mary Peters also has been a longstanding advocate of public-private partnerships. "Unleashing the investment locked in the private sector by partnering with business is the most efficient path to the transportation future this country needs and deserves," she told an audience of Arizona contractors in February. It's a message she and her senior staff have conveyed many times before and since. Using the leverage of private capital to supplement public funding also lies behind the proposal by Senators Christopher Dodd (D-CT) and Chuck Hagel (R-NE) for a National Infrastructure Bank (S.1926) The proposal would establish "a unique and powerful public-private partnership," Dodd said in his opening statement at a March 11 hearing on the bill, held by the Senate Committee on Banking, Housing and Urban Affairs. "Using limited federal resources, it would leverage the significant resources and innovation of the private sector. It would tap the private sector's financial and intellectual power to meet our nation's critical structural needs."

A2 Unions

CP avoids politics -- even the unions are coming around to privatization.

Tax Cuts NB

Public sector financing is inefficient and forces higher taxes -- privatization solves and facilitates significant tax cuts.

Fiscal problems. The level of government expenses in a variety of social welfare practices is a growing burden on public finances, leaving limited options but divesture. Current fiscal trends clearly underline that all levels of governments have limited if any margin and that accumulated deficits have led to unsustainable debt levels. The matter becomes how public entities default on their commitments. Since transport infrastructures are assets of substantial value, they are commonly a target for privatization. This is also known as “monetization” where a government seeks a large lump sum by selling or leasing an infrastructure for budgetary relief. High operating costs. Mainly due to managerial and labor costs issues, the operating costs of public transport infrastructure, including maintenance, tend to be higher than their private counterparts. Private interests tend to have a better control of technical and financial risks, are able to meet construction and operational guidelines as well as providing a higher quality of services to users. If publicly owned, any operating deficits must be covered by public funds, namely through cross-subsidies. Otherwise, users would be paying a higher cost than a privately managed system. This does not provide much incentives for publicly operated transport systems to improve their operating costs as inefficiencies are essentially subsidized by public funds. High operating costs are thus a significant incentive to privatize. Cross-subsidies. Several transport infrastructures are subsidized by revenues from other streams since their operating costs cannot be compensated by existing revenue. For instance, public transport systems are subsidized in part by revenues coming from fuel taxes or tolls. Privatization can thus be a strategy to end cross-subsidizing by taping private capital markets instead of relying on public debt. The subsidies can either be reallocated to fund other projects (or pay existing debt) or removed altogether, thus reducing taxation levels.

Tax cuts are critical to economic growth.

Exts – Tax Cuts K/T Growth

Tax relief is key to economic recovery.

Very few Americans would argue with the proposition that our current tax code is arcane and anachronistic. The American public wants a tax code that is fair, simple, and pro-growth. The current system fails miserably on each of those counts. The source of the problem is the income tax itself. The past several rounds of "tax reform" should have taught us that the income tax cannot be fixed or simplified. It must be scrapped entirely. The Cato Institute has published a plan that calls for replacing the personal income tax, the corporate income tax, the estate tax, and the capital gains tax with a simple flat rate national retail sales tax. The incoming Ways and Means Committee chairman, Bill Archer of Texas, has cited the need for just such a fundamental restructuring of our tax system. Replacement of the income tax would immediately jump-start the U.S. economy. The rate of savings, investment, and capital formation would be positively promoted. For the typical American worker who has suffered stagnant real wages over recent years, the abolition of the income tax would be the single most effective way to raise the standard of living, for both this generation and future generations. More important, if the GOP is genuinelycommitted to the idea that the federal government is too big, too costly, and too intrusive in the lives of American families and businesses, then it must close down the Internal Revenue Service. The IRS is the belly of the beast of big government. To that end, Congress should • abolish the capital gains tax, • outlaw the passage of all retroactive taxes, • end the withholding tax, • send an annual tax disclosure form to all taxpayers, • require a supermajority vote to raise taxes • enact a flat tax, • replace the income tax with a national sales tax

Taxes decrease economic productivity -- multiple reasons.

Let us begin with some conclusions drawn from existing economic theory. What is the likely outcome if the difference between gross and net wage rates that is composed by deductions for income and social security taxes becomes greater and greater? What are the probable consequences of higher and higher differences between the gross and net earnings of capital such as profits, divi- dends and interest? What are the consequences of increasing marginal income tax rates, of higher and higher rates of value added tax or of other indirect taxes? Lack of space obviously prevents a thorough discussion of these pro- blems. But several conclusions seem to be warranted. Firstly, it becomes relati- vely more and more rewarding under these conditions to expend time and effort in reducing the tax burden and in attempting to gain welfare benefits instead of doing productive work. Secondly, productive work which can escape taxation, i.e. the underground economy, tends to be more and more attractive; the benefits become greater and greater compared to the risks involved. Third- ly, at given gross rates of profit and interest, saving and investment become less and less attractive relative to consumption. Moreover, much saving will be invested unproductively in precious metals, works of art, private homes and other property in order to gain speculative profits, which are either not taxable or taxable at lower rates or which are more difficult to tax. Finally, risky investments in projects aiming at product and process innovation will decline, since the high profits arising if the project is successful will be taxed at high marginal tax rates, whereas the losses which may be incurred if the project fails can only be deducted from profits for a limited period of time. The conclusion is therefore that an increasing tax burden has a tendency to reduce saving and investment, especially risky investments which are most innovative and productive. A diversion of resources into conspicuous con- sumption and unproductive assets is encouraged, more labor is expended in efforts to reduce the taxes paid and to secure welfare benefits and in lines of production where lower or no taxes are effective. It follows that a misalloca- tion of resources and lower and less productive investment must be expected to occur whenever state activity increases substantially in market economies.

Tax cuts are an empirically successful method for spurring growth.

Tax Cuts and the Economy Tax cuts, when used properly, have stimulated the economy. Many credit President George W. Bush's tax cuts for moving the economy out of recession. Similarly, in 1964, Congress enacted an 18% cut in personal taxes to spur growth. The legislation was designed to encourage consumer spending - many believe that it succeeded admirably as consumers delivered a textbook reaction. According to a December 2004 article in Celtia.info, a magazine distributed in Celtic countries, tax cuts have also shown positive results in other countries as well. Ireland's recent tax cuts are believed to have improved living standards significantly. For years, the Irish were faced with high unemployment, budget deficits and high taxes. In 1986, Ireland faced a fiscal crisis. After reducing government spending, the government lowered taxes on both individuals and corporations. Over the next 13 years, Ireland's per capita income went from only 63% of the United Kingdom's average to besting it in 2000. Ireland now enjoys one of the highest standards of living in Europe. According to a May 2007 article in the Herald Tribune, tax cuts in Poland, Slovakia and Hungary before their entry in the EU have spurred economic growth in those countries.

State Budgets NB

Federal mandates strain state resources -- only the CP solves.

Two significant trends are driving the movement towards privatization. First, governments at all levels are strained for financial resources. Privatization is a means for providing needed and popular infrastructure without further straining the public budget. Second, the private markets are capital rich, seeking to invest increasing quantities of capital at attractive risk-adjusted yields. Investment in privatized infrastructure can offer attractive opportunities. The federal government traditionally has heavily funded much of the infrastructure currently targeted for privatization. During the past few decades, efforts to reign in the federal budget have resulted in declining resources for roads, bridges, airports, seaports, and water systems. These budget reductions have impacted both capital and maintenance costs. As a result, these burdens have shifted to state and municipal budgets. Increasing revenue at the state and local levels, however, is politically very difficult. Thus, privatization is viewed as a mechanism for providing infrastructure without negatively impacting a state or municipal government’s fiscal position. Over the past decade, it has been the regional governments in the US that faced severe fiscal pressures that have predominantly privatized. This issue impacts both capital costs of developing new infrastructure and maintenance costs for older infrastructure. Infrastructure investment needs in the US fall into two basic categories. The first involves growth areas, including booming new suburbs and areas of regional growth, such as the southern and western portions of the nation. The needs in these areas are for capital to develop infrastructure to support this growth. With federal funds more limited, states and municipalities need to be more creative in financing these needs. Privatization of the new infrastructure is an obvious solution.

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UQ – State Budgets

State budgets are being squeezed -- high levels of unemployment.

Tax Foundation: Collapsing Unemployment Insurance Systems reports record high levels of unemployment and law reserve funds, placing pressure on federal-state unemployment insurance (UI) tax and benefit system. Between 2008-2011, $174 billion was paid in, while $450 billion was paid out in unemployment taxes. Over the past three years, 34 states exhausted their UI trust funds and borrowed from the federal government, although some states already begun repaying those loans, and are not expected to for several years. Taxfoundation.com. June 6, 2012.

UQ – State Education Budgets

Education is being cut now – budgets are tight

NEW YORK (CNNMoney) -- Don't tell school districts that the economy is picking up. Many are still too busy figuring out how they are going to teach their students with diminished resources. More than eight in 10 districts say they are inadequately funded, and more than half anticipate a decrease in state and local revenues for the coming school year, according to a recent survey from the American Association of School Administrators. Even in districts where state aid is stabilizing, local funding is shrinking or costs are rising faster than revenues. Many are only now feeling the effects of the housing bust as towns lower property assessments, which affects the property tax revenues that many schools depend on.

Furthermore, with the increase in budget cuts to education comes an increase in costs to parents. This increase is felt across all educational levels from Kindergarten through PostSecondary education. With state post-secondary educational institutes also feeling the wrath of cuts, many have increased tuition prices. With lower Pell Grant availability down $3 billion in 2011 (USDOE, 2010) and the tuition increases many universities are employing, there exists an increase to parental/student funding. For low income families this may mean an inability to obtain a higher education due to a lack of funding opportunities.

Loss of federal funding is putting state education on the brink.

UQ – State Police Budgets

Crime rates are dropping fast -- smart policework -- multiple impacts.

Exts – CP Solves State Budgets

CP alleviates state budget issues and increases efficiency.

State budget pressures force education cuts and police cuts -- the CP solves.

The CP allows states to focus on other budget priorities -- avoids tax increases.

State Budgets Impact – Competitiveness

State university cuts destroy competitiveness.

Declines in competitiveness cause multipolarity that results in war -- universities are key.

State Budgets Impact – Crime

Cutting police forces spikes crime rates.

"When you drastically cut the number of police in cities, which is happening all across America, crime goes up,'' Biden said Sunday on CNN's State of the Union. "That is a fact … It's that simple. It's not an ideological point. It's not a political point. It's just a physical reality. "When the economy tanks, when foreclosures increase exponentially, when homes get abandoned, drug outfits move in, arsons go way up," Biden said. "That causes a spiral. That drives down revenue available for the cities and counties. They lay off more cops. The more cops who are laid off, the more crime that occurs."

State Budget Impact – Econ

Further pressure on state budgets wrecks economic recovery -- they’re on the brink.

With tax revenue still declining as a result of the recession and budget reserves largely drained, the vast majority of states have made spending cuts that hurt families and reduce necessary services. These cuts, in turn, have deepened states’ economic problems because families and businesses have less to spend. Federal recovery act dollars and funds raised from tax increases have greatly reduced the extent, severity, and economic impact of these cuts, but only to a point. And federal aid to states is slated to expire well before state revenues have recovered. The cuts enacted in at least 46 states plus the District of Columbia since 2008 have occurred in all major areas of state services, including health care (31 states), services to the elderly and disabled (29 states and the District of Columbia), K-12 education (34 states and the District of Columbia), higher education (43 states), and other areas. States made these cuts because revenues from income taxes, sales taxes, and other revenue sources used to pay for these services declined due to the recession. At the same time, the need for these services did not decline and, in fact, rose as the number of families facing economic difficulties increased. These budget pressures have not abated. Because unemployment rates remain high — and are projected to stay high well into next year — revenues are likely to remain at or near their current depressed levels. This has caused a new round of cuts. Based on gloomy revenue projections, legislatures and governors have enacted budgets for the 2011 fiscal year (which began on July 1, 2010 in most states). In many states these budgets contain cuts that go even further than those enacted over the past two fiscal years. Cuts to state services not only harm vulnerable residents but also worsen the recession — and dampen the recovery — by reducing overall economic activity. When states cut spending, they lay off employees, cancel contracts with vendors, reduce payments to businesses and nonprofits that provide services, and cut benefit payments to individuals. All of these steps remove demand from the economy. For instance, at least 44 states and the District of Columbia have reduced overall wages paid to state workers by laying off workers, requiring them to take unpaid leave (furloughs), freezing new hires, or similar actions. State and local governments have eliminated over 400,000 jobs since August 2008, federal data show. Such measures are reducing not only the level and quality of services available to state residents but also the purchasing power of workers’ families, which in turn affects local businesses and slows recovery.

State Budget Impact – Kills Stimulus

State budget pressures kill the effectiveness of federal stimulus policies -- turns the case.

From California to Connecticut, the global recession has squeezed state finances, forcing many state governments to slash services, raise taxes or find unusually creative ways to close the gap. The widespread budget shortfalls -- expected to continue through at least 2011 -- threaten to put a drag on the nation's economic recovery and undermine President Obama's stimulus plan, according to Wharton faculty and other experts. Indeed, much of the more than $230 billion that the federal government sent to the states to stimulate their economies over the next two years is instead being used to balance budgets. "The states aren't really playing the game like Obama hoped they would," says Wharton finance professor Robert Inman. "The dire condition of many states is a direct result of the financial crisis," according to Wharton finance professor Itay Goldstein. "States depend on tax revenues, which decline in times of crisis due to rising unemployment, lower salaries, less spending, etc. Also, states depend on the credit market to smooth cash availability. [The credit] market has been in a freeze during the crisis, and this makes it more difficult to get financed. You combine these factors ... and you get difficult times for states, just like for firms and individuals." At least 48 states either addressed or still face shortfalls totaling $163 billion in their budgets for fiscal year 2010, according to a recent report from the Center on Budget and Policy Priorities, a Washington, D.C.-based research center. A month after July 1, when the fiscal year in most states began, five states -- Arizona, Connecticut, Michigan, North Carolina and Pennsylvania -- remained deadlocked over how to balance their budgets. At least a dozen more states discovered billions in new shortfalls almost immediately after passing their budgets. If projections are correct, the pain for most states won't end anytime soon. The National Conference of State Legislatures (NCSL), a Denver-based bipartisan organization that serves state lawmakers and their staffs, estimates that the cumulative state budget shortfall for fiscal years 2008 through 2012 could top $348.2 billion. Cliff Diving in 2011 "Many states say they are looking at a cliff in 2011 because they know [the federal stimulus funding they will have received from the American Recovery and Reinvestment Act of 2009] will be gone, and they do not expect state revenue performance to rebound strongly enough to make up the difference," the NCSL reports in its recent State Budget Update for July 2009. "Many states are looking at a minimum of four to five consecutive years of deep fiscal problems."

State Budgets NB – A2 Federal Govt Control

Federal action still relies on states for implementation -- wrecks state budgets and prevents them from focusing on other priorities.