Public Policy and Governance – Page 281

Academics Say the Darnedest Things…

It’s too bad that articles in academic journals are so filled with jargon, because they often contain valuable information, or make important points that get ignored or glossed over, even by other members of the academy.

Case in point, a recent article in Public Administration Review, a very highly-regarded journal focusing on issues of public management. The title ” Governance, Privatization and Systemic Risk in the Disarticulated State” was calculated to make your eyes glaze over, and I will admit I only read it because I know both of the co-authors (one is a SPEA colleague) and know them to be first-rate scholars.

Ignore the wonky title. This is yet another analysis of government’s love-affair with privatization.

The authors apply research on “systemic risk” to the public-private partnerships that have become ever more common over the past quarter-century or so, the networks of for-profit and non-profit organizations increasingly used by public-sector agencies to do government’s work and deliver public services. As they note, such public networks are similar to financial systems: they are complex, interdependent and risky. Furthermore, if and when they fail, that failure has “potentially catastrophic” effects on citizens who depend upon public services.

One of those risks is that an organization in one of these privatized networks will try to benefit at the expense of the others. The article cites several examples: halfway houses in New Jersey were found to have falsified records in order to have high-risk inmates placed in their (understaffed) facilities; in Tucson, Arizona, a downtown development project employed a network of developers and consultants that spent millions of taxpayer dollars and failed to produce anything.

The risk isn’t confined to dishonesty and self-dealing. The Providence Service Corporation is the largest provider of privatized social services in North America. When the 2008 Great Recession hit, investors dumped their stock in the company (it went from $36 per share to less than a dollar). The loss of capital threatened the ability of the company to continue delivering services to 70,000 clients.

After an extensive discussion of the nature and extent of the dangers involved, the authors conclude that, “reliance upon third parties to produce government services is fraught with risk at all levels.”

This analysis joins a growing and steady accumulation of evidence that the wholesale embrace of privatization of public services is too often costly, risky and counter-productive.

The rush to privatize–to offload public responsibilities–is part and parcel of the assault on the whole enterprise of government that has always been part of American political discourse, but which really gained traction during the Reagan Administration. It’s an attitude, rather than a philosophy, and it plays to the very American desire to address messy, complicated realities with simple, bumper-sticker remedies.

As we are learning the hard way, government can’t privatize away its responsibilities, and too often, the effort to do just that ends up making matters worse.

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Dollars and Sense

This morning, I was scheduled to participate in a statehouse rally intended to urge the Governor and General Assembly to exhibit rational behavior, also known as Medicaid expansion under the Affordable Care Act. (Of course, this is Indiana, where rational political behavior can be pretty rare.)

The weather required organizers to reschedule, but I’m posting my prepared remarks, which centered on dollars and sense.

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Many of us have just wished our friends and loved ones a healthy, happy and prosperous New Year. In Indiana, those are going to be elusive goals.

According to a report issued in December by the respected Kaiser Family Foundation, Indiana stands to forego17.3 billion dollars between 2013 and 2022 because we are refusing to follow the lead of surrounding states (including those governed by Republicans) and implementing the ACA’s Medicaid expansion.

Indiana is refusing to accept the federal dollars that would pay for expansion of Medicaid despite the fact that over half a million Hoosiers have lost employer-sponsored coverage since 2000, and despite the fact that Indiana has seen the nation’s largest loss of health insurance coverage for children. More than eighteen percent of Indiana children have lost coverage since 2000.

Let’s talk dollars and sense.

Under the ACA, the federal government will pay 100% of the costs of expanded Medicaid for the first three years and 90% thereafter. Expansion would actually save Hoosier taxpayers money, since some of those federal dollars would pay for services we currently provide.

Since there is no rational reason to forego billions of dollars and deny a quarter of a million Hoosiers access to affordable coverage, some Indiana officeholders have resorted to deliberately misleading their constituents. One legislator recently sent out a survey seeking “input on legislative topics”. The Medicaid question read as follows:

“Currently, one out of six Indiana residents is on Medicaid, or about 1.1 million Hoosiers. Medicaid makes up about 14 percent of the state’s budget. Under the Affordable Care Act (or Obamacare), Indiana can expand Medicaid to cover more uninsured Hoosiers at a projected cost to taxpayers of more than $1.4 billion by 2020. This expansion would allow one in four Indiana residents to enroll in the program. Do you support full Medicaid expansion for Indiana under Obamacare guidelines?”

The question clearly–and dishonestly–implies that Indiana taxpayers would foot the bill for expansion. (Of course, he might get an answer he doesn’t want if he explained that new federal dollars would cover the costs.)

The question we need to ask our Senators and Representatives is pretty simple: Why are you refusing to allow the federal government to pay the entire cost of expanded coverage for three years and 90% thereafter—especially when those dollars you are rejecting would create an estimated 30,000 Hoosier jobs and, according to health economists, would reduce premiums paid by those of us who do have private insurance?

The only response I’ve heard is weak and highly speculative: the federal government might stop paying the full 90% at some future time. But if the feds cut payments, we could cut services, so that excuse just doesn’t pass the smell test.

It’s hard to escape the conclusion that Indiana is leaving 17 billion dollars on the table, leaving more of our citizens uninsured, costing Hoosiers who are insured more money, and refusing to cover Indiana’s most vulnerable children simply because our governor and state legislative leaders will oppose anything and everything proposed by this President, no matter how that opposition affects the citizens they were elected to serve.

Here’s a news flash: you don’t have to like this President—and you don’t have to like the Affordable Care Act—in order to accept billions of federal dollars that will save lives and money and create jobs for the people of Indiana.

Thanks to Governor Pence’s refusal to implement Medicaid expansion, Hoosiers will pay higher state taxes, higher health insurance premiums and higher out-of-pocket expenses. And those costs will fall most heavily on those who can least afford them.

Our politicians may be aiming at President Obama, but the people they are hurting are the Hoosiers who elected them.

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No Free Burgers…

If there’s one thing that conservative and liberal economists agree about, it’s that old bromide about there being no free lunch.

That widget you are manufacturing contains raw materials, its construction takes labor, and its distribution and marketing must be paid for. Your facility and utilities cost money. Those costs–plus some profit–have to be reflected in the price, or you’ll go broke.

You may be able to gain a market advantage by shifting some of your costs to others–we all know of cases where pollution created during production is discharged into the air or water to be paid for by the community at large, rather than by being properly disposed of and the cost of that disposal factored into the product’s sales price–but if it’s a cost of doing business, someone has to pay it.

Market theory assumes that the widget manufacturer will pay all the costs of production, and then pass those costs on to the ultimate consumer, as part of the price.

Increasingly, however, taxpayers are assuming those costs.

Case in point: we are subsidizing the wages of a quarter of the people who have jobs today. A recent study from UC Berkeley and the University of Illinois found that fully 52% of fast-food workers receive public assistance–mostly Medicaid and food stamps–to the tune of $7 billion dollars a year. (McDonald’s workers alone got $1.2 billion of that.) One Wisconsin Wal-Mart costs taxpayers over a million dollars a year.

The United States now has the highest proportion of low-wage workers in the developed world. And as the report noted, every dollar taxpayers spend subsidizing corporations so they can continue paying their workers poverty wages is a dollar not spent on early childhood programs, or schools, or roads, or any other social good.

We need to have a national conversation about who is paying for that burger.

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Pointing Fingers

There is substantial agreement across constituencies that America’s political system is broken. That’s where the agreement ends; who you blame for the dysfunction will depend upon your political orientation and the source and degree of your disgust.

Wherever your finger is pointing, it is becoming increasingly clear that the toxic nature of our politics is threatening to turn off the young people who will be needed if we are ever to improve the system.

A couple of professors recently shared some troubling data in the Washington Post: high school students they had surveyed would rather do anything other than become involved in politics. They don’t want to run for office. They don’t want to be Mayors or Councilors or Governors. Serving as a Member of Congress was their dead-last occupational choice.

As the professors wrote, the fact that they do not want to run for office

“cannot be divorced from their perceptions of the political system. Eighty-five percent of our survey respondents did not think that elected officials want to help people; 79 percent did not consider politicians smart or hard-working; nearly 60 percent believed politicians are dishonest; and fewer than 30 percent said they thought candidates and elected leaders stand up for their convictions.”

There are more than 500,000 elected positions in the U.S. Given the attitudes of these young people, we can only imagine who will run to fill those positions.

As the writers concluded, it’s easy to blame young people for a lack of civic engagement, but this time, “the fault lies with a political system and political figures whose behavior has turned off an entire generation.”

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About That Brain Drain…

Indiana has long suffered from “brain drain”–we have great universities that draw very bright students from around the country (and increasingly, the world), but we don’t keep many of them. In fact, the higher a student’s level of education, the more likely the student is to move away from the state after graduation.

Only about 16 percent of PhD recipients remain in Indiana’s workforce one year after graduation.

There are various reasons advanced for this situation; the nature of Indiana’s job market, the attractions of urban life (with few exceptions, Indiana is a pretty rural state), and the relative absence of other college graduates.

We aren’t the only state with this problem. Michigan, for example, is in a similar situation, and a Michigan legislator has proposed an interesting “fix.”

State Sen. Glenn Anderson, D-Westland, recently introduced SB 408, which offers a tax credit to recent college graduates who choose to stay and work in Michigan. This legislation will make it possible for talented young professionals to earn their livelihood in the state by easing the burden of student debt. The bill offers a tax credit to recent graduates who remain in state that lowers annual payments on student loans.

Student loan debt is increasingly seen as a drag on economic growth, as well as a burden on the indebted individuals. A young person who has to divert a significant percentage of her disposable income to loan repayment isn’t buying a new stove or car or house.

I don’t know whether the numbers in Senator Anderson’s proposal are the right ones, and there may be downsides to his proposal that aren’t immediately apparent.

A tax credit might not be enough to keep graduates in Hoosier cornfields. But it’s an intriguing idea.

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