Tag Archives: privatization

The Real Reason For Decimating The Federal Government…

I should have seen it.

The Washington Post recently reported on what should have been obvious to those of us who have studied the Right’s constant efforts to privatize governmental functions: Elon Musk’s mass government cuts will make private companies millions. While Trump and Musk are framing the immense and indiscriminate cuts to federal governance as removal of “waste,” they are really likely to provide what the article calls “a boon to private companies – including Musk’s own businesses – that the government increasingly relies on for many of its key initiatives.”

Much of my academic life was devoted research on contracting-out, a/k/a privatization–the decision to provide government services through private contractors rather than government employees.

My skepticism began with obvious misuse of the term.  Actual privatization would mean selling off government operations and allowing them to sink or swim in the marketplace (a la Margaret Thatcher). Americans, however, use the term to mean something else entirely: government “contracting out” with private companies to supply goods and services being financed with tax dollars.

There are certainly times where contracting makes sense, but government hasn’t been a very good judge of when those are. Contracts with units of government are qualitatively different from contracts between private actors, and those differences make it far more likely that the contracts ultimately negotiated will be unfavorable to the taxpayers who are funding them–and that’s even without the predictable “crony capitalism” that rewards campaign donors and favored billionaire sycophants with lucrative contracts at taxpayer expense.

As Musk has proceeded to lay waste to the federal bureaucracy, many objectors have noted that despite population growth, the federal workforce has been flat for decades. There’s a reason: a few years ago, I came across data showing that the federal government was actually paying the salaries of some 17 million full-time contract workers who weren’t technically government employees.

Criticisms of government operations ignore the reality that programs are often stymied by a lack of skilled in-house personnel. That includes–among other things– the government’s inept handling of refugees and the (mis)management of Medicare and Medicaid ($103.6 billion in improper payments in 2019 alone).

Too few critics recognize that passing a law to do X or Y is only a start; the unit of government charged with administering the law or program needs sufficient resources to do so. Those resources include adequate numbers of well-trained employees and skilled supervision– virtually impossible when contractors are providing the bulk of the services.

Back in 2021, I posted about an example from 2004, when George W. Bush turned the job of collecting the hundreds of billions of dollars that tax scofflaws owed Uncle Sam over to private collectors–parroting the GOP insistence that private business would do a better job than federal workers.  Most of what the private firms brought in was from easy-to-collect cases that began running out after just a few months. When the IRS brought the work back in-house, agents collected some two-thirds more money in that same few months, and it came from the harder cases the private companies had avoided. Relying on private tax collectors actually ended up costing the federal government money.

I should note that Republicans’ subsequent actions suggested that “efficiency” hadn’t really been the goal. They slashed 20 percent of the IRS’s budget and 22 percent of its staff. For people making more than $1 million, the number of tax audits dropped by 72 percent—and the money the IRS collected from audits fell by 40 percent.

The Guardian report noted that private firms are salivating as Musk decimates the federal bureaucracy.

Musk’s plans have already excited Silicon Valley mainstays such as Palantir, whose executives praised Doge on an earnings call last week and talked about how the disruption by the billionaire’s strike squad was good for the company. Palantir already has won hundreds of millions of dollars in US military contracts in recent years for AI-related projects.

Musk himself has extensive contracts worth billions of dollars through companies like SpaceX that are set to expand under the new administration.

There are certainly situations in which contracting out makes sense–but we are already relying on private contractors beyond the point of reason. We have contractors who do more or less the same work as civil servants, sitting in the same offices, for years on end, and typically at far higher cost. We have contractors who oversee contractors, contractors who write policy for government officials, and Trump is firing federal contract managers who are already too few in number and too outgunned in skills to manage it all.

The GOP’s persistent attacks on civil servants costs taxpayers and enriches privateers. The Trump/Musk goal is more of the grift.

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Crony Capitalism–The Big Grift

Not to sound like some sort of weird Pollyanna, but despite the considerable downsides and probable suffering involved, perhaps the Trump administration’s coming destruction of America’s governing institutions is overdue. Maybe we need a thorough-going rethinking of the ways in which America’s current governing structures support and encourage some very destructive approaches–especially to our economic life.

As I have frequently asserted, I am a huge fan of market capitalism–properly understood. By “properly understood,” I mean a system that recognizes two essentials of a working market economy: the maintenance of a true level playing field, which requires rational, reasonable regulation; and proper recognition of the areas of the economy that are not suited to a market approach. Markets are marvelous devices for the production of all manner of goods and services–and absolutely inappropriate and damaging in other areas of our communal lives.

The basic definition of a market transaction is one in which a willing buyer and willing seller, both of whom are in possession of all information relevant to the transaction, enter into a sales agreement. Rather obviously, that definition excludes things like medical care, where the “buyer” is not in possession of the same information as the provider, and is generally in no position to bargain with the provider or to shop around for a better deal.

What about transactions where the “buyer” is government?

Take prisons. In a market economy, should government “purchase” incarceration services from entities competing for those government contracts? Or–as most of us might suspect–does the prospect of a “buyer” with virtually unlimited resources thanks to the taxing power invite would-be contractor/sellers to engage in a range of unethical behaviors–big donations to selected political figures in order to get the contracts, and/or failure to provide the services at an optimum (or even adequate) level in order to generate more profit?

Should prisons be privatized–i.e., considered part of the market economy? Or is the marketization of such essentially governmental services an invitation to corruption?

One recent report looked at the “industry” of immigrant detention. Titled “Revenue Over Refuge,” the report found the following:

  • Hundreds of millions of dollars are flowing from city and federal governments to private equity firms for goods and services used to detain immigrants.
  • 63 percent of federally-designated ICE facilities contract with private equity-owned companies for a range of services.
  • Private equity-owned companies are winning emergency contracts for managing migrant shelters in cities across the country.
  • Companies like Wellpath and G4S have faced investigations and lawsuits and paid out settlements for mistreating immigrants in their care.
  • Private equity firms and other alternative asset managers stand to profit from increased taxpayer-funded immigration detention, although alternatives to detention cost less.

Are we really surprised to find corporate America engaging in these profit-maximizing tactics? More fundamentally, are prisons the sort of consumer item we think of when we consider the merits of healthy market economies?

When I was still teaching, I required the graduate students in my Law and Public Policy classes to produce team projects on a  policy issue that the team would choose. Over the years, several of the teams investigated government contracting with the private prison industry. In every case, the teams’ conclusions were highly negative. Not only did they focus on the poor performance of the contractors–and the high potential for graft–but most teams addressed what I think is the underlying philosophical question: when should government contract out–and when shouldn’t it? When is it appropriate for government to be the “willing buyer” in a market transaction?

America is heading for a very ugly few years, as the MAGA movement tries to install a government that might have been appropriate for an 18th Century society–a government utterly insufficient for America’s contemporary culture and other realities of the 21st Century. The next few years will range from very unpleasant to devastating (those of us with documented citizenship, a measure of financial security and white skin will be spared the worst of it; others won’t be so lucky.) But when the fever subsides, when the current MAGA eruption of racism, misogyny, anti-Semitism and other assorted bigotries has run its course (at least this time), the rest of us must be ready to offer practical systemic and economic reforms.

Production of that reform agenda needs to be a central part of the Resistance.

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“Privatizing” Our Schools

I devoted a fair amount of my academic research to the issue of privatization, and I largely agree with the periodic analyses on the “In the Public Interest” website.

Confounding the issue is the fact that what Americans call “privatizing,” is really something quite different: contracting out.

Margaret Thatcher privatized many of her country’s industries–she sold them off to private-sector operators, who then owned them and paid taxes (and in some cases went bankrupt and out of business). In the U.S., by contrast, we “privatize” by encouraging government agencies to contract with for-profit and non-profit organizations to manage government programs. 

In other words, a program that government is obligated to provide continues to be paid for with tax dollars, and government remains responsible for ensuring that it is operated in a manner that’s consistent with the Constitution, the terms of the contract, and (ideally, at least) the public interest.

My research convinced me of three things: 1) while contracting may be appropriate under some circumstances, it is not the panacea that so many politicians seem to think. Sometimes it makes sense, often it doesn’t.  2) the cost savings that are touted by privatization advocates are largely mythical, the result of omitting what it costs government to manage these contracts–or the even greater costs of failing to manage them. And 3) far from shrinking the size of government, as proponents seem to believe, contracting actually expands both the size and scope of government, while at the same time making that expansion less visible and government less accountable.

Bottom line: contracting out doesn’t usually save money, and the ability of government to monitor those with whom it contracts has proved to be less than ideal, to put it mildly.

Also, in far too many situations, contracting has become the new patronage.

I have written pretty extensively about the issues involved, including Indianapolis’ unfortunate flirtation with “privatizing” under former Mayor Stephen Goldsmith. 

Years of research have taken much of the bloom off the privatization rose, but of course, as readers of this blog are well aware, there is one area in which proponents stubbornly continue to insist upon benefits that have proved imaginary, while studiously ignoring numerous and troubling negative consequences. 

That area is public education.

“Florida Man” DeSantis isn’t the only ideologue  pushing a voucher program, but an article in the linked website  revolved around a set of concerns explored by a Florida  newspaper :

With Tallahassee “poised to bleed billions from public classrooms through a sweeping expansion of private school vouchers,” The Sun Sentinel lays out some of the problems this will bring:

If a private school wants to teach children that Jesus rode dinosaurs and call it geography, the state has no say.

If a private school wants to expel an honor-roll child for being gay, that child is out of luck.

If a private school wants to teach students in a building rife with code violations, students will just need to bring buckets on rainy days. Or fire extinguishers.

If a private school wants to hire teachers with a criminal background, or teachers repeatedly fired from previous jobs, or teachers who have no training in teaching, who in the state has the authority to stop them?

If a private school abruptly closes mid-year, who takes care of the students?
The answer? No one.

These are not scenarios limited to Florida. You can find troubling examples of each of them in existing voucher programs in Indiana and elsewhere. 

Most of us understand–and budget numbers confirm– that voucher programs bleed dollars from public schools that need those resources.

I don’t know about Jesus riding a dinosaur, but multiple investigations of private religious schools accepting vouchers have found creationism  substituted for science instruction. Many of those same schools proudly and publicly decline to accept gay students, or even non-gay students who have two mommies or two daddies.

In Ohio a few years ago, David Brennan, a politically well-connected businessman, opened a chain of schools in order to profit from that state’s then-new voucher program; students didn’t learn much, and several of the schools were found to have multiple, dangerous code violations.

In Indiana, we’ve had voucher schools that suddenly closed, leaving parents and students high and dry.

Forgive me for sounding like a broken record, but there was a reason Americans  established public schools. Public schools are intended to teach more than “reading, writing and arithmetic.” They are intended to create informed and engaged citizens–to advance e pluribus unum by pursuing what is termed the civic mission of the schools.

Heedless of the educational failures and lack of accountability, the World’s Worst Legislature is planning to expand Indiana’s already out-of-control school privatization. No wonder Indiana ranks 43d in the percentage of citizens with  bachelor’s degrees–and  worse, lacks legislators having common sense.

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Now They’re Coming For The Library

I have tended to laugh when enraged Rightwing parents demand that schools and/or libraries “ban” book X or Y–in our digital age, access to that material is generally a click away. And that’s in addition to several organizations pushing back with offers to send a free copy to any kid who makes a request.

As a parent, I learned early that if you want to get a child–or especially a teenager–to read something, the most effective thing you can do is tell them they can’t.

But there are some more insidious ways to subvert American libraries, and I recently came across an article highlighting one of them.

The article began by pointing to the great value of America’s public libraries

“There aren’t many truly public places left in America,” Jennifer Howard writes in Humanities Magazine. “Most of our shared spaces require money or a certain social status to access. Malls exist to sell people things. Museums discourage loiterers. Coffee shops expect patrons to purchase a drink or snack if they want to enjoy the premises.

“One place, though, remains open to everybody,” she continues. “The public library requires nothing of its visitors: no purchases, no membership fees, no dress code. You can stay all day, and you don’t have to buy anything. You don’t need money or a library card to access a multitude of on-site resources that includes books, e-books and magazines, job-hunting assistance, computer stations, free Wi-Fi, and much more. And the library will never share or sell your personal data.”

It’s evidently the fact that libraries are “public” that most irritates the Right. The article takes an in-depth look at the private company currently pushing a privatization agenda, adding the current political assault on history, diversity, and racial justice to the purported glories of privatization.

That’s what what happened in Huntsville, Texas, where the city council voted to outsource the Huntsville library’s operations after some residents objected to a book display themed around Pride Month.

Lest you shrug and think “well, of course– it’s just Texas,” think again.

According to the article, a one-time software company called Library Systems & Services (LS&S), backed by  Argosy Capital Group, a private venture firm, has doubled its size and in the past decade has taken over 17 library systems in five states. It runs over 80 branches, and is now the nation’s fifth-largest library system.

So what happens when the private sector takes over a public good–in this case, the public library?

When LS&S takes over, it receives a set fee from a local government. The corporation gets control over the collection, services, and programs. Most important, it takes over staffing. Librarians at these facilities are no longer public servants; they serve at the pleasure of LS&S. Although it has been building its portfolio since the late 1990s, LS&S has met with little competition; its CEO likes to brag that it boldly goes “where angels fear to tread,” namely, into local fights with committed activists who love their libraries and librarians. The LS&S proposal to privatize the Prince William County, Maryland, library would have achieved its promised savings by laying off 20 percent of the staff, trimming benefits, and cutting pensions. The library trustees said the proposal was “unfair to employees” and rejected it.

The American Library Association has outlined numerous issues surrounding privatization of libraries: “quality of library services, loss of local community control, governance, loss of control of tax dollars, and collection development.”

The ALA also pointed out that privatization often leads to the loss of community involvement with foundations, nonprofits, and Friends groups.

During the pandemic, local public libraries served as community hubs providing a variety of services; in addition to other services, they distributed more than 2.5 million free, at-home COVID-19 test kits. Forgive me if I don’t see a for-profit, private operator doing that–or providing the other numerous free services that our local library provides–everything from access to computers for poor kids whose homes lack them, to help with tax returns. (Somehow, I doubt these privatized libraries host Drag Queen story hours, either–and I’m sure that’s one reason proponents support them.)

Citizens depend upon their public libraries for access to information–all sorts of information, whether their neighbors approve of that information or not.

Wikipedia identifies five fundamental characteristics of public libraries: they are supported by taxes; they are governed by a board to serve the public interest; they are open to all, and every community member can access the collection; they are entirely voluntary, no one is ever forced to use the services provided and they provide library and information services services without charge.

Wikipedia says “Public libraries are considered an essential part of having an educated and literate population.” Precisely what the Right doesn’t want.

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Enlarging The Already-Big Hole In the Wall

The overtly pious Justices placed on today’s Supreme Court by Mitch McConnell aren’t likely to stop imposing their religious beliefs with their decision to overrule Roe v. Wade. Multiple observers have warned that we are dealing with religious zealots intent upon enforcing their vision of Christian Nationalism–a vision that goes well beyond the effort to put women in our “proper” (i.e., subservient) place.

This is a Court that has bent over backwards to elevate religion– especially conservative Christian religion.

If we look at the Court’s “pipeline,” we can see that the hits are likely to continue coming. I’ve posted previously about the case of the public school coach who wants to lead prayer on the fifty-yard line, and the fact that, during oral argument, the Justices seemed inclined to allow him to do so. But that’s not the only vehicle available to a Court intent upon empowering their particular version of Christianity.

As Adam Liptak reported in December,

The Supreme Court on Wednesday seemed ready to take another step in requiring states to pay for religious education, with a majority of the justices indicating that they would not allow Maine to exclude religious schools from a state tuition program.

The court has said that states may choose to provide aid to religious schools along with other private schools. The question in the new case was the opposite: Can states refuse to provide such aid if it is made available to other private schools?

The State of Maine has a number of rural communities that do not have public secondary schools. Maine law requires those communities to send young residents elsewhere for their education, and to do so in one of two ways:’ They can sign contracts with nearby public schools, or they can pay tuition at a private school chosen by the student’s parents so long as it is, “a nonsectarian school in accordance with the First Amendment of the United States Constitution.”

This case arose when two families in Maine challenged that law. The parents want to send  their children to religious schools, and they argue that the state’s refusal to spend tax dollars to allow them to do so violates their right to the free exercise of their faith.

As Liptak noted, religious litigants have found the current court to be very hospitable to their arguments.

Religious people and groups have been on a winning streak at the Supreme Court, which seemed likely to continue in the new case. In recent decisions, the justices have ruled against restrictions on attendance at religious gatherings to address the coronavirus pandemic and Philadelphia’s attempt to bar a Catholic agency that refused to work with same-sex couples from screening potential foster parents.

The court also ruled that the Trump administration could allow employers with religious objections to deny contraception coverage to female workers and that employment discrimination laws do not apply to many teachers at religious schools

The likely precedent for this decision is a case called Espinoza v. Montana Department of Revenue. In that case, the Court found that a provision of the state’s Constitution banning aid to schools run by churches ran afoul of the  Constitution’s Free Exercise Clause, by  discriminating against religious people and schools. Writing for the majority, John Roberts held that a state need not subsidize private education–but that once it decides to do so, “it cannot disqualify some private schools solely because they are religious.”

That is fair enough. It is also why privatization efforts like Indiana’s voucher program–which bleed resources from public education in order to send tax dollars to private schools–are so dangerous and socially divisive. In Indiana, some ninety percent of voucher students attend religious schools (schools that have not, by the way, improved the academic performance of those students.)

Plaintiffs freely acknowledged that the curricula of these religious schools is divisive and discriminatory.

One of the schools at issue in the case, Temple Academy in Waterville, Maine, says it expects its teachers “to integrate biblical principles with their teaching in every subject” and teaches students “to spread the word of Christianity.” The other, Bangor Christian School, says it seeks to develop “within each student a Christian worldview and Christian philosophy of life.”

The two schools “candidly admit that they discriminate against homosexuals, individuals who are transgender and non-Christians,” Maine’s Supreme Court brief said.

Justice Elena Kagan wanted to know why taxpayers should fund “proudly discriminatory” schools. The answer, evidently, is that six judges on this Supreme Court believe that when discrimination is required by Christian theology, it is entitled to special deference.

I somehow doubt that a Satanic school–or even a Muslim or Jewish one– would receive that same deference….

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