Public Policy and Governance – Page 233

Connecting the Dots–Inequality Edition

I am one of those tiresome academics who has repeatedly criticized the so-called privatization of government functions.

I say “so-called” because what Americans call privatization is no such thing. Actual privatization would require government to sell off or otherwise abandon a particular activity, and let the private sector handle it. (Much like Margaret Thatcher selling England’s steel mills to private-sector interests.)

What Americans call privatization is more accurately described as contracting out; government retains responsibility for a service and the obligation to fund it, but delivers the service through a third-party surrogate, either for-profit or not-for-profit.

There are certainly instances where choosing such a surrogate makes sense; unfortunately, we Americans tend to embrace fads in government as elsewhere. So rather than engaging in analyses of risk and reward for each proposal to contract, too many public entities have accepted the argument that nongovernmental actors will do a better job, or be less expensive, no matter what is to be outsourced.

Research results strongly suggest otherwise. Sometimes, contracting is appropriate; often it is not.

With the publication of a new in-depth report, In the Public Interest has illustrated the often pernicious effects contracting can have on equality. The report centers on five ways in which contracting out exacerbates inequality:

User-funded contracting. Public budgets have tightened all across the country, largely due to the American public’s unwillingness to pay taxes to support services we continue to demand. As a result, some jurisdictions are allowing contractors to charge fees to end-users to subsidize or completely fund an outsourced service.

This is increasingly happening in areas where citizens have little to no political voice. In private probation, for example, offenders are expected to pay for everything from their own drug testing to the costs of ankle-bracelets, despite the fact that as a group they lack the resources to do so.

Rising rates. Residents of places that have privatized critical public services such as water or transit have experienced steep increases in their rates. Some of these increases can be attributed to the profit motive, but in other jurisdictions—like my own—the increases mask desperate, clandestine efforts to shift the costs of public infrastructure from taxpayers to ratepayers. (In Indianapolis, the city sold the water company, which—thanks to deferred maintenance needs—had a negative value of several billion dollars. As part of the deal, the purchasing entity, a nonprofit, “adjusted” its payments in lieu of taxes (PILOT) obligation, upward. That allowed the city to float bonds, repayable from the artificially increased PILOT, and use the proceeds to pave deteriorated streets. The result was to shift the costs of infrastructure repair from general tax revenues to utility ratepayers. It would be hard to think of a more regressive strategy.)

Cutting the social safety net. Programs like Medicaid and food assistance are often subjects to privatization experiments, and the report notes that the impact can be
tragic. Contractors have increasingly taken over critical social services like child foster care services, welfare, the distribution of food assistance, Medicaid, and child support services. But as the report details, the complex social problems faced by families and children who utilize these services are difficult to address using a privatization model, and many social services contracts have financial incentives that inadvertently perpetuate cycles of poverty and divert money from critical programs to corporate profits.

Indiana, again, provides an example. Then-Governor Mitch Daniels attempted to outsource welfare intake; as a result, many recipients were denied benefits to which they were clearly entitled, and others endured long waits and confusing, burdensome processes. The results were so negative that the effort was discontinued, but the ensuing lawsuits cost the state millions of dollars that might otherwise have provided needed services.

A race to the bottom for workers. One of the recurring criticisms of privatization has been that, when private companies take control of a public service, they often slash wages and benefits to cut costs, replacing stable, middle class jobs with poverty-level jobs. The report confirms the criticism.

Similarly, the report underlines increasing recognition that privatizing schools, especially, increases socioeconomic and racial segregation. As the text notes, introducing private interests into things like schools and public parks can—and often does–radically impact access for certain groups.

The report is a sobering reminder that there is a critical difference between procurement—government purchases of such things as street paving or computers—and contracting out delivery of core governmental responsibilities. It turns out that “Weakening democratic control over public goods and services increases economic, political, and racial inequality.”

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About That Opioid Epidemic

Credit where credit is due: Medical science and pharmacology have been nothing short of miraculous over the past century. People live longer and healthier lives as a result of breakthroughs in our understanding of how the body works, and how it responds to medications.

But we are also beginning to see some troubling consequences of our reliance on “miracle” drugs. Scientists warn of an emerging resistance to penicillin and other antibiotics, and blame their overuse. And then there is the opioid epidemic, which is yet another example of the problems that emerge when drug use and policy are dictated by the profit motive rather than by medical science and the Hippocratic Oath’s dictum “First, Do No Harm.”

AP and the Center for Public Integrity recently released a study detailing the effects of Big Pharma lobbying on opioid use and abuse. It should give us pause.

Key findings from the reporting:

Drug companies and allied advocates spent more than $880 million on lobbying and political contributions at the state and federal level over the past decade; by comparison, a handful of groups advocating for opioid limits spent $4 million. The money covered a range of political activities important to the drug industry, including legislation and regulations related to opioids.

The opioid industry and its allies contributed to roughly 7,100 candidates for state-level offices, with the largest amounts going to governors and the lawmakers who control legislative agendas, such as house speakers, senate presidents and health committee chairs.

The drug companies and allied groups have an army of lobbyists averaging 1,350 per year, covering all 50 state capitals.

The opioid lobby’s political spending adds up to more than eight times what the formidable gun lobby recorded for political activities during the same period.

There’s much more.

I know I’m beating a dead horse (what, no medical interventions for the horse?), but there are economic arenas where markets work beautifully, and there are arenas where they don’t. Health care falls in the latter category. “Buying” health care is not equivalent to buying a car or a stove or other consumer good. The parties to the transaction do not possess equivalent information, and the “buyer” needing immediate care is rarely in any shape to go comparison shopping in any event.

The opioid epidemic is just one more example (in a very long list) of what happens when we insist on maintaining markets and encouraging the profit motive in a sector where informational and power asymmetries make genuine competition impossible.

Perhaps–if this election gives us a sane President and legislature–we can begin to correct the situation, by revisiting both the prohibition on government’s ability to negotiate drug prices, and the inclusion of a public option in the Affordable Care Act.

And someday–no doubt after I’m long dead–we might stop letting lobbyists make health policy, get Medicare for All or its equivalent, and join the majority of countries that have recognized that access to health care and lifesaving drugs should not be treated as profit-generating consumer commodities.

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Quid Pro Quo…

I’m certainly not surprised by the recent revelations about Scott Walker’s unethical fundraising. I’m just depressed by yet another confirmation of the sorry state of American politics and the increasing corruption of the political system. I don’t enjoy being suspicious and cynical, but it’s getting a lot harder to maintain my Pollyanna side.

For those who missed the recent reporting, here’s one lede from the Wisconsin State Journal:

A new batch of leaked documents provides the most complete record yet of how Gov. Scott Walker raised millions of dollars for a supposedly independent, tax-exempt group during the 2011 and 2012 recalls — activity that prompted a now-halted John Doe investigation into whether Walker’s recall campaign circumvented state campaign finance law.

The newly revealed donations to the Wisconsin Club for Growth included six-figure sums from a lead producer who later stood to benefit from changes slipped into the 2013-15 state budget.

In another article, expanding on the details of the “lead producer,” we read

One of the more tangible revelations found in the leaked documents is how money buys bad policy-making decisions. An example is how Harold Simmons, a man who owned a company that produced lead that used to be in paint, made $750,000 worth of donations to Walker in 2011 and 2012 and got Republicans to protect him from lawsuits.

The Guardian US posted more than 1,300 pages of documents online, detailing more of Walker’s corrupt behavior. It’s unclear how the newspaper got the documents, which were being held under seal.

These disclosures come just weeks before the U.S. Supreme Court will consider a petition by prosecutors to overturn a Wisconsin Supreme Court 4-2 decision that quashed the investigation into Walker’s practices. The prosecutors bringing the petition argue, among other things, that conservative justices Michael Gableman and David Prosser should have recused themselves from the case.

Walker, in a May 2011 letter to Republican strategist Karl Rove, wrote that his chief political adviser R.J. Johnson ran the efforts to elect Gableman in 2008 and re-elect Prosser in 2011. Johnson was under investigation for his role in coordinating advertising for both the Walker recall campaign and Wisconsin Club for Growth, which is organized as a tax-exempt 501(c)4 group.

“Club for Growth—Wisconsin was the key to retaining Justice Prosser,” Walker wrote to Rove.

Johnson affirmed the group’s role in a December 2010 email to Club for Growth director Eric O’Keefe, saying “Club is leading the coalition to maintain the court.”

In this case, “maintaining the court” evidently meant retaining judges who’d been bought and paid for. Engaging in such partisan activities is illegal for a tax-exempt 501(c)4 like the Club for Growth.

It’s bad enough when elected officials like Walker ignore the laws with impunity, but when quid pro quo politics infect the judicial process, it’s worse. The ability of citizens to rely upon the impartiality of jurists is a bulwark against inequality, corruption and tyranny.(And speaking of politics infecting the judiciary, when will the Senate discharge its constitutional duty to vote on the nomination of Merrick Garland??)

It’s all pretty sleazy.

Buying laws, neutering the courts….and we wonder why young people don’t trust “the system.”

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The Age of Vandalism?

Random thoughts prompted by a seemingly interminable election campaign:

When I ran for Congress in 1980, women candidates were still rare. One of the “truisms” I encountered about the differences between male and female candidates was “Men run for office to be someone; women run in order to do something.” As with all sexist constructions, it isn’t a “one size fits all” observation, but it certainly is an accurate description of Clinton and Trump. Clinton has issued reams of carefully constructed and highly detailed policy positions; Trump talks only about himself–and from all appearances, has not the foggiest notion of what governing entails or what the constitution permits. The question, of course, is whether a celebrity-obsessed culture wants leadership or entertainment–no matter how dangerous or damaging that entertainment may be.

I share in the depressing point of view offered by a reader of Talking Points Memo:”Win or lose, on November 8, Donald Trump will have garnered some 60 million votes. Sixty million Americans will have gone to the polls and voted for him — clear-eyed or self-deluded people, making that choice enthusiastically or resignedly, very much because of what he represents or in spite of it. 60 million people will have voted to entrust themselves and the people they love not simply to a vulgarian narcissist who desperately needs medical help, but also to someone who is so arrogantly and defiantly ignorant that he thinks Supreme Court justices investigate crimes, that federal judges sign bills, that he would have the power to replace leadership in the armed services with officers who have publicly supported him, that the Constitution has (at least) 12 articles, that the United States could use nuclear weapons tactically without initiating nuclear war, that we could have new libel laws that wouldn’t gut the Bill of Rights, etc. Win or lose, Trump has already exposed something about us that we need to grapple with. All of us.”

I’ve never understood vandalism. Theft is comprehensible; people want something and take it. But destruction just for the sake of destruction has always been unfathomable to me. I mention this because, more and more, participants in America’s political system have come to resemble vandals–intent on mayhem rather than reconstruction, unwilling to participate in the hard work of productive reform. Whether it’s the members of Congress’ “lunatic caucus” or the thugs acting out at Trump rallies, or the racists relieved that “political correctness” no longer restrains them from spewing their hate, these are people simply venting their rage, trying to bring down “the system,” with no concern about the social or fiscal costs and no apparent concern for what comes after the destruction.

I’m very depressed. The Trump campaign has uncovered and threatens to normalize an America of which I was previously–blissfully–unaware.

Forty-nine more days…..

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Self-Interest Properly Understood–and Taxes

Since at least the late 1980s, policy disputes in the United States have largely revolved around the actual and perceived deficiencies of government. It has been an article of faith among self-styled fiscal conservatives that wasteful state and federal governments are imposing excessive and unnecessary tax burdens on the American public.

Engaging in this line of argumentation is particularly appealing to candidates for public office, since it plays to widespread resentment of the obligation to pay taxes while avoiding the pesky need to identify specific instances of the “fraud and waste” that are widely supposed to exist.

There are certainly situations where tax dollars are misspent. Most of those situations involve poor management practices, since voters tend to base their support for political candidates on ideology rather than perceived managerial competence. But more often than not, assertions of “waste” are based upon disagreement with something that government is doing–a belief that services being provided or programs being supported are unnecessary (especially when such services or programs are primarily seen to benefit others).

What government should do, and how it should fund what it does, are persistent and entirely legitimate issues. The problem is, too many of us have imbibed the Kool-aid; we want the services, we want to live in thriving communities with a good quality of life, but we don’t want to pay for the services and amenities necessary to produce that quality of life.

Worse, we frequently don’t recognize the ways in which we benefit even from government programs and services we don’t personally use. A couple of examples:

When voters are asked to support bond issues or tax increases for public education, people who do not have children in the system (usually a majority of those voting) often oppose the measures, because they see no personal benefit, no immediate “return on investment.” What they fail to recognize is that the quality of local public education systems affects their property values, enhances (or diminishes) job creation efforts, and makes their communities safer and more attractive. In the long run, good schools are in their personal self-interest.

Similar metrics apply to taxes for public transportation. Even people who will never use transit benefit personally from public transportation systems that reduce congestion, improve air quality, connect low-income workers to their places of employment, and improve mobility for the elderly and disabled.

Even people who care only about minimizing their personal tax burden will ultimately benefit, because long-term, the ability to hold down tax rates (especially here in Indiana, where constitutionally-imposed tax caps severely restrict municipal governments’ revenue options) will depend upon a city’s ability to grow its tax base–its ability to entice people to move in, buy homes and start businesses. Cities that successfully market themselves do so based upon quality of life measures–good schools, well-maintained parks, excellent public transportation.

Often, sound investments take time to generate returns. That’s particularly true of investments in our communities.

Sometimes, “self-interest properly understood” (as De Tocqueville noted many years ago) is the opposite of immediate gratification. That doesn’t mean the investments aren’t necessary and worthwhile.

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