Is Government Privatization Good For U.S. Citizens?

(Cartoon image is by Monte Wolverton at cagle.com.)

Republicans love to promote the privatization of governmental functions. They claim that private businesses are more efficient. I don't buy that argument. If they are more efficient, it is because they only have their profit margin to worry about and don't have to worry about what is good for all citizens. But the reason we leave some functions in our society up to government is precisely because the good for citizens is more important that making some private company richer.

Here is what former Labor Secretary Robert Reich (pictured) says about privatizing government:

Privatization. Privatization. Privatization. It’s all you hear from Republicans. But what does it actually mean?

Generations ago, America built an entire national highway system, along with the largest and best public colleges and universities in the world. Also public schools and national parks, majestic bridges, dams that generated electricity for entire regions, public libraries and public research. 

But around 1980, the moneyed interests began pushing to privatize much of this, giving it over to for-profit corporations. Privatization, the argument went, would boost efficiency and reduce taxes. 

The reality has been that privatization too often only boosts corporate bottom lines.  

For example, consider Trump’s proposal for infrastructure. It depends on private developers, who would make money off of both tax subsidies and private tolls. So the public would get charged twice, without any guarantee that the resulting roads, bridges, or rapid transportation systems would be where they’re most needed.

It’s true that private for-profit corporations can do certain tasks very efficiently. And some privatization has worked. But the goal of corporations is to maximize profits for shareholders, not to serve the public interest.

The question should be: What’s best for the public? Here are five rules of thumb for when public services should not be privatized:

1. Don’t privatize when the purpose of the service is to bring us together – reinforcing our communities, helping us connect with one another across class and race, linking up Americans who’d otherwise be isolated or marginalized. 

This is why we have a public postal service that serves everyone, even small rural communities where for-profit private carriers often won’t go. This is why we value public education and need to be very careful that charter schools and other forms of so-called school choice don’t end up dividing our children and our communities rather than pulling them together.  

2. Don’t privatize when the service is less costly when paid for through tax revenues than through prices set by for-profit corporations. 

America’s hugely expensive for-profit health-insurance system, for example, is designed to sign up healthy people and avoid sick people, while running up huge tabs for advertising and marketing, and giving big rewards to shareholders and executives. Which is why the administrative costs of Medicare are a fraction of the costs of for-profit medical insurance – and why we need Medicare for all.

3. Don’t privatize when the people who are supposed to get the service have no power to complain when services are poor. 

This is why for-profit prison corporations have proven again and again to violate the constitutional rights of prisoners, and why for-profit detention centers for refugee children at the border pose such grave risks. 

4. Don’t privatize when those who are getting the service have no way to know they’re receiving poor quality. 

The marketers of for-profit colleges, for example, have every incentive to exploit young people and their parents because the value of the degrees they’re offering can’t easily be known. Which is why non-profit colleges and universities have proven far more trustworthy.

5. Finally, don’t privatize where for-profit corporations face insufficient competition to keep prices under control. 

Giant for-profit defense contractors with power over how contracts are awarded generate notorious cost overruns because they’re accountable mainly to their shareholders, not to the public. 

In other words, for-profit corporations can do some things very well. Including, especially, maximizing shareholder returns. But when the primary goal is to serve the public, rather than shareholders, we need to be careful not to sacrifice the public interest to private profits.

Tragic Cost Of Medicare Privatization For Seniors (& Others)

During his presidential campaign, Donald Trump promised to protect Medicare. It now looks like he may be getting ready to break that promise. Speaker Paul Ryan is already writing another of his bills to privatize Medicare -- putting seniors at the mercy of heartless insurance companies. Those companies don't really want to insure seniors, because that is a group generally more in need of medical care than any other -- and you can be sure that the premiums they will charge seniors will be sky-high (meaning many poor and working class seniors will be unable to buy insurance).

Medicare is a government program that has worked exceptionally well (like Social Security) -- and has insured that seniors do not have to do without life-saving medical care (especially preventative care). It would be a tragedy to abolish it, and force seniors to buy private insurance -- a tragedy that would also extend to the families of those seniors and hospitals (who would see the misuse of their emergency rooms skyrocket).

Here is what Josh Marshall, editor and publisher of Talking Points Memo, says about this:

We are hearing more about the Trump/Ryan plan to phase out Medicare and replace it with private insurance and vouchers. But we're still hearing much, much less than about Obamacare or a lot of other issues. Obamacare is super important. Don't get me wrong. But Medicare is a much, much bigger deal. Most DC journalists don't actually understand what's being proposed. You think it's hard getting good insurance when you're 30 or 50? Try getting good private insurance when you're 70 or 80.

Providing health insurance coverage to seniors will unquestionably cost more if run through private insurance. No one who has looked at the comparative data on the cost efficiency of Medicare and private carriers can question this. There's no money savings. Quite the opposite. The only difference is that seniors will pay vastly more out of pocket because the vouchers won't come close to the costs of a policy. The upshot of the Ryan plan is significantly increasing the cost of what society pays for the medical care of seniors and then making seniors pay dramatically more out of pocket. All with none of the bedrock gaurantees Medicare provides.

That's what phasing out Medicare means. Ironically, what Trump and Ryan are proposing is something like Obamacare: you buy your insurance on an exchange and you get some premium support from the government. Obviously, not everyone loves Obamacare. But building an exchange and subsidy adjunct for non-seniors onto an existing and fairly robust private health insurance system is one thing. Creating one from scratch for people who are all pretty much by definition bad risks is close to laughable. Laughable if you're not bankrupted or dying because you couldn't get care. 

Remember the other things Medicare significantly guard against. If parents have insupportable medical bills or have no way to pay for care, they go to children. In the absence of any other options, that's how it should be. But that money comes out of other things: buying homes, putting kids through college. The social insurance model of Medicare has positive effects well beyond direct beneficiaries. 

Ryan and Trump want to pass a bill to phase out Medicare in just six months.

Privatization Increases Inequality In Our Justice System

(This image is from the website PRWatch.)

There is a trend that has been going on for quite a while now -- and it bothers me a great deal. It is the privatization of our criminal justice system. This is happening in many ways -- from creating private for-profit prisons, to the services provided to the system by many different companies (like electronic monitoring, food services, etc.).

The idea is to cover (or at least reduce) the costs of administering criminal justice, and if possible, even turn it into a profitable venture for government. This may sound good, but it is a very bad idea. Taking the cost to the taxpayer out of administering criminal justice means the taxpayer (i.e., the ordinary citizen) will care less about what happens in that system. If citizens are going to arrest, convict, and incarcerate people, then the state (the taxpayer) should be the one paying for that -- because then they will keep an eye on that system and attempt to make it work right.

Privatization does the opposite. By turning criminal justice into a profit-making business, we lessen oversight of citizens and increase the possibility of abuse (especially if that abuse results in more profit). And it increases the inequality in our system of justice. When justice is "for sale", the poor are left out, and don't get the same quality of justice that the rich can afford. Don't we already have enough of an equality problem already, without creating more so someone can make a profit (off a system that should never be used for profit, but for justice)?

The following post (written by Josie Duffy for Daily Kos) illustrates one way this privatization is creating an unfair system of justice (but there are many more). I would ask -- is this the kind of justice we want? Does fairness no longer matter?

Rampant privatization is leading to collateral consequences. In almost every possible part of the criminal justice process, privatization results in a system that disproportionately punishes the indigent. Now the International Business Times reports there is a new way that for-profit justice is ruining the lives of the poor: GPS tracking.

In South Carolina, a traffic violation resulted in the arrest and $2,100 bail of Antonio Green, a father of five. One of the conditions of his bail was being forced to wear an electronic monitoring device. And not only did have to wear it—he had to pay for it. According to the article, "In Richland County, South Carolina, any person ordered to wear the ankle monitor as a condition of their bail must lease the bracelet from a private, for-profit company called Offender Management Services (OMS)."

Green was living on $900 a month, but was charged a $179.50 set-up fee, plus $9.25 a day to wear the device. In other words, the device ended up costing him half his monthly income that first month, and a third of his income every month after.

He didn't have much of a choice. After all, those that can't pay go back to jail.

Green paid a total of about $2,500 for the device over nine months, during which he "had gone broke, racked up debt from overdraft fees, and spiraled into anxiety over his finances." And it looked like he'd have to wait another year before trial, which would have cost another $3,600 at least.

He couldn't afford that money. Slowly, it became an untenable burden on him and his family. So last month, he turned himself in.

When Green got to the courthouse, he found out some interesting news: His case had actually been thrown out two months earlier.

No one had thought to let him know. Surprising, as they knew where he was every moment and were still managing to collect his money.

This is not an isolated incident. Counties and states across the nation are not only tracking individuals but forcing them to pay for it. For someone like Antonio Green, a traffic violation turned into an unbearable financial burden.

What's more, the actual monitoring of defendants, especially those who have not committed serious crimes, is in itself terrifying. People are paying significant money for the complete loss of their privacy.

For more on this story, see the International Business Times article here.

Support For GOP Plan To Privatize Medicare Is Small

The Republicans in the House of Representatives recently released their proposed budget for 2016, and once again, it contains a measure that would effectively kill the current Medicare program.

They claim what they are offering is an improvement because it would offer seniors a "choice". The proposal would leave the current program as it is, but would offer a subsidy for those who want to buy a private insurance policy (and leave the Medicare program). To the brainless, this might sound reasonable -- but it isn't. It would mean the death of Medicare -- something the Republicans have been trying to achieve since the program started in the 1960's.

Seniors pay into the Medicare program to help finance it, and these payments come from their Social Security checks. And like other health insurance programs, Medicare is successful because all seniors are in it -- both the healthy and those with health problems. The program needs all of those people to survive.

If the rich and upper middle class seniors pull out of the program, and private insurance companies are able to cherry-pick the healthy among the rest, then the Medicare program will be left with only the poor and the unhealthy. And it cannot survive under those conditions. The Republicans know this -- it's why they are using this back-door method to attack the program (and kill it). Their purpose is not to improve health insurance for seniors. It is to get rid of Medicare -- a program that has worked well to provide health care for all American seniors.

Fortunately, it looks like the American public is not as dumb as Republicans think they are. They have not bought into the GOP lie that their privatization of Medicare is an improvement, and far more people oppose the Republican plan than support it. In fact, only 19% support the ridiculous plan -- and even among the GOP's own base, the support is only about 22%.

The GOP may well have bit off more than they can chew with this silly privatization plan. The American people like Medicare, and they don't want it dismantled.

The chart above is from a new YouGov Poll -- done on March 18th and 19th of a random national sample of 1,000 adults, with a 4 point margin of error.

Government Can Do It Better

Right-wingers would have everyone believe that the private sector can do everything better than the government can. That's just not true. There are things that they government can do better -- like defending the country, apprehending and housing criminals, and collecting intelligence on our enemies. And I would add providing health insurance to that list. Why should we pay profit for some capitalist in any of these ventures? Doesn't that just add to the cost? And doesn't privatization just give some individual or company an excuse to cut corners and provide shoddy and inferior service to increase their profits? Privatization is not the answer to better government. It is only an excuse to funnel more taxpayer money into corporate bank accounts.

An Update From Bernie

In the 77 years since President Franklin Roosevelt signed Social Security into law on August 14, 1935, the retirement program has been one of the nation's most successful anti-poverty programs. Before Social Security existed, about half of America's senior citizens lived in poverty. Today, less than 10 percent live in poverty.

Today, Social Security not only provides retirement security but also enables millions of people with disabilities, and widows, widowers and children to live in dignity and security.

In these highly volatile economic times, when millions of Americans lost their life savings in the 2008 Wall Street crash, it is important to remember that since its inception, through good economic times and bad, Social Security has paid every penny owed to every eligible beneficiary.

Despite Wall Street and right-wing misinformation, Social Security, which is funded by the payroll tax, does not contribute to the deficit. In fact, the Social Security Trust Fund today, according to the Social Security Administration, has a $2.7 trillion surplus and can pay 100 percent of all benefits owed to every eligible American for the next 21 years. Further, unlike the huge commissions paid out to Wall Street firms, Social Security is run with very modest administrative costs.

Despite Social Security's popularity and overwhelming success, we are now in the midst of a fierce and well-financed attack against Social Security. Pete Peterson, the Wall Street billionaire, has pledged $1 billion of his resources to cut Social Security and other programs of enormous importance to the American people. Other billionaires and Wall Street representatives are also working hard to weaken or destroy Social Security and endanger the well-being of millions of Americans. We must not allow their effort to succeed.

Let us never forget that the current deficit of $1 trillion was primarily caused by two unpaid-for wars and tax breaks for the rich. These policies were strongly supported by "deficit hawks." The deficit is also related to a major decline in revenue as a result of the Wall Street-created recession. The deficit is a serious issue, but we must not move toward deficit reduction on the backs of the elderly, the children, the sick and the poor. This would not only be immoral, it is bad economic policy. At a time when the wealthiest people in this country are doing phenomenally well and their effective tax rate is the lowest in decades, the top 1 percent must begin paying their fair share of taxes. At a time when large corporations are enjoying record-breaking profits, we have got to eliminate the huge corporate loopholes which result in a massive loss of federal revenue. At a time when we have tripled military spending since 1997, we must take a hard look at a bloated and wasteful Defense Department.

House Budget Committee Chairman Paul Ryan has been a proponent of privatizing the retirement program by putting seniors' savings into risky Wall Street investments. Even before tapping Ryan as his running mate, Republican presidential nominee Mitt Romney said he wants to begin the process of privatizing Social Security. He also would gradually increase the retirement age to 68 or 69. And he favors slowing the growth of benefits for persons with "higher incomes." Under a plan floated by Romney's allies on Capitol Hill -- Sens. Lindsey Graham (R-S.C.), Rand Paul (R-Ky.) and Mike Lee (R-Utah) -- someone making about $45,000 a year today who retires in 2050 would receive 32 percent less in annual Social Security benefits than under the current formula. By that definition, the top 60 percent of all wage earners would be considered "higher income."

President Barack Obama, meanwhile, was a staunch defender of Social Security in his 2008 campaign. So far this year, however, Obama has refused to stand behind his four-year-old opposition to cuts. In fact, the president has signaled that he may be open to lowering benefits by changing how they are calculated. In my view, it is long past time that the president told the American people in no uncertain terms, as he did in 2008, that he will not cut Social Security on his watch.

To keep Social Security's finances sound in the future I have introduced legislation -- identical to a proposal that Obama advocated in 2008 -- to apply the payroll tax on incomes above $250,000 a year. Under current law, only earnings up to $110,100 are taxed. The Center for Economic Policy and Research has estimated that applying the Social Security payroll tax on income above $250,000 would only impact the wealthiest 1.4 percent of wage earners.

Those who want to cut Social Security benefits are looking at a number of proposals. One of the most talked about ideas is moving toward a so-called "chained-CPI," which would not only impact seniors, but also military retirees and those who receive benefits from the Department of Veterans Affairs. The "chained-CPI" approach changes how the Consumer Price Index is calculated, so that a person 65 years old today would earn $560 a year less in Social Security benefits once they turn 75. Benefits would be cut by nearly $1,000 a year once they turn 85. Instead, I have proposed legislation to base Social Security cost-of-living adjustments on a Consumer Price Index for the Elderly, a measure that would increase benefits because it would take into account the real-life impact of rising health care costs and prescription drug expenses paid by seniors.

While we often take Social Security for granted, we must not forget that Social Security today is providing dignity and security to tens of millions of Americans. It is a program that is working and working well. We must stand up today, on the 77th anniversary of this enormously important program. We must pledge to continue the fight against the right-wing Republicans, some Democrats and their wealthy backers who want to destroy the program.

Thank you for all that you do.

Sincerely,

Private Contractors Cost The Government More - Not Less

It has been a mantra of the Republican Party for decades now that private contractors can do the business of government cheaper and more efficiently. This has led to the federal government contracting out work to private companies for everything from computer services and human resources to war and prison services. That sounds great on the surface. The only problem is that it just hasn't worked out that way.

A non-profit Washington-based group, the Project on Government Oversight (POGO), did a study on the private contracting of government services and found that it is almost always more expensive -- and usually as much as twice as expensive. Out of the 35 programs they studied, at least 33 of them cost the government more money than if the work had been done by federal employees.

For example, the government was billed by a private contractor $268,653 for computer engineering services. Government employees (at current salary and benefits) could have done the same work for $136,456. A human resources private contract cost the government $228,488, while government workers could have performed the same services for only $111,711.

POGO general counsel Scott Amey said, "That's a big difference. We compared the full compensation paid to federal government and private sector employees to the billable rates in federal service contracts. Across the board you see that it cost government more to pay for contractors."

Frankly, this doesn't come as any surprise to me. Most of the private contractors aren't interested in actually saving the government any money. They see the contracts as a way to make exorbitant profits on their services -- profits they could never get away with in the private sector.

But their Republican lackeys keep feeding them these contracts -- just look at the billions of dollars made by numerous companies off the two unnecessary wars we are fighting (contracts that have little or no oversight). And the Republicans will continue to do this as long as they can, because they get a hefty chunk of it back to fill their campaign chests (which should be considered as kickbacks, which is what they really are).

The Republicans would like for Americans to think the poor, the elderly, the unemployed, and children are draining our government coffers. In truth, it's the corporations -- the same corporations who refuse to pay their fair share of taxes.

Social Security Is OK For Another 27 Years

The picture above shows the kind of "reform" the Republicans would like to deliver to the Social Security system -- they would like to destroy it and give all that money to the Wall Street bankers to play with (it's called privitization). They know it's far too popular with the American people to do that right away, so they are trying to convince people that the system is unsustainable and will soon go broke if benefits are not cut soon. They think they can whittle away at the system a bit at a time until there is nothing left of it.

That's a huge crock of horse manure though. The non-partisan Congressional Budget Office has released a new report that says the Social Security system can keep making full payments to its recipients until 2038-40 -- at least another 27 years. If some adjustments to the system are not made, it will be able to make only partial payments starting around 2040.

But are the needed adjustments substantial? Do benefits need to be cut or the retirement age raised? Will the program still be there when today's youngsters need it many years down the road? The answers to those questions are No, No, and Yes. Only one minor adjustment needs to be made. Benefits do not need to be cut or the retirement age raised. And the program will be healthy and available when everyone alive today needs it (and far into the future).

And what is this minor adjustment that's needed? Simply mandate they every American, regardless of their income, pay the same percentage in FICA taxes. Currently Americans must pay 6.2% of their wages (although this has been reduced to 4.2% for 2011) in FICA taxes. But this only applies to the first $106,800 of wages (and does not apply at all to investment income -- which is the primary income for many of the rich).

That means that workers making less than $106,800 must pay the full applicable percentage, while the rich (who make much more than that) will effectively pay a much smaller percentage of their income than workers do -- and they will get a larger social security check when they retire because that is determined by money earned and not taxes paid. And if all of their income is investment income, they will pay no FICA tax at all.

Is this fair? Of course not! But you can bet the Republicans will fight removing the $106,800 cap on FICA taxes -- first, because it would mean they would have to pay the same percentage as other Americans, and second, it would mean their Wall Street buddies would have to pay the same percentage as the peons who have to work for a living.

And just making the FICA tax fairly administrated (i.e., make everyone pay the same percentage) would result in two good things:

1. Working and middle class Americans (who make less than $106,800 a year) would not have to pay a penny more than they currently do in FICA taxes.

2. Social Security would be fully-funded far into the future -- providing full benefits for many generations of Americans.

Don't let the Republicans fool you into thinking the program is about to go broke or needs massive reform including benefit cuts. It just isn't true. And don't let them fool you into thinking cutting Social Security would help balance the budget. Since Social Security is fully-funded through FICA taxes, it did not contribute to the budget deficit and cutting its benefits will not bring down the budget deficits.

Parker County Is Making A Mistake

Parker county commissioners voted on Monday to let a private company take over the operation of their county jail. They then awarded the contract to the second largest prison management company in the country -- CiviGenics.

Commissioners said it cost them $56 dollars a day per prisoner to currently run the county jail. They have contracted to pay CiviGenics only $39 a day per prisoner. The sheriff and the commissioners are not only celebrating the money they will save, but say it will allow them to put more deputies on the street, because jailers will no longer be employees of the sheriff's department. The jailers will now be private guards working for CiviGenics.

On the surface, it looks like a good deal for the city. But I have to wonder if they've really thought this thing through. They may well be opening themselves up to very expensive future problems.

How exactly is CiviGenics going to operate the jail on $17 dollars per day per prisoner less than the county was able to do, and MAKE A PROFIT? They certainly wouldn't be taking the contract if they didn't expect to make a profit.

I know some conservatives believe that a private company will just be more efficient. But there is absolutely no reason to believe that the county government could not be just as efficient as a private company. The same jail standards must be met whether run by the county or not. If the current sheriff couldn't run the jail efficiently, then the voters should replace him with someone who could.

Where is the $17 savings per prisoner (plus the profit) going to come from?

Are fewer guards going to be guarding the same amount of prisoners, thus creating a dangerous situation for guards and prisoners?

Are these guards going to be paid less and given less benefits, resulting in less competent guards being hired and creating a dangerous situation?

Are the guards going to be given less training, resulting in less competence and a more dangerous situation?

Are the prisoners going to be given substandard food and medical care?

The cuts have to come somewhere, and all of the above would set the county up for huge lawsuits in the future. After all, whether the jail is run by a private company or the county government, state law says the county is ultimately responsible. They will be legally liable for all the private company's shortcomings ( and there will have to be shortcomings).

Whether conservatives want to admit it or not, some things are better done by the government. Guarding and caring for those incarcerated by the government is one of those things.