The Progress of Liberty

I offer the fourteenth part of my response to Mr. Jetton’s critique of my essay, “How to Privatize the Roads: The Mechanisms and Benefits of Road Privatization.”

Mr. Jetton writes, “I believe Mr. Stolyarov misconstrues the lease terms for the Chicago Skyway and similar cases. What the Chicago government received was a cash infusion of $1.8 billion in exchange for a net revenue stream — toll revenues minus maintenance costs — spread out over 99 years. (See here.) Indeed, it would make little sense for the lease to give the Chicago government ‘rent’ over 99 years when that’s what it already had. Also, the city of Chicago’s purpose in doing the deal was to give it cash to cover short-run deficits.”

I concede this point, which implies that I now look on the Skyway partial privatization more favorably than I did in the past. I applaud the Chicago government’s willingness to address its deficits by means other than borrowing more, taxing more, or reducing the purchasing power of money (which, I suppose, a city government does not have the de facto power to do). My only remaining problem with the Skyway partial privatization is that it occurred in the form of a 99-year lease rather than an outright sale.

Mr. Jetton writes, “In Mr. Stolyarov’s proposed system of privatization, I assume he means a sale rather than a lease. If so, it does nothing to counter my comment in post 34. The transaction, whether sale or lease, is a cash infusion into the hands of government (immediate or in a short span of time) which it can spend on other things.”

Again, Mr. Jetton is right. The government can indeed spend the cash infusion gotten from privatizing the road on other things. However, this may be a good or a bad outcome, depending on what the government spends this revenue on. I think Mr. Jetton and I both agree that government deficits are undesirable, as is a government debt that continues to accumulate interest and thereby continually cost taxpayers money. The more debt the government can pay off without increasing taxes, the better off taxpayers will be in the short and the long run.

Perhaps the way to prevent the government from using the extra revenue gained to expand its spending on further welfare programs or on more effective coercion of taxpayers is to stipulate in the road privatization proposal that the money gained from selling the road must be used first to pay the existing government debt and then (if any money is left over) as a substitute for tax revenue, with taxes reduced correspondingly.

Sincerely,
Gennady Stolyarov II

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