Who is Mort Downey?
By Kevin Connor  •  Jan 29, 2009 at 13:14 EST

LittleSis brings transparency to the quiet names: people who are not necessarily officeholders, who may not be very well-known, but who exert significant influence over the policymaking process. They make decisions and advocate for policies that affect our lives in profound ways, but we are not well-equipped to hold them accountable or understand their sphere of influence. From time to time, we’ll use this space to give special attention to one of these individuals.

Today’s “quiet name” is Mort Downey. I picked Downey, a former Deputy Secretary of Transportation and recently a member of the Obama Transition, because I believe his career trajectory, influence, and policy outlook shed light on the rationale behind the low levels of public transit funding in the stimulus.

Some background on the stimulus: House Transportation Committee Chair James Oberstar wanted $17 billion in public transit funding in the stimulus package, but by the time the House bill was presented, it had been slashed to $9 billion. The White House was behind the cuts, and Oberstar and Larry Summers reportedly engaged in a shouting match. Congressman Peter DeFazio later called out Summers for being anti-infrastructure. $3 billion of the cuts were eventually restored.

Supposedly, the Obama team’s single most important calculus when determining what made it into the stimulus package was whether projects were “shovel-ready” – projects that can get underway quickly and provide a short-term boost to the economy. But according to many respected economists, including Dean Baker and James K Galbraith, the stimulus package doesn’t do near what it could in terms of funding shovel-ready mass transit projects. In other words, shovel-readiness is not an adequate explanation for the low levels of funding.

The name Mortimer Downey caught my eye because he offered up this bogus explanation to defend the Obama team’s cuts in an interview with ShovelWatch, a stimulus tracking project spearheaded by The Takeaway, WNYC, and ProPublica:

“You have to be realistic about how fast and where money can be spent,” said Downey, who no longer has a formal role in the Obama team. “Some of the things in the transportation and infrastructure proposal are great long-term proposals,” but, Downey said, they can’t get started quickly enough. He noted the Obama administration will release a budget this year, and there will be a new transportation appropriations bill. “I don’t think you can reach an overall conclusion about how well transit is faring until we see all those things. Otherwise it would be a rush to judgment.”

Downey is a well-respected transportation expert. He has impressive credentials: Assistant Secretary of Transportation under Carter, CFO and Executive Director of the MTA in the 1980s, Deputy Secretary of Transportation under Clinton. He was an Obama Transition team lead for the review of the Department of Transportation. You can see it all on his LittleSis profile. Recently, the Washington Post mentioned him as a candidate for Transportation Secretary, calling him the potential “wise man” pick.

But there’s plenty of evidence to suggest that the wise man doesn’t wield his substantial influence on behalf of the public interest.

Who does he speak for? Since leaving the Clinton administration, Downey has worked as a self-employed transportation consultant at Mort Downey Consulting, and as President and then chairman of PB Consult, a transportation consulting subsidiary of the engineering giant Parsons Brinckerhoff. PB Consult advises clients in various transportation markets on a whole range of strategic issues: project planning, finance, public-private partnerships, regulatory issues, and so on.

PB Consult’s core business appears to be infrastructure privatization. Two of the three deals featured on the front page of the company’s website involve the privatization of transportation infrastructure – two toll roads, in fact: the A25 Québec and the Northwest Parkway Toll Road in Colorado. The third deal appears to be another Wall Street boondoggle, involving the purchase of port container terminals by the Ontario Teachers’ Pension Plan.

This is what the sage’s firm is proud of?

PB Consult is also a member of the National Council for Public-Private Partnerships. “Public-private partnership” is apparently the accepted industry term for infrastructure privatization (I’m guessing it plays better with the public).

Downey has established himself as a cheerleader for infrastructure privatization in recent years. In 2007 he penned an opinion piece for Traffic World, an industry magazine, titled A Role for Public-Private Partnerships. Downey argued that private collaboration was the best way forward for the nation’s transportation infrastructure, given the funding crisis:

Facing this staggering shortfall in funding, traditional approaches have been increasingly augmented by partnerships of private groups with public agencies, which during the last five years have begun pumping larger amounts of money into the system.

There are many forms of PPPs and ways for the public and private sectors to collaborate as partners to leverage scarce public resources and expedite needed transportation projects, while protecting and promoting public interests.

The argument is smooth and innocuous-sounding, and it’s easy to see why he is a high-paid spokesperson and lobbyist for Wall Street’s infrastructure privatization effort.

He also appears to be something of a spokesperson for the Obama administration, and his transition role indicates that he is well-regarded by the Obama team, even if he did not get the Transportation post.

Anyway, his argument in Traffic World begs the question: if funding shortfalls are “staggering,” why wouldn’t Downey see the need for more transit funding in the stimulus bill?

More on the way, but if you’re interested in the pitfalls surrounding privatization, particularly with respect to transparency, check out this Progressive States Network report.

Connecting the DOTs on Wall Street & Infrastructure
By Kevin Connor  •  Jan 26, 2009 at 19:49 EST

Last week, the news broke that infrastructure spending had been cut from the stimulus bill to make way for tax cuts. Congressman Jim Oberstar (D-MN), chairman of the House Transportation Committee, first shed light on this tradeoff — transit funding for tax cuts, essentially — in a speech to the US Conference of Mayors.

The cuts don’t square with a number of economic and political realities. Obama and his economic advisers are on the record voicing strong support for infrastructure spending, especially as a way of creating jobs; public infrastructure spending has near unanimous support from Americans, according to conservative pollster Frank Luntz; politicians of all stripes want to reduce dependence on foreign oil, and transportation initiatives are a big part of that; and public transit systems are facing dangerous budget shortfalls across the country.

Why, then, is transportation funding getting short shrift?

Here’s my best guess: Wall Street wants it that way.

On Wall Street, infrastructure privatization is the next big thing. It works like this: governments – city, state, and federal – sell off public assets like highways and airports, usually through long-term leases, to private entities like Morgan Stanley or the Carlyle Group. These private players finance the infrastructure deals through bond sales to investors.

High levels of stimulus spending on transportation infrastructure would make it harder for Wall Street to buy off your roads, bridges, and airports at rock-bottom prices.

A few recent press reports indicate that Wall Street is ramping up its push to privatize infrastructure. Last Wednesday, a group of Wall Street firms released a report saying that they could offer a “private stimulus” for the nation’s transportation infrastructure. From a Wall Street Journal article on the report:

A coalition of banks and private-equity firms is pushing for a greater role in reshaping the nation’s infrastructure, hoping to capitalize on government budget deficits and a dearth of funds for transportation projects.

In a report due out Wednesday, a group including Morgan Stanley, Credit Suisse and the Carlyle Group says $180 billion of private capital is available for investment in highways, airports and other transportation infrastructure. The report says this money could help create millions of jobs, boost economic growth, reduce travel congestion and free up government dollars for other priorities.

In other words, Wall Street wants to finance a new infrastructure boom the same way it financed the real estate boom.

Considering the way that last boom went, it seems like poor timing for Wall Street to campaign for control of public assets. And given that Wall Street isn’t so popular with the American public right now, it seems unlikely that politicians would align themselves with its latest financial engineering effort. Right?

Wrong. The same day that the Wall Street coalition plugged its infrastructure plans, Secretary of Transportation Ray LaHood echoed their message, telling his Senate confirmation panel that he favored finding private solutions to the country’s infrastructure problems. His comments were reported in a Wall Street Journal article by Chris Conkey, the same reporter who copied the press release wrote the article reporting on the Wall Street coalition’s plans for a private stimulus.

Speaking at his Senate confirmation hearing, former Republican Rep. Ray LaHood of Illinois said the widening budget deficits at the federal and state levels should lead government officials to take a closer look at allowing private investors to build, operate and maintain new toll roads and bridges.

“There’s not going to be enough money,” Mr. LaHood told the Senate Commerce Committee. “I think we do have to think outside the box.”

He’s right: there isn’t enough money for transportation infrastructure. But a big part of the problem is low levels of funding in the stimulus package.

Wall Street has plenty of other well-connected allies in this fight. Obama’s Chicago, led by Mayor Richard Daley, is at the forefront of infrastructure privatization. Chicago’s pols have been selling off everything from parking meters to airports in recent months.

Upon returning from his trip to the inauguration, Daley made a strong pitch for infrastructure privatization at every level of government, echoing Lahood’s words:

“If they start leasing public assets — every city, every county, every state and the federal government — you would not have to raise any taxes whatsoever. You would have more infrastructure money that way than any other way in the nation,” Daley said. “But, that is thinking outside the box and very few governments ever, ever think outside the box.”

If Daley needs help thinking outside the box, he can always go to his brother Bill, former Secretary of Commerce, who was a board member of the Obama Transition Economic Advisory Board and is midwest chairman of JP Morgan Chase. Or Bill’s son William, a lobbyist for Morgan Stanley.

In recent months, Daley’s solution has proven seductive for many state and local governments, despite the fact that Wall Street control of roads, highways, and transit systems is not terribly popular with the American people (I’m guessing). From a Reuters article last August:

Cash-strapped U.S. state and city governments are likely to sell or lease more highways, bridges, airports and other assets to investors desperate for stable returns after being frazzled by the credit crisis.

The trend is set to pick up speed given worsening budget deficits in state capitals and city halls nationwide.

Of course, if the stimulus geared funding towards transportation infrastructure spending, state and local governments would be less likely to sell off these assets to Wall Street investors. But that funding has been cut substantially, over the protests of Congressman Peter DeFazio of Oregon and others.

DeFazio has blamed Larry Summers for anti-infrastructure bias. But I’m guessing that Summers is just doing what he does best: pleasing his friends in finance.

I’ll have more on this over the next few days.