A Libertarian Case for Public Works

Libertarians are a diverse lot. Some are stone cold anarchists, prepping in remote hills for the day when governments fail and a blood dimmed tide is loosed upon the world. And then at the other extreme there are libertarian billionaires and their paid for intelligentsia, rationalizing everything from erasing national borders to legalizing opium.

It’s a strange mix. Some libertarians bristle at the suggestion they might support open borders, while staunchly defending the natural and inalienable right for people to choose to mainline heroin. Others would have that exactly the other way around. If there were a convention of libertarians, and someone asked the true libertarian to stand, they would all stand up, and not one of them would be fully in agreement with any other one.

This is the fractious gang that nonetheless at times will run third party candidates who manage to attract enough votes to swing elections in battleground districts. Despite convoluted denials, these close elections almost invariably tilt Left if a libertarian candidate runs a viable campaign. But it’s in the intellectual sphere where policies are imagined and policies are defended where libertarians have the most political influence.

Libertarian ideologues inform the well funded factions who justify neoliberal policies that import cheap labor and export jobs to nations where labor is cheaper still. From some of the most well heeled libertarian policy shops, bought by billionaires, libertarians strive for additional relevance by making common cause with progressives. Legalize drugs. Open the borders. Of course there is a climate crisis. And of course this attempt by libertarians to ingratiate themselves is used and abused by progressives, who know better than to ever trust a Social Darwinist!

If there is one broad area of agreement among libertarians, however, it might be regarding the general principle of limited government. And in the messy real world where politicians who actually get elected have to operate, the principle of limited government must find expression in policy. It’s boring to be a wonk. But unless you turn the destiny of your nation over to the murderous clarity of authoritarian warlords and dictators, it’s the wonks who design the policies that determine your future.

So in recognition of the role libertarians play in defining an ideological foundation that translates into policy, here is a libertarian case for public works. The goal of government spending on infrastructure is to help fund practical projects that yield long-term returns on investment in the form of a lower cost of living: water, energy and transportation infrastructure with proven value and durability. Up until a few decades ago, that goal was generally fulfilled. There may have been wasteful spending, but the projects delivered obvious public benefits that last for generations.

Today, unfortunately, the government is committing hundreds of billions of dollars to subsidizing wind turbines, solar farms, battery farms, and surveillance infrastructure to “help” Americans conserve energy. The result of these programs will be to raise the cost-of-living. What America needs is to deregulate the energy sector, removing constraints on the development of practical, cost-competitive energy technologies, and without spending a single tax dollar, let private companies compete to sell abundant, affordable electricity and transportation fuel. But with water and transportation, however, it’s more complicated.

Even with deregulation, the inherent costs to design, build and upgrade the broad, smart-car enabled roads and freeways needed to bring America’s transportation infrastructure into the 21st century are higher than the average driver can afford. With water, particularly in the arid Southwest from Texas to California which nearly 100 million Americans call home, the costs can be even higher. Massive projects to transfer water between basins, recycle water, capture storm runoff, and desalinate water can only be built at costs that millions of ratepayers cannot afford. Policymakers have to make tough choices.

They can impose scarcity on the population, igniting general inflation that victimizes working families. They can make energy and water cost so much that small businesses fail, more manufacturing goes overseas, and only big corporations survive by passing on to customers the costs of excessive regulations and politically elevated costs for inputs. That is current policy. It consolidates wealth in the hands of an ascendant oligarchy, and is marketed to gullible Americans as a necessary sacrifice to cope with the climate crisis.

In this economic strategy, the government has to spend billions to subsidize low income households that cannot possibly afford to pay for their electricity, natural gas, or gasoline, or to drive on toll roads, or to purchase food that costs more because the irrigation water cost more. The government has to build housing because the regulatory environment, combined with the shortage of entitled land and available water has made housing unaffordable. These become permanent subsidies, costing hundreds of billions, if not, over time, trillions of dollars. They consume a growing share of state and federal budgets, requiring higher taxes and taking away funds from other spending options. But there is an alternative.

If the government instead subsidizes the capital cost of road improvements and water supply projects, the required investment by private sector partners is reduced proportionately. This reduces the amount ratepayers will have to spend for water and transportation, at the same time as it lowers the overall cost-of-living by reducing the costs for these basic inputs. Since even with water, more than half the price the ratepayers are charged is to amortize the capital investment, using general tax funds to lower the necessary amount that has to be recovered by the private utility will significantly lower the cost to the consumer.

This is the libertarian case for public works. It is based on the assumption that once a generation the government makes a significant investment in water and transportation infrastructure upgrades, building assets that can last 50 years or more before requiring significant retrofits, and that these costs, while seeming wasteful or extravagant in the moment, are far less than the cost of providing permanent subsidies to households that cannot possibly survive in a totally privatized system.

These assumptions are far from beyond debate. But this gives rise to additional nuances. To what extent can regulations be abolished to lower costs to the private sector? At some point, the private sector probably can deliver water and energy at a price that even low income households can afford. But what is sacrificed in order to achieve this? It ought to be credible to assert, for example, that anthropogenic CO2 will only assist humanity and ecosystems, by creating a slightly warmer world with air that fertilizes plants far more efficiently. But to suggest that industries in general can go back to polluting the air, water and land with the impunity that defined their emergence two centuries ago is absurd. Externalities exist, no matter where reasonable people draw that line, and managing them adds cost.

The 1950s and 1960s was the last golden age for public works in the United States. Resuming the momentum established by the great public works projects of the 1930s, we built dams and aqueducts, interstate freeways, and a power grid that delivered an oversupply of water, energy, and road capacity. But for the last half-century we have been coasting on those assets, and we have wrung as much conservation out of the system as can be achieved in a nation that continues to grow its population. It is time to build again.

Libertarians can play a powerful role in influencing America’s infrastructure strategy in the near future. They can support totally private solutions, but must recognize that will involves costs so high that it will require government subsidies to low and even middle income households that may last in perpetuity. Or they can support public investment to lower the percentage the private sector has to invest and recover when financing infrastructure, which will trigger one-time public investment, with the ripple effect of lower costs throughout the economy.

This article originally appeared in American Greatness.

Edward Ring

Edward Ring is a contributing editor and senior fellow with the California Policy Center, which he co-founded in 2013 and served as its first president. He is also a senior fellow with the Center for American Greatness, and a regular contributor to the California Globe. His work has appeared in the Los Angeles Times, the Wall Street Journal, the Economist, Forbes, and other media outlets.

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