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February 04, 2006

Privatization: Stealing from Our Children

Indiana is planning to privatize a major highway and the deal reflects the fundamental fraud of many privatizations. Today's politicians get cash up front and leave it to future consumers to pay the price in higher costs.

In the deal, the state of Indiana gets $3.85 billion up front to bolster its present budget. Future legislatures won't get another dime in tolls for the next seventy-five years. And the company leasing the road?

[T]he venture could recoup its investment in 17 years, then make $21 billion in profits over the next 58 years.
So in exchange for under $4 billion in immediate revenue, today's legislature is costing the state $21 billion in future revenues. Even adjusted for inflation and the present value of the upfront money, it looks like a bad deal.

But worse is that it's an anti-democratic deal, stealing revenue from the future to pad the budget in the present. That has been the constant fraud of privatization around the world as governments sell off assets, usually at fire-sale prices, but glowing with the ephemeral immediate boost to current revenues.


Posted by Nathan at February 4, 2006 08:39 PM