Infrastructure Privatization is a Bad Solution for Government

link here to article

When a business gets into financial trouble and it is unable to increase revenue it can choose to sell off revenue producing assets. This provides the needed cash but it does so at the expense of future revenue from the lost assets. Governments in need of cash and without the ability to raise cash via taxation, have been moving in a similar direction. For example, Greece did a deal with a Wall Street bank which gave the bank the revenue it derived from airport fees in return for funds which made its balance sheet look better to European regulators. The bank made money in two ways: it charged the Greek government a hefty fee for devising the deal and it gets access to a stream of revenue that yields a better return that sovereign debt.

State and local governments have been doing similar things in the US. This article suggests that the price that they are paying for short term revenue relief is very high. Its sad to see state and local government going to pawn brokers for needed cash.