Economics

Should we use our land and resources to make a permanent income fund for all

Trump’s Best Deal Ever: Privatize the Interstates

To quickly summarize Smith’s proposal, he wants Trump to privatize the highway network (and other lands) and use the money to establish a permanent income fund for all Americans. The theory behind this is that the land in this country is our land, so we should all share in the profits.

I have a few concerns with this idea. First off, the notion that “competition for roads will keep tolls low” is naive. I can list dozens of industries where “competition” should be keeping prices low, yet all of the competitors raise prices in tandem. It is naive to think collusion does not exist.

But, let’s assume we live in a collusion free economy for a moment – as most naive economic models suggest. Under this auction technique, once a bidder wins a piece of highway, what is stopping them from raising the price of the toll? Once they own the highway, they can charge whatever price they want. And naturally the price will creep higher and higher to capture all of the additional consumer surplus. This is what good, smart businesses do.

But what about the non-toll alternatives? Well, this is naive to think these will exist. First off, any private company buying a highway will only buy the most used highway. Thus, the non-toll roads will be back roads that might take 2-3x+ to get to your destination. Consumers will effectively be coerced into wasting time driving a long route to save money or pay an ever increasing toll. Not a great solution.

In sum, if you do not allow private companies to buy the best highways, they will not buy the back roads, or if they do they will discount the price dramatically. Both of which make this plan useless.

That said, there is evidence that in highly populated areas parallel toll roads and free highways are profitable. But, to establish a large proposal like this and create an income fund, you will need to lease and auction land all across American, not only in the most populated cities. Perhaps, this idea can work on a city, county, or state level.

That said, the idea of a permanent income fund using land and resources in America is a rather unique solution to income inequality. It also puts to the use the vast amount of land we have in this country. The problem is that selling/leasing our most beautiful land for private use will ultimately speed up the demise of natural resource destruction. And once they are gone, we cannot recreate nature. But, I do think there is a balance whereby we can capture the economic benefits of our land without ruining the environment.

What this balance is? Well, that’s for smarter people than me to decide.

I will leave you with a couple of great lines from the article. I must say, this is a great sales pitch.

Better highways, more land for productive development plus a permanent fund sending checks to every citizen. A guaranteed basic income financed from public assets waiting to be monetized and put to work. You might even get the progressives’ vote. Have you ever made such a great deal?

After highways, bridges and federal acreage, your next project would be to start auctioning all U.S. mineral, oil and gas resource rights for deposit to the fund. These assets also belong to the people, not the government. Can a Washington outsider pull it off?

Categories: Economics, Finance

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