Ed Wallace

The Real Infrastructure Plan

Sometime in the near future we are supposed to see an outline of President Trump’s promised $1 trillion infrastructure plan to bring our nation into the 21st century. During the campaign — which seems a lifetime ago — the promise of spending $1 trillion to improve our roads, bridges, water systems, and so on almost sounded like the government realized they had put off these critical improvements long enough, and now we’d see real action. Even without seeing the plan before writing this column, however, it’s a safe bet most will be disappointed. Well, at least the motoring public will be.

After all, this past Monday gave us a Wall Street Journal article claiming that officials at the National Security Council suggested the administration actually become vested in a new 5G wireless network because of “the growing economic and political threat from China” beating us to it. Even if our government has to pitch in to get it built. Some claimed it would amount to nationalization of the system. The Wall Street Journal even compared this to the original construction of the interstate highway system. So, with this plan we counter China’s moves while watching YouTube videos on our iPhones faster? Of course, under the new FCC rules ending net neutrality, you’ll have to pay more for those faster downloads.

Maybe that’s another public-private partnership, like our toll roads. We put up a great deal of the money (that’s the public part), and then the private companies charge America’s next three generations rent to use them.

Now the government involvement in the next 5G network may never happen. But it seems plausible because of other private industry-government ventures. You may remember that Taiwan manufacturer Foxconn, the same entity that assembles iPhones in China, claimed it wanted to build a mega-factory in America. The winning bidder, Wisconsin, agreed to pony up $3 billion in tax abatements, road construction, and other infrastructure improvements. Gov. Scott Walker couldn’t have been prouder of his state’s winning that bid; the fact that Foxconn has played this game before and never built a factory seemed not to matter. Nor did the fact that apparently Foxconn believes a signed contract is only the start of negotiations.

Sure enough, in November Foxconn came back and told Wisconsin that the improvements the state planned for Interstate 94 weren’t good enough for their proposed super factory in Racine County. No, even though fully autonomous vehicles aren’t close to coming to market, Foxconn proposed that the new freeway expansion include additional lanes for self-driving trucks.

That’s right, Foxconn wanted freeway lanes completely devoted to a vehicle that, as of now, doesn’t exist.

It gets better. By the end of last year, it was reported that the $3 billion sweetheart deal to lure Foxconn to Wisconsin had grown to over $4 billion with all the extras the manufacturer was demanding. Worse, the state had also agreed to allow Foxconn to ignore some of the environmental regulations that govern its other manufacturers’ operations.

That fiasco also shows how companies envision our transportation future, while finding ways to slash their costs of doing business. It wasn’t just the tax abatements or promises of roads, electricity, water and sewer systems. No, now it’s dedicated freeway lanes for self-driving trucks to save more corporate money. Still, Foxconn is not an outlier on this concept. Because whether or not fully self-driving cars arrive on a date far in the future (don’t hold your breath), the reality is that there’s a huge financial incentive for businesses to purchase self-driving trucks as soon as they are perfected and come off the assembly line.

According to an article, since verified, by Tim Dickinson in Rolling Stone, the International Transport Forum reported that potentially 1 million heavy-duty truck drivers could lose their jobs within seven years after self-driving Class 8 rigs roll out. McKinsey Global Institute projects that 85 percent of all trucking jobs — or 1.5 million — could be eliminated by 2027. The reasons are financial. Today American truckers take home around $60 billion in annual pay, and $60 billion will buy a lot of new autonomous trucks.

From a design, engineering and sales viewpoint, self-driving trucks are a much wiser bet than putting the same system into our personal automobiles. After all, one doesn’t have to get pricing down to the point that public demand would surface for a self-driving car. No, corporations have the luxury of long-term depreciation of expensive improvements (like self-driving trucks) because those units could massively reduce variable costs, such as salaries for truckers, immediately. Additionally, where the public might have some qualms about letting an unmanned vehicle drive them around town, industry will not care as long as it’s proven to save money.

Just as automation has devastated the number of factory workers building automobiles, it could do the same in the trucking industry — and much sooner than one thinks.

After all, it’s been well over a year since a self-driving big rig full of beer was tested from Fort Collins to Colorado Springs, a 120-mile run. True, it had a police escort for the test; but the truck managed that entire run without any human intervention until a driver took over to unload the truck at the distribution center. In fact, one day that might be the last jobs available in over-the-road trucking. Like tugboats bringing large ships into port, drivers might well be needed for the last quarter mile to take trucks in and out of their starting or final unloading destinations.

Uber Truckers

Speaking of America’s ports, truck drivers constantly move in and out of their dock areas, bringing in trailers for export shipments, while others haul full trailers out for deliveries or for a long-distance driver to take over. Keep in mind that there are around 12,000 truckers needed for just that job at the Long Beach and Los Angeles ports. Only to cut the costs of labor, trucking companies treat everyone that works for them at those ports as independent contractors. Meaning, the shipping companies don’t withhold taxes or pay benefits. They lease trucks to the drivers, who are then responsible for all costs associated with their rig, including insurance, fuel cards, repairs, all fluids, filters, and tires.

But those drivers are contracted to one trucking company, where they get all their orders for the day and again, shoulder all the jobs’ costs. (According to the IRS rules, that makes those truckers employees.) But, according to the June 29, 2017 Los Angeles Times, once all of the trucker’s expenses are paid, that lucrative-sounding $2,500 a week for short-haul trucking turns into an $18-an-hour job with zero benefits. Other stories have found cases where some truckers would see $18 an hour as a huge raise in pay.

The point is that there have been National Labor Relations Board rulings saying these are not independent contractors, but employees — to no avail. The state has also issued rulings for the past seven years saying the same thing, and ordering $45 million in wages be returned to those truckers for illegal classification of the workforce. Again, nothing changed.

But as labor experts have noted, this situation at our ports in Southern California is simply part of a larger trend that’s emerged over the past 30 years. After all, isn’t this the trucking industry’s version of being an Uber driver? You lease or own your vehicle, pay all expenses, and get the minority share of the fares involved.

News on the DL

During many discussions about the proposed national infrastructure plan, it has been suggested that we use $200 billion of the taxpayers’ money as equity for private industry, or city and state governments, to build $1 trillion worth of new infrastructure over a 10-year period. That is $20 billion per year of our tax money, and that amount becomes significant only when you realize that in 2014 all of the federal gasoline and diesel tax revenues totaled a little over $35 billion. That’s right, the plan is to give most of our gas and diesel tax revenues to investment banks to use to bring in clients, or lend to local governments, who in turn will build or fix our highways, so we will then have the pleasure of paying rent on something we used to own outright.

Yet consider this: One article last week said that it appears our banks will save $30 billion in federal corporate taxes thanks to the new law.

Let that sink in for a moment. The banks stand to save almost as much in corporate taxes as we collect in federal gasoline and diesel taxes; meanwhile, we’re offering them our tax money as equity for them to build new highways, or fix existing ones, and then charge us rent to use them, in the form of tolls.

The entire reality of what’s happening today is so mind-boggling that I am literally at a loss to create a summation, other than to say two things: All of these stories have been in plain sight for months. And Wisconsin Governor Scott Walker should take a job at a new car dealership for a couple of months. At least then he would learn how to negotiate a deal properly, so that both sides win and the signed contract is final.

© Ed Wallace 2018; Ed Wallace is a recipient of the Gerald R. Loeb Award for business journalism, bestowed by the Anderson School of Business at UCLA, and hosts the top-rated talk show, Wheels, 8:00 to 1:00 Saturdays on 570 KLIF AM. Email: edwallace570@gmail.com